Maximizing impact

We welcome the Association of Charitable Foundations' (ACF) latest report Investment: the pillars of stronger foundation practice, part of its Stronger Foundations initiative.

It sets out seven pillars that ACF considers should be the hallmarks of a stronger foundation ranging from engagement with investment matters by all Trustees through to influencing the behaviour of others in relation to investments.

The heft of the report lies in encouraging Trustees to align better their charitable mission with how they invest their assets. It is a well-known disfunction in charitable foundations that the money making and money spending functions are like chalk and cheese, and struggle to see each other’s view point. There are reasons why this is so, which in itself is interesting.

Greg Davies of Oxford Risk explains that the critical factors for success here are clarity of purpose and managing the trade-offs between making a return and making a point. This may explain why personal foundations are so often leaders in this field. A dominant Trustee, such as the founder, can easily decide that they would prefer to make a point about climate change, for instance, regardless of any consequence for the portfolio. She or he can reconcile that tension personally, but a Board of Trustees will feel pulled in different directions because of their differing skills and interests. What may be occurring here is beautifully described in the Abilene Paradox and managing these multiple viewpoints is essential.

What is disappointing in the report is that simply spending more money on your charitable purpose is not considered as a way of increasing impact whereas it is obviously the most impactful mechanism available. In a decade of austerity for their beneficiaries, most foundations have found themselves vastly wealthier in real terms but reluctant to pass on that gain. If impact lies in delivering benefit to beneficiaries, there are more impediments than simply not aligning money and mission.  

That is where the collective governance focus should be - and where Yoke and Company’s unique and independent skill set can assist.