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04/20/2011

How Your Family Office Can Practice Philanthropy Through Its Investment Practice


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While “giving back through philanthropy” will be a key topic for discussion at NYSSA’s 3rd Annual Family Office Conference on May 10, it may be well worth noting that a number of family offices are now discovering that they can express their philanthropic goals not just by “giving back” in the traditional sense but also through their investment practices.

Stephen Viederman has first-hand experience with this innovative approach to philanthropy as the former president of the Jessie Smith Noyes Foundation, a family foundation that was one of the earliest to put its investment assets behind its mission. The practical guidance he has offered to family foundations like Noyes is equally applicable to family offices that are not explicitly “purpose-driven” but whose family members desire to deploy a significant portion of their assets for the social and/or environmental benefits of their community or for the world at large.

In the early 1980s the Noyes Foundation began to implement what today might be called a “responsible” or “sustainable” investing practice by screening its assets to exclude companies that were engaged in businesses that were misaligned with its mission, including companies in the tobacco and agricultural chemicals sector. It went on to hire investment managers who were knowledgeable in targeting companies that were best in their class in terms of their performance on social and environmental issues. It became involved in shareholder advocacy—voting proxies and co-filing shareholder resolutions aimed at improving the social and environmental performance of the public companies in which it was invested. It also became one of the first “impact” investors—taking positions in private firms that offered solutions to the societal and environmental challenges that it was attempting to address on the grant-making side.


3rd Annual Family Office Conference


As more and more investment vehicles and strategies become available to sustainable investors, family offices are likely to discover that they need not give up financial return in their quest to fulfill philanthropic goals. Indeed, it is becoming increasingly evident that investing for positive social and environmental impact is also just plain smart investing. As Viederman explains in a recent article, “Investing as if the Future Matters,” social and environmental issues are strongly linked to real and often “hidden” future financial risks. A prudent approach to identifying and managing those risks can lead to the avoidance of related “predictable surprises” and to the attainment of competitive advantage in the marketplace.

–Susan Arterian Chang writes on sustainable finance and investing, and is the director of content development for Capital Institute, a collaborative space supporting the transition to a new economy through the transformation of finance.

 

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