Nathan Cummings report offers insights into mission-aligned investing

Nathan Cummings report offers insights into mission-aligned investing

A report from the Nathan Cummings Foundation examines the challenges of and opportunities for mission-aligned investing and offers resources for institutional investors interested in shifting to such a strategy.

The foundation announced in 2018 that it would "align 100 percent of [its] nearly half-billion dollar endowment with [its] mission of creating a more just, vibrant, sustainable, and democratic society," with a focus on the climate crisis and growing inequality. Based on a landscape study of the field and the foundation's own experience implementing a "total-enterprise approach to impact," the report, Values Proposition: How and Why We Transformed Our Investment Model to Align Our Capital with Our Mission, found that while there is no negative correlation between the percentage of mission-aligned assets in a portfolio and the financial performance of that portfolio, the use of traditional measures of performance can serve to screen out younger and more diverse fund managers, stifling innovation and growth.

The report notes that portfolios designed to create impact invariably start with an organization-wide commitment to an inclusive, anti-racist approach. But by not truly engaging fund managers on issues of diversity and inclusion, ESG, and impact, traditional investment advisors often function as a barrier between investors and their values. "We believe mission-driven institutions need to reexamine this arrangement and establish new ground rules, new forums, and new modes of access to ensure the transmission of values and priorities is direct and strong," the report's authors write.

The study also found that impact measurement and management is still "a work in progress," with most impact portfolio managers aligning their metrics with the United Nations Sustainable Development Goals and only a few fully integrating more widely accepted ESG or impact metrics or measures of social, racial, or economic justice. "If mission-aligned investing is to realize its potential as a tool for achieving systems change — if we are to create real and lasting impact," the report's authors argue, "then we must test our social justice thesis at each step of the investing process."

Among other things, the report outlines the foundation's journey from the board's unanimous decision to shift its entire portfolio into impact investments to the lessons it has learned along the way. In August 2020, the foundation began to apply a racial equity lens to its investments, and a subsequent analysis found that while, as of the end of the year, 28 percent of the foundation's portfolio was managed by funds majority-owned or managed by women and/or people of color, only 9 percent had applied a racial equity lens to their underlying investment decisions.

According to board chair Jaimie Mayer, the foundation "will keep asking [itself] what more [it] can do to 'go to the place that is your own' and bend the arc of [its] philanthropic journey toward justice."