hands full of coins

Why foundations should invest their endowments for impact

A £72bn question

By Laura Boyle and Matthew Mannix 1 September 2022 5 minute read

A £72bn question: Why foundations should invest their endowments for impact

This guest blog on why foundations should invest more of their endowments in impact investments is by Laura Boyle and Matthew Mannix. Laura Boyle is Head of Stakeholder Engagement at Snowball. Matthew Mannix is an independent philanthropy and impact investment consultant. Snowball offers investors a long-term diversified investment vehicle, its portfolio of funds is actively managed for robust and measurable positive impact. A version of this blog was originally published on Snowball’s website on 20 July 2022.

According to the Association of Charitable Foundations’ Foundation Giving Trends 2021 report, the UK’s largest 300 charitable foundations have over £72bn in total assets. Unfortunately, most of these assets are invested in mainstream capital markets with little consideration of impact.

While foundations have started recognising that ESG issues are material to their endowments’ financial performance, there is a growing recognition that simply moving towards responsible and sustainable investment strategies will be insufficient for meeting our social and environmental objectives. (For instance, see the statement by CCLA’s Head of Responsible & Ethical Investment, James Corah, in the EIRIS Foundation’s report Responsible Investment in Charity Pooled Funds).

The Impact Investing Institute define impact investments as: ‘Investments made with an explicit intention to generate positive, measurable social and environmental impact alongside a financial return… [I]t goes beyond responsible and sustainable investment approaches and is ultimately about contributing solutions to environmental and social problems—not just managing the risks associated with them.’ Investing endowments in impact assets, such as alternative energy technology providers, social housing real-estate investment trusts, and earned wage access companies, can help foundations to put more of their resources toward directly combatting these urgent issues.

Given the increasing urgency with which we need to tackle pressing challenges—including the cost of living and climate crises—we need more trusts and foundations to allocate more of their endowments to impact investments.

Foundations that are leading the way

A group of pioneering foundations have already started transitioning their endowments toward impact investments. Toniic’s T100 study lists 18 foundations that have committed to ensuring 100% of their investment portfolios are aligned with their charitable missions. Snowball co-owners and investors The Golden Bottle Trust and the Panahpur Trust have also committed their entire investment portfolios to achieve an intentional, positive social and environmental impact.

As key sector bodies such as the EIRIS Foundation, the Association of Charitable Foundations, ShareAction’s Charities Responsible Investment Network and the European Venture Philanthropy Association (EVPA) are calling for foundations to allocate more of their endowments toward investments that generate a positive impact, more foundations are considering how they can use their endowments to further their charitable missions.

Click here to see a timeline of significant moments in investing endowments for impact, from 2011 to the present day.

Myths around impact investments

According to the Impact Investing Institute’s report Investing with impact in the endowment, there remains a lack of impact investing from endowments by UK foundations due to a few misperceptions related to impact investing.

Firstly, foundations can legally use their endowments to make impact investments. Legal experts now agree that endowed charities are permitted to invest their endowments to seek both financial and mission-aligned social or environmental returns, including lawyers from the law firms Bates Wells and Herbert Smith Freehills. The legal basis for investing a foundation’s endowments in impact-focused assets was also further clarified by the landmark High Court judgement of Butler-Sloss V Charity Commission. (See Bates Wells’ explanatory note highlighting the ten key legal principles the judge outlined that apply to charity trustees when investing).

Secondly, impact investments can obtain market-rate returns. There is now a good evidence-base demonstrating that risk-adjusted market-rate of returns and impact co-exist. For instance, the Global Impact Investing Network’s 2020 Annual Impact Investor Survey of 294 impact investors found that 67% of respondents were able to obtain risk-adjusted market-rate returns. (Remember here that many impact investors intentionally invest for below-market-rate returns to finance initiatives where they consider the potential positive impact large enough to accept a lower financial return). And 88% of respondents said that their investments’ financial performance was either in line with or exceeded their expectations.

And finally, products exist that can make impact investing less complicated and more affordable. Making direct impact investments is a more technical exercise than regular investing as you need to assess an investment’s potential financial performance and its potential social or environmental impact. However, there are now many funds that can make investments on a foundation’s behalf across a range of asset classes—including venture capital, private equities, public equities, fixed income and credit, and real assets.

Meeting the challenges we face

Philanthropic foundations are often criticised as overly cautious and conservative and for misdirecting their resources in ways that sustain and exacerbate the systemic and underlying root causes of the problems they claim to be tackling. At a time when a global cost of living crisis is compounding the effects of poverty, and Europe has recently experienced record-breaking temperatures, we are reminded that we exist at a pivotal moment for diverting more investment toward meeting social and environmental challenges.

We strongly echo the call of the former President of The Heron Foundation, Clara Miller, to investment decision-makers of charitable foundations, to ‘lead, not lag’ when it comes to aligning investments with our social and environmental goals. Now is the time to put the £72bn to work, using it to impact invest in solutions to meet the challenges we face.


If you are interested in using your foundation’s endowment to further its charitable mission, consider attending this peer-to-peer learning event on Utilising endowments for mission hosted by Snowball investors the Friends Provident Foundation and the EIRIS Foundation.


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