Mission-Related Investing for Individuals

In my column on the future of wealth management and philanthropy that appeared in Wealth Manager magazine last November I wrote:

“Mission related investing (MRI) is the term used to describe investments made by philanthropic entities in the pursuit of both financial and social returns. Unlike traditional socially responsible investing that relies on “negative screening”—the avoidance of public companies that do not pass certain social criteria—MRI implies proactively seeking investment opportunities that produce a blend of financial returns and social impact that are in line with the philanthropy’s mission. Still an emergent issue, MRI is characterized by limited deal flow, especially in deals that have minimums low enough to allow widespread participation. But MRI brings philanthropic advising directly into the domain of the wealth manager.”

Now, it appears that the Calvert Giving Fund has taken a significant step towards increased deal flow and lower minimums that should make it much easier for wealthy individuals and smaller foundations to participate in a strategy that has largely been the domain of institutional foundations.

The Calvert Giving Fund is a national donor advised fund. Like Schwab Charitable, Fidelity Charitable Gift Fund and the Vanguard Charitable Endowment, Calvert provides low cost donor advised fund administration without providing advice on where to give. While structured as a nonprofit, the group is affiliated with Calvert Investments, a leader in socially responsible investing.

For some time the Calvert Giving Fund has offered social responsible investment options to their donor advised funds, as well as “community investment notes” that pay a below market rate of return and finance community development projects. Now they’ve added a Global Impact Ventures Platform. The platform currently offers access to five mission related investment options:

• Acumen Fund: 10 year Senior Note (debt), 3% interest either paid or compounded into the principal
• LeapFrog Investments: Equity Investment into Limited Partnership with 10 year life
• MicroVest: 7 year equity limited partnership
• Public Radio Fund: Promissory Note, 3 years at 0% or 5 years at 4%
• Root Capital: Promissory Note, 3 years at 3% or 3 years at 0%, senior tranche

The investments all offer social impact in addition to a financial return. You can read summaries of the social impact potential here.

The really big news is that there is a minimum of only $25,000 to invest in each fund. Community foundations and national donor advised funds have a huge opportunity in the MRI space, because they can aggregate their donor/client’s investments into an investment in a fund like those above and count as a single investor. In other words, while a certain investment might have a $250,000 minimum, a community foundation or national donor advised fund can bring 10 of their donor advised funds in at $25,000 each and reach the minimum.

If an investment advisor or individual wants to invest in traditional profit driven investments, they can open an account at Schwab or Fidelity and have access to thousands of mutual funds, every publicly traded stock and bonds. If you buy stock, you don’t have to call the company, you buy it directly on the broker’s platform. Same thing if you buy a mutual fund. Now the Calvert Giving Fund has created a platform for mission related investing that integrates with existing financial markets.

Very cool. I hope that they are successful in marketing the program to advisors and individual philanthropists. I also hope that institutional foundations that care about mission related investing make some investment on the Calvert platform to help them grow.

Sean Stannard-Stockton is a principal and director of Tactical Philanthropy at Ensemble Capital Management. Ensemble Capital provides families both traditional investment management and philanthropic planning. He is the author of the blog Tactical Philanthropy and writes the column On Philanthropy for the Financial Times.

Read more stories by Sean Stannard-Stockton.