Social Investing Expands Reach of Philanthropy

Casey has long worked to empow­er fam­i­lies and cre­ate eco­nom­ic oppor­tu­ni­ty in a strug­gling Oak­land, Cal­i­for­nia neigh­bor­hood, but in 2005, it start­ed using an addi­tion­al phil­an­thropic tool—by mak­ing a social invest­ment as well as grants to fur­ther its mission.

With afford­able hous­ing a key chal­lenge in the Oak­land neigh­bor­hood, Casey’s $2 mil­lion pro­gram relat­ed invest­ment (PRI) and $250,000 grant to the non­prof­it North­ern Cal­i­for­nia Com­mu­ni­ty Loan Fund were ear­marked to finance 300 hous­ing units that low-income fam­i­lies could afford to rent.

“Increas­ing the inven­to­ry of afford­able hous­ing is an essen­tial com­po­nent of the Foundation’s efforts to cre­ate oppor­tu­ni­ties for fam­i­lies in Oakland’s Low­er San Anto­nio neigh­bor­hood,” explains Christa Velasquez, Casey’s direc­tor of social investments.

Designed to pro­vide a soci­etal or mis­sion-relat­ed return as well as a finan­cial return, social invest­ments include two types: PRIs and mis­sion-relat­ed deposits. PRIs are gen­er­al­ly below-mar­ket rate loans, loan guar­an­tees, or equi­ty invest­ments that sup­port char­i­ta­ble pur­pos­es aligned with a foundation’s mis­sion. Mis­sion-relat­ed deposits— typ­i­cal­ly struc­tured as mar­ket rate insured cer­tifi­cates of deposit or share certificates—are made to finan­cial institutions.

Under Doug Nelson’s lead­er­ship, Casey has boost­ed social invest­ing exter­nal­ly and inter­nal­ly, says Sharon B. King, pres­i­dent of the F.B. Heron Foun­da­tion in New York. ​“Doug has been enor­mous­ly help­ful to the mis­sion invest­ing move­ment,” says King. ​“He took on a very pub­lic role in pre­sent­ing the ratio­nale for mis­sion investing—and he took Casey beyond talk to tangible.”

In 2007, Casey joined with Heron and Mey­er Memo­r­i­al Trust, of Ore­gon, to launch the More for Mis­sion Cam­paign, which chal­lenged foun­da­tions to increase ​“social invest­ing” by $10 bil­lion with­in five years.

Casey also helped build the field by co-found­ing the PRI Mak­ers Net­work, an affin­i­ty group of foun­da­tions that make social invest­ments. And Casey, along with Mey­er and Heron, pro­vid­ed sup­port when a lead­ing invest­ment con­sul­tant to foun­da­tions— Boston-based Cam­bridge Associates—created a mis­sion-relat­ed invest­ing group in 2007.

Inter­nal­ly, Casey’s allo­ca­tion of the endow­ment for social invest­ing has grown from $20 mil­lion in 1998 to $125 mil­lion in Feb­ru­ary 2010. Casey devel­oped an expert in-house social invest­ing team and to date has invest­ed $64 million.

“Doug empha­sizes that we use our social invest­ments to make mar­kets work,” says Velasquez. ​“We often go in and either fill the gap by pro­vid­ing the last piece of financ­ing need­ed to make some­thing hap­pen or some­times we’re the very first ones, pro­vid­ing cred­i­bil­i­ty, kind of like the Good House­keep­ing Seal of Approval. Or we’ll finance a project and hope that if it proves suc­cess­ful, our funds will even­tu­al­ly be replaced by the tra­di­tion­al cap­i­tal markets.”

Nelson’s pas­sion­ate advo­ca­cy of social invest­ing as a way for foun­da­tions to spend more of their wealth to do good and to encour­age pri­vate mar­kets to do good has encour­aged more foun­da­tions to take some risk, by mar­ry­ing invest­ments with grants.

“Doug has always rec­og­nized the lim­i­ta­tions of phil­an­thropy, that its resources are finite, and that if we real­ly want to be a game chang­er, we have to lever­age more sources of cap­i­tal from the mar­kets them­selves,” says Gary Hat­tem, chair of the board of Liv­ing Cities, a phil­an­thropic col­lab­o­ra­tive that includes Casey.

For Mey­er Memo­r­i­al Trust, a 2006 speech by Doug Nel­son at the PRI Mak­ers Network’s first con­fer­ence, urg­ing foun­da­tions to not only spend more of their assets but to spend dif­fer­ent­ly, was a turn­ing point.

“I remem­ber being struck by his clear com­mit­ment to going well beyond tra­di­tion­al grant mak­ing and uti­liz­ing all assets of the foun­da­tion to the great­est extent pos­si­ble,” recalls Dou­glas Stamm, Meyer’s chief exec­u­tive offi­cer. ​“It had a sig­nif­i­cant impact on me and my trustees in the audi­ence as well as on oth­er foundations.

“I give Doug, per­son­al­ly, and the Foun­da­tion, with­in the indus­try, tremen­dous cred­it for mov­ing mis­sion relat­ed investing—which is all about hav­ing greater impact in what we do—from a very nascent stage just a few years ago to the main­stream,” says Stamm. ​“It is now one of the most con­se­quen­tial top­ics in the field.”