One Foundation’s Journey in Impact Investing: Lessons Learned and How to Overcome Initial Skepticism
This is the fourth blog in a 4-part series documenting The Russell Family Foundation’s (TRFF) impact investing journey, detailed in their recently released case study, “The Impact Investing Journey: Aligning Portfolio with Purpose”. Click here to read the first blog post, click here for the second, and here for the third post in the series. To learn more about TRFF’s impact investing journey, access the full case study here.
Impact investing is more widely understood today than it was just a few years ago. We at The Russell Family Foundation are heartened by the recent news that sustainable investment has surged worldwide by 34 percent since 2016. Yet, impact investing is far from a mainstream approach. There are philanthropic foundations both large and small dipping their toes in impact investing, while many others are still watching from the sidelines.
Some of the reasons for this include the fact that there is no one impact investing playbook. What works best is unique to individual organizations and this work carries a stigma that if you prioritize social impact, you will lose on the financial side. But I truly believe that any foundation, no matter how small, has the ability to incorporate mission-aligned investments without sacrificing financial gains.
Believe me, our confidence at TRFF and the now nearly 75-percent mission-aligned portfolio did not happen overnight. We weathered our share of missteps and collected a variety of significant learnings. The key was to embrace our instructive failures and continually improve, principles instilled by TRFF’s founders George and Jane Russell.
Any foundation thinking about impact investing must adopt a similar mindset of trial and error, continuous improvement and never allow skepticism to overrule what could be a pivotal turning point for your organization. Here is my advice for foundations on how to overcome those initial obstacles and skepticism when it comes to experimenting with (and hopefully eventually, fully implementing) impact investing.
Talk About Your Investment Policy Statement
This may sound incredibly simple, but having a conversation with stakeholders about your investment policy statement allows you to reflect upon and refine objectives and policies that clearly illustrate your organization’s position. Having frequent conversations also allows for greater flexibility with strategies, ensuring everyone is in alignment, and that you don’t get stuck in old policies that do not represent where you are today as a mission-minded organization.
Stage a Tug-Of-War Exercise With Traditional and Mission-Driven Investment Strategies
Take some time to develop two hypothetical investment strategies, one that seeks the greatest financial return and another that prioritizes impact. Use the results as a case study to guide your portfolio. We did this at TRFF and quickly realized we could have both financial and social returns; these outcomes were not independent of one other. Our strategy then became a blend of both approaches. Ultimately, it pushed us to make transformative changes over many years, getting us to where we are today.
Leverage Existing Resources and Knowledge from Other Organizations
The Russell Family Foundation’s shift to impact investing did not come to fruition in a vacuum. Thanks to the work of other organizations, including Mission Investors Exchange, we were able to consider others’ advice and strategize using their past experience as a base. Some of the organizations we looked to as thought leaders in this space included Global Impact Investing Network, Divest Invest Philanthropy, and Confluence Philanthropy.
Expand Your Investment Team
Another major turning point for TRFF was when we created our Mission Related Investment Committee (MRIC), combining program staff and investment advisors. This approach made for more thoughtful and strategic decision-making. Program staff could better understand financial implications and investment advisors began to realize how funded projects actually operated on the ground, in the community. Leveraging this approach at your own organization can reveal insights you may never uncover otherwise.
Remember that change takes time and there will be missteps. It is what you do to regain your balance and momentum that will be critical to your success. Wherever you are in the journey of impact investing, I invite you to take a chance and embrace the beginner’s mind, to learn by doing.