In a recent interview, Graham Macmillan, Senior Program Officer, Inclusive Economics at the Ford Foundation, spoke with US SIF: The Forum for Sustainable and Responsible Investment about getting more foundations to adopt sustainable and responsible investing (SRI) approaches.
A small but growing number of US foundations are investigating or pursuing SRI. They are embracing the notion that in addition to making grants, they can employ investment and shareowner strategies across their assets to help achieve positive societal outcomes and targeted financial returns.
US SIF: What do you think are the primary reasons foundations have stayed on the sidelines of sustainable and impact investing?
Over decades, many foundations have adopted the mentality that their financial assets are sacred and must be protected. At the same time, foundations are beholden to rules and regulations. For whatever reason, there is a separation here that represents an old way of thinking. Not an inappropriate way of thinking necessarily, but it does not support or reflect what organizations like the Ford Foundation and US SIF are espousing, which is that you can utilize your financial assets or your endowment for a greater purpose then just maximizing returns.
US SIF: Do you think Ford and other foundations who have already committed some or all of their endowments to sustainable and impact investing will be able to galvanize action on the part of other foundations?
I think it will be a collective voice among many foundations demonstrating that endowments can be invested in a way that has a sustainable and responsible impact—a measurable impact. It’s going to be a collective action over a period of time that ultimately drives action.
US SIF: Do you think small and medium-sized foundations will move more quickly in this direction than the largest foundations?
Small and medium-sized foundations play a critical role because, in many ways, they are more connected to communities than larger foundations like Ford Foundation and others may be. The more that they recognize this opportunity—and have the tools and understanding of the rules and regulations that allow them to do this, I think they are actually going to have a greater impact over the long run.
The reality is that we need to build a policy for the next 100 yearsâ€”not just the next six months.
US SIF: What do you think the role of public policy is for foundations in supporting a more equitable and sustainable economy and financial system?
In many ways, public policies are the cornerstone to affecting the behavior of the market. Whether it's actual legislative policy or regulatory change or executive action, there is a range of different tools that can be brought to bear. The reality is that we need to build a policy for the next 100 years—not just the next six months.
Whether it be investment professionals, managers of institutional assets or subject matter experts who know a particular issue very deeply, we need to collectively work together to make policy recommendations because policymakers aren't necessarily experts in these areas. We are all trying to create a more inclusive economy—one that works for everybody and not just for a few. But one of the risks we face in impact investing is that we’re actually perpetuating the inequality we're trying to fight against by having asset owners and asset managers invest in opportunities that should be shared by those that are excluded. So the more that policy recognizes that and reinforces a more equitable approach to investing, the more likely we are to succeed in the long run.