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October 15, 2015

Impact Investing Can Bring Big Returns and Court Battles

The Wall Street Journal examines the growth in high-dollar impact investments by activist philanthropies, focusing in large part on the Baltimore-based Abell Foundation's stakes in mission-aligned areas like sustainable energy.

Abell has engaged in a series of legal battles with big auto makers over its patent on components of powertrain engines used in hybrid cars, technology developed by a firm in which the foundation invested. Settlements and verdicts in the cases have steered tens of millions of dollars from companies like Hyundai and Toyota into Abell's anti-poverty and education programs in Baltimore.

Balanced against such payoffs, the Journal writes, are risks that investments in start-ups can drag on for years, fizzle without yielding marketable products, or engender court fights and debates that put foundations' reputations at risk.

Abell President Robert Embry said he would recommend the approach to other philanthropies if they have the legal and financial expertise to evaluate projects. Abell's investments have "roughly doubled our size" and "increased the scale of what we can do," he said.

Read a Chronicle of Philanthropy article on the spread of impact investing and an opinion piece on its potential benefits for foundations.