Aligning Investments with Impact: Lessons from Pioneering Foundations
by Sandy Carvajal, Impact Manager at Brightlight
At Brightlight, we've seen growing interest from philanthropic organisations looking to align their investment portfolios with their mission and values. But for many, taking those first steps can feel daunting.
That's why I was thrilled to recently host a conversation with leaders from three foundations at different stages of their responsible and impact investing journeys. Their candid insights offer a valuable roadmap for others looking to get started or expand their approach.
The Case for Change
Why should trusts and foundations consider responsible and impact investing in the first place? As Daniel from Australian Communities Foundation pointed out, there's an inherent contradiction in funding environmental protection through grants while simultaneously profiting from companies causing environmental harm through investments.
We've found that donors and stakeholders are increasingly pushing foundations to address this disconnect. There's also growing recognition of the tremendous opportunity to amplify impact by activating investment capital alongside grantmaking.
Importantly, the data now clearly shows there's no financial trade-off required. As Daniel noted, responsible investing has been demonstrated to enhance returns over the long-term. This allows foundations to remain true to their values while still meeting their fiduciary duties.
Getting Started: Key Success Factors
For foundations just beginning to explore this space, our speakers emphasised several factors that enabled their initial progress:
Internal Champions and Expertise
At Minderoo Foundation, having an internal advocate in their Chief Investment Officer was crucial for building momentum. He conducted extensive research and consulted with other foundations to inform their strategy.
We've seen how valuable it can be to have someone on staff or the board who is passionate about driving this agenda forward. But external expertise can also play an important role, especially for smaller foundations.
Governance and Policy Changes
All three foundations highlighted the importance of reviewing and adapting governance structures. This included expanding investment committee membership to bring in diverse perspectives beyond traditional finance backgrounds.
Updating investment policies was also key. As Daniel described, ACF "turned their investment policy upside down" to incorporate responsible investment objectives alongside financial goals.
Public Commitments
Making a public commitment to responsible investing helped sharpen ACF's focus and create accountability. We've found this can be a powerful catalyst for sustained action and progress.
Learning from Peers
A common theme was the value of learning from other foundations further along in their journeys. The philanthropic sector tends to be very open to knowledge sharing in this space. As Cronje from Minderoo advised: "Talk to your peers - there are so many people happy to help get you on the right track."
Evolving the Approach
As foundations progress on their responsible investing journeys, our speakers highlighted several ways their approaches have evolved over time:
Broadening the Toolkit
Minderoo initially focused only on commercial investments aligned with their program themes. But they found this limited their ability to support emerging social enterprises and catalytic impact first opportunities.
We're increasingly seeing foundations expand their capacity to include a spectrum of capital - from grants to catalytic investments to market-rate impact investments. This allows for a more nuanced approach tailored to specific impact goals and market needs.
Market Building
Foundations like Minderoo are recognising the need to play a market building role - not just deploying capital, but helping develop the ecosystem and pipeline of investable opportunities. This is especially important in nascent impact areas.
Active Ownership
ACF is exploring how to more effectively leverage their position as investors to drive change through stewardship and engagement. We see growing interest in this as a complement to responsible investing approaches.
Measurement and Learning
All three foundations emphasised the importance of robust impact measurement and management. As Cronje noted, this allows them to understand what's working, adapt their approach, and clearly articulate the outcomes achieved.
Overcoming Challenges
Our speakers were refreshingly candid about the challenges they've faced. Some key ones included:
Balancing diverse stakeholder perspectives, across staff, advisors, and investment committees
Finding the right investment advisors with the alignment and capacity to execute their impact goals
Navigating any legal and structural constraints
Deploying capital at scale, especially for larger foundations
But they all emphasised that these challenges can be overcome with persistence and creativity. As Daniel advised: "Don't let perfection be the enemy of good. Any step is a positive step."
Looking Ahead
It was exciting to hear about the innovations on the horizon. Reichstein Foundation is collaborating with peers on an "Endowments for Impact Challenge" to stimulate more tailored responsible investment advice for the sector. Minderoo is exploring new ways to provide catalytic and patient capital to build the pipeline of investible opportunities for others.
These initiatives point to the dynamic nature of this space. We're continually seeing new possibilities emerge for foundations to activate their investments for impact.
Getting Started: Next Steps
For trusts and foundations considering taking their first steps, our speakers offered some practical advice:
Start with conversations - reach out to peers who have already begun this journey
Review your investment policy and governance structures with values aligned advisors
Engage your board and investment committee in discussions about aligning investments with mission
Consider making a public commitment to responsible investing
Explore working with an advisor experienced in this space to map out next steps
The key is to just get started, recognising it's an ongoing journey of learning and evolution. As Cronje noted: "You're never going to get it right from day one. Be prepared to continue learning, but you've got to start somewhere."
At Brightlight, we're excited by the growing momentum we're seeing in this space. By thoughtfully aligning their investments with their values and impact goals, trusts and foundations have an incredible opportunity to amplify their positive influence in the world. We look forward to supporting more organisations on this rewarding journey.
Contact Ivan Chew, at ichew@brightlightimpact.com to learn how Brightlight can support your foundation's impact journey.