US foundations could better promote ESG principles as well as fulfill their core goals by more actively voting proxies, filing more shareholder resolutions, directly engaging with companies and considering a switch in investment managers, according to the Forum for Sustainable and Responsible Investment (US SIF).
The US SIF’s newly released investment guide suggests foundations can work toward their key goals more effectively by employing a series of strategies, rather than just relying on the money in their endowments. The guide also suggests foundations can promote ethical change by joining shareholder coalitions such as the Ceres Investor Network on Climate Risk and the Thirty Percent Coalition, which seeks to boost female representation on boards.
‘Typically, foundations allow their financial managers to make as much money as possible any way they can so they’ll have more to give away in grants. But foundations exist to leverage social change,’ notes John Powers of the Educational Foundation of America in the guide. ‘Therefore, foundations have a fiduciary responsibility to the public to use every tool and means available to them, including managing their endowments to complement their grant making to achieve social or community benefit.’
The US SIF guide is meant to encourage foundations, including the $36 bn Bill & Melinda Gates Foundation, the $11 bn Ford Foundation, the $9 bn Robert Wood Johnson Foundation and others to consider SRI in their investment decisions as well as in their core activities.
The guide suggests foundations can adopt strategies such as actively targeting companies that follow ESG principles for investment, shunning companies with poor records and investing with an eye to specific issues such as climate change, water or human rights.
Foundations with a focus on the health field should consider avoiding investment in tobacco companies and others known for a negative impact on health, the report says. It also suggests environmental foundations could choose only investment managers that assess companies on sustainability criteria, and foundations that promote diversity can tap shareholder activism to promote board diversity at the companies they invest in.
