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May 05, 2008
Council on Foundations
Taking a Long View of Foundation Investments
Proponents of socially responsible investing told participants at the Council on Foundations meeting that factoring social and environmental issues into their funds’ investment decisions doesn’t have to mean lower financial returns — but will require a new mind-set.
The fight for socially responsible investing is a fight against the prevailing emphasis on short-term financial results, said Peter S. Knight, president of Generation Investment Management US, in Washington.
When Generation Investment Management analyzes businesses to invest in, it looks at traditional financial factors, such as market position and competitive advantage, but also at social and environmental factors. The investment-management company believes that over time businesses whose operations are socially and environmentally responsible have a competitive edge.
But for that kind of approach to become more widespread will require a different time line on the part of many investors, said Mr. Knight.
“If you pay an investment manager to manage to the quarter, guess what, they’ll do it,” he said. “But if you give them a three-year, four-year, five-year time horizon in which they’ll be compensated on their performance, then that’s what they’re going to do.”
The business climate is changing quickly, and companies are going to have to start taking responsibility for the environmental impacts of their operations, said Thomas W. Van Dyck, a senior vice president at RBC Dain Rauscher, an investment-management company in Minneapolis.
“Carbon’s not going to be free anymore,” he said.
Given the wide range of investment opportunities available today, said Mr. Van Dyck, foundations don’t need to sacrifice their ideals for financial returns.
“There’s so many different ways to make money,” he said, “you don’t necessarily need to go in those areas that you don’t believe in.”
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