Study: Less Than Half of Foundations Use Impact Investing

Study title: Investing and Social Impact: Practices of Private Foundations

Organization: The Center for Effective Philanthropy

Summary: With increased interest in impact investing, the center surveyed 64 CEOs of private foundations about their organizations’ practices. All of groups give at least $10 million annually in grants. The survey found that 41 percent of respondents said their foundations currently use impact investing, 6 percent plan to in the future, and 20 percent don’t plan to.

The center defined impact investing as “investments that are made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.”

Among the findings:

• The most common areas in which foundations report making these investments are community development (46 percent), employment and economic development (42 percent), and education (38 percent).
• Fifty of 60 CEOs said their foundations do not actively screen out particular companies for ideological reasons. Seven of the 10 that reported screening out companies do so to exclude tobacco.
• Among 23 respondents who reported using endowments for impact investing, the median share invested was 2 percent.
• Among 25 respondents who reported using program and grant budgets for impact investing, the median share going to impact investing was 0.5 percent.
• About 86 percent of the CEOs said financial return was a key investing consideration for their foundations, and more than three-fourths of respondents said that returns on their foundations’ impact investments are lower than returns on other investments.