In the largest commitment of its kind by any private foundation, the Ford Foundation said it would invest $1 billon in mission-related opportunities such as affordable housing and financial services.
The Ford Foundation has an endowment of $12 billion and it is explicitly highlighting the potential of impact investing with its effort in the hopes that it will catalyze other foundations and institutions to take similar financial steps.
“Using a deliberate and phased approach, the foundation will gradually carve out funds from its existing investment portfolio and deploy them over time into funds seeking to earn not only attractive financial returns but concrete social returns as well,” the foundation said in a prepared announcement. “Initial investments will focus on areas where the foundation has deep prior experience and sees both significant investment opportunity and significant alignment with its mission to reduce poverty and injustice. Two initial areas of focus are affordable housing in the United States and access to financial services in emerging markets.”
Darren Walker, president of the Ford Foundation, said,“We are making this commitment because we believe MRIs have the potential to become the next great innovation for advancing social good. We need to expand our imaginations and our tools if we want to tackle the large-scale problems facing the world today. We can’t neglect the tremendous power of markets, including the capital markets, to contribute—and with today’s announcement, we are putting a significant amount of our money where our mission is.”
Mission-related investments are derived from a foundation’s endowment and must meet particular investment standards with regard to risk and return. These differ from the more traditional program-related investments, which must meet particular charitable standards and complement a foundation’s stated objectives.
The Ford Foundation makes between $500 million and $600 million in charitable grants each year and officials say the $1 billion siphoning will have little to no impact on its grant-making activities. By law, foundations must grant at least 5 percent of endowment values per year.
“No matter the investment, our choices will be an extension of our history of seeking the most innovative ways to promote a more inclusive economy,” said Xavier de Souza Briggs, vice president for the foundation’s Economic Opportunity and Markets program. “We are applying what we have learned from PRIs to inform the way we approach mission-related investing. The result, we hope, is to expand and diversify the market for MRIs so that it becomes easier for other institutional investors to invest in ways that consider social impact.”
The Ford Foundation has a long history of pioneering new and innovative financial programs. It has offered low-interest loans and equity investments in urban developments and for homeownership. The Green Revolution, microfinance, public-private partnerships in cities, legal aid, the creation of public broadcasting and Sesame Street, as well as support for history-changing movements such as the civil rights and women’s movements in the U.S., the fight against apartheid in South Africa and the protection of human rights dissidents and defenders in Latin America in the 1970s and in the Soviet Union in the 1980s, are among the many achievements the Ford Foundation lists as having fostered.