Some years from now, we will look back on a conversation around foundations and their endowments that followed this arc:
Phase One: Nobody pays much attention to what foundations are investing in even as a few pioneers take up the cause of program-related investments.
Phase Two: Deploying endowment capital for "impact investments" becomes hot, but the scale of such investments remains small. Meanwhile, talk of "disinvesting" in bad companies is only just getting going and foundations are only occasionally criticized for investing in companies that work at cross-purpose with their grantmaking.
Phase Three: Foundation portfolios are routinely put under a magnifying glass and foundation leaders find themselves loudly and publicly criticized if they're investing in socially irresponsible companies. Meanwhile, foundations that don't engage in significant impact investing are seen as backwater operations that are underperforming as a matter of course.
Phase Four: Most large foundations are mainly invested in socially responsible companies and engage in significant impact investing, meeting standards in both areas set by an outside body. Outliers face peer pressure and stigma, and even sanctions of some kind.
By my reckoning, we're now in Phase Two, but heading toward Phase Three. And I'd bet money that we'll see Phase Four in the next ten or twenty years.
A new article in The Nation magazine criticizing the Gates Foundation for investing in rogue companies is part of a rising tide of such scrutiny, while 17 foundations recently pledged to disinvest from fossil fuel companies. As for impact investing, we all know how hot that's getting.
So my question for foundations everywhere is this: Do you want to be behind this curve or ahead of it?