Unleashing the Power of the 95%

Caption TK

In the early 1990s, I was a junior financial analyst for Citibank. I just graduated with a Bachelors degree from New York University, Stern School of Business and was ready to hit Wall Street. Back then there was no impact investing field, no Environment, Social, and Governance (ESG) investing and no conversations on how extractive financial practices enable deep poverty and inequity. I didn’t last that long in my job. I needed and wanted to work in a field that actually creates long-term systemic impact that stays accountable to the communities they aim to serve.

The last eighteen years, I have been working in the social justice philanthropic field and have done significant donor organizing to push the needle in funding women, girls, and LGBT rights in the U.S and globally. Most of the institutions I have worked at have tried to do their grantmaking with integrity and accountability.

The progress has been slow and steady to unlock more funding for social justice organizations to do the deep work of ending structural injustices. But it is now time for philanthropic institutions to look internally and at their endowments where 95% of its wealth is locked up, and unleash its potential towards a more generative, sustainable, and just economy.

For the past thirty years, Jessie Smith Noyes Foundation has been at the leading edge of funding grassroots organizing in the United States. We are a philanthropic institution that keeps pushing the field to do better, whether it is in social justice grantmaking or aligning its endowment towards social justice goals. At Noyes, we have a mantra that the activation of our endowment — the 95% of our investment capital — MUST be mission-aligned. This concept isn’t the norm because many foundations believe that mission-aligned investing doesn’t equal increased financial return and will diminish its asset base.

However, there are numerous studies that have shown that impact investments can outperform the market. Demand for socially responsible funds and investments are also being driven by many millennials with wealth who are demanding their traditional wealth managers to look at these financial vehicles. At its core, the impact investing field is trying to bring finance back to balance that seeks a socially and environment just society.

I believe justice-oriented philanthropic institutions that aren’t using a mission-aligned investing approach are obstructing the effectiveness of the social justice field.

At Noyes, we seek to invest our $65 million endowment in companies that provide commercial solutions to major social and environmental problems and/or build corporate culture geared toward advancing equity, opportunity, and community.

The Foundation will consider:

  • The environmental impact of a business by its use of materials, generation of waste, and the goods it produces or services it provides;
  • Issues of corporate governance, including selection of directors, role of independent directors, diversity on the board and executive team, compensation policies, relations with labor unions, employee benefits programs or other demonstrated commitments to the well–being of all individuals involved in an enterprise; and
  • A corporation’s openness and accountability to all stakeholders, its local job creation, its corporate giving to and active involvement with community organizations, or its other initiatives that provide net benefits to the local economy.

With the fierce urgency of now, we’ve also leveraged our power as asset holders to push the investment advisor community to think more deeply and critically about how to advance the field of social impact investing.

In fact, in our recent search for a mission- and values-aligned investment advisor, we used the LOI process to pose questions to the investment advisor community about the future of social justice investing, and the appropriate strategies for achieving truly equitable returns. The Noyes board was hopeful that this search will help educate the Foundation on the state of the impact investing field and the options for an investment manager that can provide comprehensive services as well as secure involvement from the Foundation board and staff in investment selection and criteria that is mission aligned.

Given the accelerated pace of innovation and growth in the sustainable, responsible and impact investing field; we had an open call to the investment community to provide letters of interest as the first stage of our advisor search. We asked some critical questions in this phase:

  • What does “social justice investing” look like now and in the future?
  • What does corporate accountability mean in an era of globalization of capital and supply chains? How does this translate into portfolio selection?
  • How can our mission aligned investment portfolio drive the creation of systemic impact in the areas of social justice, equality, human rights, health, and diversity?
  • How can the practices and culture of our investment advisors and fund managers embody our values and mission of social justice and equality?
  • What investment resources do the grassroots social justice organizations, Noyes support need in order to develop sustainable and viable operations?

The board also decided to share the results of the broader field questions with the philanthropic and investment community. In June, we released a report of the key takeaways from our investment advisor search that provides a snapshot of the current state of the investment advisor community’s ability to integrate social impact into the investment process. At a high level, the process confirmed two broad observations about the world of investment advisors for foundation investments.

