Mission Possible: How Foundations Are Shaping the Future of Impact Investing
Mission Possible: How Foundations Are Shaping the Future of Impact Investing
This series, produced in partnership with Mission Investors Exchange, will explore what’s next in impact investing and what we can learn from some of the most innovative foundations.

Mission investments are a proven tool that enables us to seize time-sensitive opportunities and grow promising innovations in ways we could not with grants alone. These investments help attract new sources of private capital to the issues we care about and recycle resources to make more dollars available over the long-term. Since our first mission investment in 1980, the Packard Foundation has made more than 250 investments totaling $750 million, dedicating up to $180 million of our endowment at a given time.

While mission investing is not a new strategy for the foundation, our approach to it has evolved significantly over the years. In the early days, we primarily made simple bridge loans to help our grantees and other nonprofit organizations own and upgrade their facilities to better serve local communities, and to enable large-scale conservation land acquisitions in the American West. Today, we support an ever-wider array of creative investments for both nonprofit organizations and mission-driven, for-profit ventures that are attracting and working with new sources of private capital and co-investors. For example, we were a founding investor in the funds of  Ecotrust Forest Management, which attracted a range of private impact investments and tax credit equity to support and expand its sustainable forestry and conservation work. We have also found ways to use venture financing to increase women's access to affordable, quality reproductive health choices. In the 1990s, we made a loan that brought Plan B, “the morning after pill,” to market for the first time in the United States. More recently in 2013, we invested in the launch of Afaxys Pharmaceuticals, which has grown to be one of today’s leading providers to ensure affordable reproductive health products for women through public health clinics nationwide.

Throughout this evolution, we have always had an “impact-first” approach. Our mission investments are tied to our grantmaking, and prioritize social and environmental impact over financial returns. We use mission investments to develop promising innovations and ideas that support the policy and systems change we seek.

Currently, we are doubling down on climate change, which we believe is the defining issue of our day, and finding opportunities for private investments to amplify and speed up our efforts to mitigate greenhouse gases. Climate change is an urgent threat that has the potential to undermine everything we care about as a foundation, and we are looking at all of our tools to see how we can most effectively address the issue at scale and reduce carbon emissions as quickly as possible. In 2011, we provided a $1.5 million start-up loan to launch a global certification system, the Roundtable on Sustainable Biomaterials, to encourage the biofuel supply chain to adopt more environmentally sustainable practices. The same year, we invested in one of the first carbon investment funds, the EKO Green Carbon Fund, as a model for attracting private capital to projects that reduce carbon emissions. Since then, we have made a range of mission investments to spur financing for renewable energy, and promote more sustainable forestry and agricultural practices to reduce greenhouse gases.

As we look to make an impact on climate change over the next 5-10 years, we are experimenting with three new approaches:

1. Investing in bigger and more diverse collaborations that can attract new resources, create more opportunities to address problems at scale, and allow opportunities for investors of all types and sizes to participate together. A great example is our recent growth capital loan to SunFunder, a global financing intermediary created to provide much-needed debt capital to deploy solar home systems in developing countries. Our early, low-interest growth capital loan of $3.5 million is helping SunFunder prove its model; build a track record to attract larger investments from public and private investors, including the Overseas Private Investment Corporation; and expand its financing for clean, renewable energy solutions from Africa to geographies worldwide. By unlocking capital for solar energy in emerging markets, there is the potential to bring renewable, reliable energy access to millions of people.

A small kiosk in Uttar Pradesh lit up by microgrid solar. (Photo courtesy of SunFunder)

2. Moving upstream to support market development. We are seeking more innovators like SunFunder—groups with promising solutions that need early-stage growth capital to quicken and grow their efforts—but finding such investable opportunities remains a challenge. So, looking forward, in the climate arena we plan to go one step further, moving upstream to help jumpstart and build future climate investment opportunities for ourselves and other investors, instead of waiting for the market to create them. For example, with the MacArthur and Hewlett foundations, and in partnership with the US and Indian governments, we are launching the US-India Clean Energy Finance initiative. The initiative will provide early-stage grants to develop renewable energy projects and companies, and get them ready for future investment by philanthropic and private investors that can take them to scale.

3. Tightly integrating mission investing and grantmaking. To make these new approaches work, our climate grantmaking and mission investing teams will need to work more closely than ever, and learn from each other’s different approaches. In the past we created grantmaking strategies and then looked for mission investments that fit them. Moving forward, we are developing climate mitigation strategies that incorporate both grantmaking and mission investing from the outset. We will need to assess which innovations and investments can realistically support the policy and systems change we are working toward, and ask ourselves, how do we measure impact? We are also increasing our external collaborations with the ClimateWorks Foundation, and other climate grantmakers and investors. Our goal is to coordinate our grantmaking and mission investing, and to explore new platforms that attract more diverse, larger grant and mission investment capital to renewable energy and other climate mitigation projects.

As we pursue new efforts to accelerate the use of mission investments to address climate change, the barriers and challenges are real. These initiatives can be complicated and time-intensive, and internally, we face growing pains as our staff work together in new ways that stretch resources and capacity. But we are optimistic that there is a role for us to play. We hope through collaborations like those described above, efforts will become easier for all foundations that seek to use both grants and mission investments to address climate change and other urgent challenges facing our world today.