The LA Times has run a two part series on the investment policies of the Bill & Melina Gates Foundation (you can read part one here and part two here). The gist of the stories is that the companies that the Gates Foundation has invested in are causing some of the very problems that the Gates Foundation is making grants to try to overcome. The Gates Foundation has already responded to say that they will be reviewing their investment policy.
Some people see this as a story about socially responsible investing. But, I think that this story highlights the key need for private foundations and other philanthropic entities to view the management of their resources (their investment assets) as one of their core responsibilities rather than something apart from the foundation (full disclosure: I am an investment manager who specializes in managing philanthropic assets).
Lucy Bernholz at Philanthropy 2173 says:
“Maybe there is a moment here – a moment for foundation executives and trustees to ask these bigger questions. What can philanthropic resources accomplish? How should they be structured to do so?”
Trent Stamp the president of Charity Navigator says:
“So what’s the real problem here? It’s a case of the foundation’s program officers and investment strategists simply not being on the same page. This is an all-too-common practice in a sector where one side of the organization is charged with saving the world, and the other needs to raise money to support the do-gooders.”
That’s the key, foundations need break down the separation between investment management and grant making and make sure that everyone is working together. This is obviously self-serving, but at Ensemble Capital we talk constantly about the need for philanthropic entities to work with investment managers who understand philanthropy.
Think of the leaders of the grant making programs as the CEO and the leaders of the investment management side as the CFO. Imagine if a business was operated with the CEO and CFO pursuing different objectives and using different strategies. The business would be handicapped and could only achieve limited results. The same is true in philanthropy.