First, impact investing services are proliferating that combines traditional portfolio management discipline and access to products with commercial returns. This debunks the theory that impacting investing is niche.

Second, the investment advisor field lacks diversity whether internally and/or a diversity of managers in firms’ databases. The investment profession remains overwhelmingly white and has a way to go in reflecting the diversity of America, where the population of African-Americans, Hispanics, Asians and other people of color is growing. More than 79% of the 434,000 financial advisers in the nation are white with people of color representing 27.7% of financial analysts, 26.7% of accountants and 35.3% of tax preparers, according to U.S. Census data.

Ultimately, working with investment advisors will require active engagement and open communication about our aspirations for organizational change in the industry and our firm belief in social justice investing.

Noyes will have to continue to be a financial activist in the impact investing field and ask directed questions on race and gender, the social and environmental value-add of particular investment managers, and ways to engage low-resourced communities into the work to make it truly accountable and have real impact.

The urgency of now — from immigrant families being torn apart to the criminalization and divestment of low-resourced communities — compels the Noyes Foundation to keep pushing within our grantmaking and investments to become more committed, knowledgeable and skilled for justice and equity. I hope that anyone working on foundation endowment management will critically explore the full activation of mission aligned investing for long-term systemic change. Please join me on this investment journey to regenerate our land, invest in people powered solutions, and build a beloved community.

This post was written by Rini Banerjee, Interim Executive Director at Jessie Smith Noyes Foundation, and originally published as part of “Liberate Philanthropy,” a new blog series curated by Justice Funders to re-imagine and practice philanthropy free of its current constraints — the accumulation and privatization of wealth, and the centralization of power and control — to one that redistributes wealth, democratizes power and shifts economic control to communities. Throughout the series, we will be sharing stories from some of our most forward thinking, transformational leaders in philanthropy about how they are facilitating a Just Transition for philanthropy.

New White Paper on Social Impact Investing

Building Power Across the Impact Investment Field
Our newly-released white paper

We in philanthropy must take our missions more seriously now than ever before. At the Jessie Smith Noyes Foundation, we believe that both our grant making and our investment strategies must be mission-aligned and work concurrently towards a more just, equitable, and sustainable world. The Foundation underwent a seven-month-long search to find a new investment advisor to help us further advance our mission-aligned investing strategies. During our search, we asked potential advisors key questions about how they connected with our values and goals as a social justice investor and grant maker; what “social justice investing” looks like now and in the future; and many more.

We are pleased to announce the release of a white paper that captures the findings from that search.

“While there is growing interest in and demand for social impact investing, there is very little documentation of how investment advisors operate, leaving social impact investors with few tools to navigate that space,” said Steven Godeke, Board Chair of the Jessie Smith Noyes Foundation. “Our white paper is an attempt to demystify the sector—and build greater accountability—by surfacing the themes that emerged from our open inquiry to the impact advisor community.”

The white paper, titled “Building Power Across the Impact Investment Field,” offers full transparency on the Jessie Smith Noyes Foundation’s overall search process, including the historical context behind the foundation’s impact investments, the questions that were posed to the investment advisor community (with a deliberate lens on gender, race, and inclusion), its evaluation criteria for selecting a firm, and recommendations for foundations interested in taking similar steps.

The paper synthesizes a number of findings gleaned from thirty-four responses to Noyes Foundation’s Open Call for Letters of Interest. “We were pleased to see so many thoughtful responses,” said Lenora Suki, Finance Committee Chair of the Jessie Smith Noyes Foundation. “Still, the industry’s understanding of impact investing ranges widely. Investment products have grown but we need new products to fill gaps across asset classes.”

Another significant finding is the apparent shortage of women- and minority-led firms, leading to a dearth of expertise on how to address gender and racial equality through investments. The report also points to some promising opportunities, including the accelerating pace of innovation in the field, and the important role that philanthropies can play in advancing the sector, through knowledge sharing, collaborative investments, and shareholder advocacy.

“Our hope is that this paper will inspire anyone managing foundation endowments to explore opportunities for mission-aligned investing to generate long-term systemic change,” said Interim Executive Director Rini Banerjee. “We invite the sector to join us in this investment journey to regenerate our land, invest in people-powered solutions, and build stronger, more sustainable communities.”