Foundations look to increase impact with responsible investing

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With low interest rates and smaller funds for grants, foundations are looking for another way to increase their impact.

Business ethics expert Christie Stephenson has noted in the last five years a significant increase in foundations redirecting their endowments from traditional investments to companies with social missions. Not only are more foundations interested, she said, they’re willing to invest a larger proportion of their endowments in responsible investing.

“Five years ago, foundations were maybe setting aside one or five per cent of their assets,” said Stephenson. “We’re [now] actually seeing the first examples of 100 percent impact-investing portfolios.”

An example is Inspirit Foundation, she said, which has a 100 per cent impact-investment portfolio.

Stephenson, the Executive Director of the Peter P. Dhillon Centre for Business Ethics at the UBC Sauder School of Business, theorised the low-interest rate environment could be a motivating factor of the recent interest. Foundations realise traditional investment methods aren’t generating a lot of funds for grants given the low interest rates, she said.

“Instead of making money any way then can and then giving grants, they can instead . . . mobilise their [entire body of] assets,” said Stephenson.

The topic begs the question: can responsible investments generate average-market returns or better?

For the foundations Stephenson has studied, at least, “not only has nothing catastrophic happened . . . things have gone very well for them.”

The new field of responsible investing has its growing pains, such as a lack of readily available information for individuals and organisations who want to invest responsibly. Despite the information gap and the nascency of the field, Stephenson is confident that there are opportunities available for those looking to invest responsibly.

“It does take a bit of digging,” she said, but noted there are options available to investors such as socially responsible mutual funds, community economic development funds, and companies like CoPower and WindShare which help individuals invest in renewable energy projects. Resources are also available from the Responsible Investment Association trade organisation.

“If millions of people put even a little bit of money into responsible investing, it would fundamentally change the investment landscape in this country,” said Stephenson.

By Jenny Tan, 27 October 2016