5. Use all your assets
At a time of crisis, it is all the more important for funders to think about how to leverage all their assets and types of power—not just grant-making—in pursuit of their goals. This might mean aligning your investment portfolio with their mission, influencing other funders, investing in sector capacity, convening people around a shared goal, or commissioning research into what works.
The pandemic has accelerated existing trends of driving more capital to respond to social and environmental challenges, but it has also spurred innovation around the world in terms of new investment platforms, vehicles and collaboratives—some of which are outlined below. Flows into sustainable investment funds have been on an upward trajectory for some time, but Covid-19 appears to have accelerated this trend, acting as a ‘wake up call’ for investors to consider the impact of their capital. Flows into European sustainable funds, funds that incorporate environmental, social and corporate governance (ESG) criteria in their investment process, more than doubled in Q2 2020 compared to the previous quarter and remained at this high level (€53bn) in Q3. In a survey of wealth holders and family offices, 69% of respondents said Covid-19 had affected their views of investing.
Actions funders can take, building on existing trends or recent innovations, include:
Consider how your investments are managed
There is an increasing trend for charity investors (foundations as well as operating charities) to re-assess their investment strategies. According to a Cazenove Capital survey of 295 charity investors, 77% of respondents decided to implement an investment policy linking mission and aims to their investment strategy, compared to 59% of respondents in 2015 and 23% in 2010. As part of the ACF’s Stronger Foundations initiative, a report was published in July 2020 which maps out seven pillars of strong investment practice for foundations, with clear guidance and examples of other foundations taking action.
In an interesting collaboration, three foundations—the Friends Provident Foundation, the Joffe Charitable Trust and the Blagrave Trust—came together in 2020 to run an open selection process, the ESG Olympics, to appoint an investment manager for a portion of their joint funds to maximise the social and environmental impact of those investments.
As the world recovers from Covid-19, ESG issues are becoming ever more central to investment decisions for increasing numbers of investors who desire a more sustainable, equitable and stronger society.
Look for impact-related investment opportunities, especially those worsened by the pandemic
Covid-19 has driven or accelerated innovation within impact investing, enabling funders to address issues that matter to them through investment opportunities, not just through grants. There are several platforms and networks to make it easier to find these opportunities, such as Good Finance or the ACF’s Social Impact Investors Group.
On a more international front, the Global Impact Investing Network (GIIN) formed the Response, Recovery and Resilience Investment Coalition (R3) to increase the scale and effectiveness of impact investing in tackling Covid-19 and its effects. The coalition aims to mobilise and co-ordinate impact investors around the world to deploy capital to high-impact investment opportunities responding to the crisis, particularly relating to health, connecting investors to each other, showcasing investment opportunities and sharing learnings, insights and resources to support economic recovery.
Just as philanthropic funders are streamlining their grant-making processes to get money out the door more quickly, the same is happening within the impact investing community. For example, some investment committees are meeting more frequently to approve investments, or making it simpler and quicker to apply for a loan.
Think creatively about using your assets to increase your grant-making capacity
Five US foundations, including the Ford Foundation and the MacArthur Foundation, announced a major innovation in 2020 of issuing social bonds to fund a significant Covid-19 grant-making programme. Between them, the five foundations anticipate over $1.7bn of increased grant-making over two years. Essentially through borrowing long-term money against their assets, each foundation could increase their payout without having to dip into their endowments.
Although a bond issuance on this scale is out of the realm of most funders, it is an important signalling effect for funders to explore ways in which they can better leverage their assets for more impact or increase their grant-making capacity. For example, some endowed funders may decide to spend-down to tackle the immediate crisis rather than last in perpetuity. At the very least, all foundations should regularly review their payout ratios.
Use your voice to influence change
In recent years, more and more funders are getting involved in influencing work, often attracted by the idea of addressing root causes to amplify their impact. In NPC’s review of how funders can use their influence for good, we highlight the importance of funders committing for the long term if they want to effectively influence social change.
For this reason, it is not surprising that many of the funders who have used their voice to influence change during the Covid-19 crisis have a long track record of this type of work. For example, Trust for London has built on its research track record to highlight how Londoners living in poverty have been hardest hit by the pandemic and to amplify the voices of people with lived experience in poverty. The Health Foundation used its young people’s future health inquiry as a platform for highlighting the issues facing ‘Generation COVID-19’.
Share your knowledge and learning
Funders can accumulate a significant body of knowledge from their work across the sector. Over the course of the Covid-19 crisis, funders have often had more bandwidth than their grantees to keep up to date with sector-wide trends.
Funders like Paul Hamlyn Foundation are sharing what they are learning from how their grantees are adapting through Covid-19. Others like Esmee Fairbairn Foundation are sharing insights about what they have learned as a funder. Sharing this knowledge can save other funders and charities time and enable a more effective collective response.