The proverbial elephant in the room when it comes to talking about endowment impact portfolios is public equities—commonly traded stocks and bonds. With few exceptions, most foundation endowments are overwhelmingly comprised of them. Even the small minority of impact-focused foundation endowments often hold significant allocations of public equities, including SK2, but we are steadily reducing our exposure from around 80% of our portfolio to eventually about a third of it. We encourage other impact-focused foundations to consider moving in the same direction.
Beyond screening for and divesting from harmful industries and controversial companies, measuring the social or environmental impact of public equities is notoriously difficult. SK2 has comprehensive screens in place prohibiting investment in certain industries we believe to have outsize negative impact on people and planet. We invest in companies widely considered industry leaders in ESG (environmental, social, governance), largely through investment funds led by women or persons of color. But beyond investing to promote diversity and minimize harm, how can we feel better about the positive impact publicly traded companies can create?
One strategy we’ve adopted is investing in diverse-led, impact-focused, activist investment funds— such as Nia Impact Capital, Boston Common, and Adasina Social Capital. Such funds actively participate in changing corporate behavior by presenting shareholder initiatives to improve internal policies. Some also organize broader coalitions of investors to exert even greater pressure on corporate management and public policy to eliminate harmful practices.
At the end of the day, we don’t have a strategy or bandwidth for measuring the impact of our public equities, beyond digesting impact reports from the activist funds we’re invested in. We see impact far more easily measured in our private sector investments, where creating positive social or environmental impact is the main reason our investees exist, rather than maximizing external shareholder value.