Endowments are long-term funds created from donations of cash and various other assets which are invested by an institutional client where, typically, only the interest earned each year is used for the fund’s specific purpose and mission. The principal amount of the fund, or the original amount invested, remains untouched and is invested continuously for long-term growth. This ensures that the endowment is viable year after year to continue its mission.
According to the Energy Action Coalition, colleges and universities are substantial investors, with assets believed to be over $400 billion in the US alone. An endowment not only provides capital solely from investment income, it can also attract additional support from other donors interested in the endowment’s specific purpose. These donors can contribute cash, stock, or another form of gift to the endowment.
Traditionally, institutional clients that establish endowments tend to invest in strategies they feel are highly profitable, even if these investments do not align with the organization’s environmental, social/human rights and/or governance mission. Furthermore, finding out what an endowment invests its money in is no simple task, especially by the greater public. For example, sometimes only high-ranking institutional professionals and their financial professionals may know what exactly the endowment is invested in.
Three Corners Capital’s Socially Responsible Investment (SRI) Approach
Endowments bring sustainability to an organization’s mission. Three Corners Capital believes that just as an endowment supports the positive mission of an organization, the positive mission of the organization should be similarly reflected in the investment strategy for the endowment.
We call this “mission related investments,” where we seek both financial return and positive social impact. We work with the institutional client on a strategy to ensure this by undergoing a thorough process of analysis, observations, and recommendations to create an investment strategy. Thus, they can clearly communicate to the greater public that their investment will generate positive return and produce positive outcomes.
Responsible SRI Endowments Mean Good Business
According to the Responsible Endowment Coalition, despite contrary beliefs, emerging reports show that SRI-funds outperform non-SRI funds. There is less disparity between the overall return performance of the best- and worst performing SRI funds across various time periods than there is for the respective non-SRI funds.
Three Corners Capital was founded to maximize both investment planning and social impact for donor advised funds and other nonprofit clients. To read further about social causes your endowment and other investments can impact, please check out our people, planet, and profit pages.
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Chris Flores, Steve Fortin and Bill Koontz are registered representatives of Lincoln Financial Advisors Corp.
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