Social investing and several definitions

October 13, 2014       The NonProfit Times      

Board members often see mission and money separately. That changed during the 1960s, according to Eric John Abrahamson, Ph.D., in his book Beyond Charity. He wrote that when activists began to question why foundations’ investments seemed to be at odds with their missions.

Changes to the tax code in 1969, he said, allowed for program related investments. Now, many foundations and charities practice social investing, making sure their money is aligned with their mission. There are two subsets of this sort of investing, said Abrahamson: socially responsible investing and mission-related investing.

Socially responsible investing is when the organization actively invests in companies with fair labor and sustainable business practices, and eschews companies whose business practices are ethically in question. Mission-related investing takes this one step further, with organizations investing in companies whose products and services are complementary of their missions. A hunger-fighting foundation might choose to invest in a company that makes high-calorie peanut butter for use in famine-hit areas.

“Taking advantage of changes in the tax code, some philanthropic entities make Program-Related Investments that provide capital to high-risk, marginalized communities, while others are engaged in “impact investing” that produces a “double-bottom line” return with social or environmental benefits as well as a return of capital or great financial receipts,” wrote Abrahamson.