The Russell Family Foundation's Journey in Impact Investing: Begin a Walk, Aim to Run
This blog below is the first of 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”. To learn more about TRFF’s impact investing journey,
- Access the full case study here.
- Click here to read the second blog post.
As foundations, we are meant to take calculated risks and be catalytic, to learn from mistakes with an open mind and resilient approach. The same is true for impact investing; there are no guaranteed outcomes, and the only way to evolve is by experimentation, grounded in clear goals and realistic expectations. While this seems like an obvious ingredient to progress, we often get asked how it actually looked in practice on our journey towards achieving almost 75 percent alignment, which begins by looking back to our DNA as a foundation.
Rooted in the legacy of our founders, George and Jane Russell, maximizing positive impact has been a primary objective of our work since TRFF opened its doors in 1999. Pioneers of the global asset management industry through Russell Investments, the Russells created the gold standard for evaluating money managers, designing innovative funds, and crafting industry-wide benchmarks in the finance industry. They were also well-known for their commitment to their employees and community. Because of this history, thoroughness, financial rigor, and a belief in experimental learning are embedded into the culture of TRFF.
Naturally, our commitment to people and place drove our desire to create positive social and environmental outcomes, not just private financial gain. However, it was by reconnecting with the ethos of our founders that we were able to leverage our legacy to truly commit to and experiment with impact investing.
In 2004, our Investment and Audit Committee and board agreed to allocate $1 million from the Foundation’s portfolio to pilot mission-aligned investments. We explored environmental mutual funds, community bank deposits, program-related investments and engaging shareholder actions, including the mutual fund Vanguard Calvert Social Index Fund; certificate of deposit with Shorebank Pacific, a community bank using deposits to fund environmental businesses and home loans; and the Certificate of Deposit Account Registry Service (CDARS) program, which bundles small CDs for financial guarantees.
In the process, we used our unique position as asset owner and field-builder to vote our proxies. In doing so, we exercised our rights as shareholders to further our mission. This increased our curiosity in tools that would support systems change alongside individual investment impact, leading us to explore a range of education and advocacy activities like signing onto the Carbon Disclosure Project to address climate change.
Through the hands-on experiment, our investment advisors learned that with a small amount of extra effort and commitment to collaborative education, it was possible to transition assets from traditional structures to ones geared toward impact. At the same time, the experience challenged and broke down the habits, routines and assumptions about doing business held by our staff, board and other stakeholders. For example, during this time we diversified our financial practices to include deposits at community banks, which required new relationships, new accounts, and new thinking outside of our usual routines.
Armed with lessons learned from this pilot, TRFF expanded efforts to experiment in other vehicles. These included a $2 million investment in Enterprise Community Partners to support green and affordable housing in the Puget Sound region and a $100,000 certificate of deposit with the Thurston Union of Low Income People (TULIP) for community development.
The decision to commit to impact investing, while attractive because of its potential for social good, is not always an easy one to make. There are multiple reasons why people might be reluctant to commit to impact investing, many of which TRFF wrestled with. The first is fiduciary, as people think it can’t consistently produce returns that compare to traditional structures. Second, people may be concerned that selling stocks could mean losing influence over a company. Finally, people often fear failure. By experimenting through a pilot, we were able to demonstrate outcomes and assess processes before committing to a more high-stakes investment, thus alleviating some of the hesitations.
TRFF’s commitment to impact investing was fueled by our core values and history as an organization, and solidified by our hands-on experimentation through a pilot, which was critical to overcoming hesitation. Impact investing is a continuous journey, and one that is not without failures. But fueled by our core values and history as a learning organization, we solidified our practice step by step over time, starting with a pilot to get to the deep commitments we have today. We continue to carry these lessons in our practice today as we journey toward a fully mission-aligned portfolio.
Impact Alpha: The Russell Family Foundation moved most of its endowment to impact...and outperformed its benchmark