In a groundbreaking shift, the California Endowment, a leading healthcare non-profit, announces its commitment to "all-in" mission-driven investments, aligning its entire $4 billion portfolio with its values of promoting racial equity and wellness. This bold move challenges the traditional model of grant-making and sparks discussion amongst philanthropic entities worldwide.
The California Endowment, established in 1996, traditionally granted a portion of its assets while investing the majority in conventional financial markets. However, a profound question, posed by a colleague, ignited a strategic shift: "If your foundation is using 5% of its $3 billion under management to make grants, what is the other 95% doing?"
This inquiry triggered a reevaluation of the endowment's role. Moving beyond the status quo, they now aim to leverage their entire investment portfolio as a tool for positive social impact.
This transition is not without its challenges. The endowment acknowledges the recent downturn in Environmental, Social, and Governance (ESG) investing, particularly in clean-energy stocks due to rising interest rates and political pressure. However, they find inspiration in the success of the Heron Foundation, which successfully aligned its entire $300 million portfolio with its goals in 2017.
The California Endowment acknowledges the complexities involved in shifting to an all-impact strategy. They are currently developing a comprehensive framework, expected to be released later this year, which will guide their investment decisions. This framework will build upon existing practices, such as excluding investments in tobacco companies and prison management, while favoring ventures led by diverse managers and fostering environmental sustainability.
The endowment emphasizes maintaining financial strength while undergoing this strategic shift. They acknowledge the presence of illiquid assets, such as private equity and real estate holdings, which can take years to sell. While details remain unclear regarding the management of these assets during the transition, the endowment demonstrates a commitment to transparency by engaging with interested parties.
The California Endowment's ambitious and innovative approach sets a powerful precedent for other philanthropic organizations. This bold move raises critical questions about the evolving role of endowments in leveraging their financial resources to address societal challenges and promote long-term positive change.
