Charities increase ‘mission investing’

Times Staff Writer

Charitable foundations are slowly increasing their use of loans and investments to support philanthropic goals, according to a study released Friday.

Among the 92 U.S. foundations surveyed, 74 used such “mission investing” in 2005, up from just a single foundation in 1968. The amount of money earmarked for such investing grew from $48 million in 1968 to $130 million in 2005.

The study, one of the most detailed on the subject, was conducted by FSG Social Impact Advisors, a nonprofit consulting group based in Boston.

It was funded by the David and Lucile Packard Foundation, which made $34 million in mission investments in 2005. Participants in the study included some of the nation’s leading foundations, such as the Ford Foundation, the John D. and Catherine T. MacArthur Foundation and the William and Flora Hewlett Foundation.


The volume of mission investing remains tiny compared with the more than $30 billion given in grants annually and more than $500 billion in foundation assets invested in conventional ways.

But the gradual rise in mission investing is a welcome sign, said Doug Bauer, senior vice president at Rockefeller Philanthropy Advisors, which assists foundations on endowment issues.

“There are more and more interesting investment opportunities that have a triple bottom line” -- financially lucrative, aligned with the foundation’s goals and positive for society, Bauer said.

For example, the Kalamazoo Community Foundation in Kalamazoo, Mich., used $19 million from its endowment to become a lender and venture capitalist for local economic development. The money, which supplemented a small grant fund, helped to create a building that houses scientific start-up companies and to develop local housing.


That approach is valuable, said Stephen Viederman, a former foundation president and expert on mission investing, because it augments grant funds rather than replaces them.

Mission investing is sometimes combined with investment screening or shareholder activism meant to prod companies to improve their social, environmental or governance performance. Those practices were not addressed in the study.