April 18, 2011

How a Donor Mixes Investments and Grants

Redwood City, Calif.

Like a lot of wealthy people, Ron Cordes started a family foundation with some of the money he received when another company acquired the business he had helped to create. But unlike most of those people, he's focused more of his attention on using the foundation's investment portfolio to advance social causes than on making grants.

Mr. Cordes talked about his experience during a session  at the Global Philanthropy Forum, a meeting of donors involved in international causes.

He said that donors are missing a great opportunity by trying to influence social change only by awarding money to charities.

"We're trying to solve all the problems with about $300-billion a year," the amount Americans donate to charitable causes, Mr. Cordes said. That's dwarfed, he noted, by the dollars invested in the stock market, about $41-trillion.

About a year and a half after Mr. Cordes started the Cordes Family Foundation in 2006, he and the foundation's board set a goal of investing 20 percent of the fund's assets in social enterprises and businesses that advance causes he cares about.

The foundation has now reached the 29-percent mark—but Mr. Cordes said that its path hasn't been easy. "The market is still new and fragmented," he said.

With his giving, Mr. Cordes is seeking to help overcome one barrier he sees: a lack of tools and knowledge on the part of financial advisers about how to invest in social enterprises and socially minded businesses.

His foundation is working with the Rockefeller Foundation, the Calvert Foundation, and others to create Impact Assets, a group that will offer such tools, including an index of the 50 top financial managers who are committed to investing in businesses that advance social causes.

Mr. Cordes said he often hears from people who say they aren't meeting their fiduciary responsibilities if they don't invest with the overriding goal of maximizing profits. He said people need to look at it differently—and perhaps the government needs to broaden the definition of "fiduciary responsibility."

"In my fund, I believe we're not fulfilling our fiduciary responsibility if we're not investing for impact," he said.

Read more about the index of financial managers in an article in the latest issue of The Chronicle and more about Mr. Cordes's philanthropy and other donors like him.