Mission Related Investing Policy
The Foundation has an unwavering commitment to equity and to building a better Southern California by supporting nonprofit organizations to better serve the underserved. The Foundation is committed to aligning its invested assets with that purpose, and desires to generate both social and financial returns with its capital. The Foundation will pursue Mission related and Impact investments (“MRIs”) holistically across the portfolio and invest a portion of its assets in Program Related Investments (“PRIs”). MRIs will be subject to the same quality and diligence standards, and return expectations, as all other investments. PRIs are investments intended to serve as an additional tool to advance its mission; production of income or appreciation of property are not primary objectives.
The Foundation aspires to align the portfolio with its core values of diversity/equity, fair and equitable workplace practices, good corporate stewardship and transparency. The Foundation seeks to have a positive impact across the entire portfolio, with MRIs and PRIs focusing on priorities outlined below. These priorities may evolve as the Foundation learns more about its ability to drive positive impact and the universe of investment opportunities expands.
- Economic and Community Empowerment: investments seek greater economic access, quality employment, financial inclusion, education and opportunity for underserved communities, particularly in Southern California.
- Diversity/Inclusion: investments promote diversity within asset managers, entrepreneurs and communities, with the aim of increasing inclusion within the investment industry; investments target enterprises with products and services that are aligned with the Foundation’s values.
The Principles that will guide the Foundation’s mission related and program related investments include the following.
- First, do no harm. The Foundation seeks investments that minimize negative impacts on our communities.
- Be bold, but practical. Investments may be undertaken in newer and/or untested strategies but with a constant eye towards prudent risk management. The Foundation embraces opportunities for continuous learning and reflection on its investment activities.
- Implement over time, as market conditions allow. Investment decisions will be based on strong due diligence and a clear understanding of benefits and risks to ensure values alignment.
- Investment activities should support the Foundation’s commitment to equity while providing opportunities to enhance returns and/or reduce risk.
General Guidelines for Mission Related Investments (MRIs)
MRI investments will be made up of managers that invest in public and private equity and credit strategies. Investments will follow the objectives and guidelines outlined in the respective sections of the Investment Policy Statement. Public equity and credit managers will be evaluated against specific market indices that best represent their investment style, although given the nature of these investments there may be certain strategies where benchmarks are imperfect. Private limited partnerships will be expected to achieve an internal rate of return over the life of the investment that is commensurate with public equity benchmarks plus a premium for illiquidity and risk. In addition to financial metrics, the Foundation will evaluate MRIs from an impact perspective using manager, advisor or other third party provided reporting.
General Guidelines for Program Related Investments (PRIs)
Program Related Investments provide resources and capital to underserved areas and align with the Foundation’s grant making strategies. The objective of the PRI portfolio is to leverage the Foundation’s assets to support its values and mission by investing a target of up to 3% of total assets in PRIs (allowable range is 0-5% of total assets). The production of income or the appreciation of property are not primary objectives. The following considerations will be used in deploying the PRI allocation:
- The PRI portfolio does not seek to diversify by asset class or type of PRI. The allocation is driven by impact opportunities.
- PRIs will generally be deployed as loans or guarantees, but the Board may decide to make equity PRIs or utilize other strategies.
- Selection criteria would follow the basic principles of the Foundation’s grant determination, qualify as “charitable” under the United States Internal Revenue Code, and be shown to offer reasonable prospect of repayment. Additional levels of due diligence may be applied depending on the type of debt or equity transaction involved.
- PRIs are expected to deliver below market rate returns and/or exhibit higher risk than MRIs. Loss of principal is not expected, but higher risk PRIs with greater potential for loss of capital may be explored
- The majority of PRI investments will have timeframes of 2 to 5 years, although certain strategies/ investments may have a longer term. All investments will be evaluated regularly throughout their terms.
- While it is an investment, a PRI is not included in the asset base used to calculate the Foundation’s distribution requirement. The objective is to recycle funds earned into new PRIs.
- PRIs would be recorded as separate business assets and not mingled with managed assets for performance reporting. (PRIs) performance will be tracked by staff and reported to the Board annually. A nominal benchmark will be established for each PRI based on the offering documents of the investment. The overall PRI portfolio will be benchmarked to inflation as measured by CPI-U.
- PRIs will also be evaluated on their social impact.