News and analysis
December 09, 2015

California Endowment Spurns Investment in Private Prisons

The California Endowment announced it will divest its assets from companies that run private prisons, jails, detention centers, and correctional facilities.

"The California Endowment strongly supports community safety and stands with communities that experience serious disparities in incarceration rates for non-violent offenses that could be handled through drug treatment and other programs that help prevent non-violent crime," Robert Ross, chief executive of the fund, said in a written statement. "It is essential our investment strategies take into account the potential impacts they could have on the communities we serve."

Whether the endowment’s move to divest from "companies that derive significant annual revenue" from private prison services will spur other foundations to follow its lead is hard to say. Activists have sought to draw attention to the disconnect between the causes some foundations support through their grantmaking and the investments they hold — with mixed results.

In September 2014, the Rockefeller Brothers Fund announced it would remove fossil-fuel investments from its portfolio. The number of foundations that have joined Divest-Invest Philanthropy, a network of foundations that have pledged to get out of fossil-fuel stocks within five years and put 5 percent of their assets into clean-fuel technologies, has grown to 115 in less than two years.

But other foundations have resisted the call to take their mission into account as they build their portfolios. They cite a variety of reasons for their decisions: the potential for lower financial returns, the reluctance of outside investment managers to narrow their investment choices, and the belief that divestment is unlikely to lead to significant change.

Send an email to Nicole Wallace.