What’s the trouble with ‘mission-related investments’? Who defines the mission.
The Ford Foundation is putting its money where its mouth is. That seems to be the message from its president, Darren Walker, and his colleagues. Ford, the third-largest foundation in the U.S., recently announced that over the next 10 years it will put $1 billion of its $12 billion endowment into “mission-related investments.”
Until recently, foundations generally invested the way everyone else did—to get the most bang for the buck. The difference was that foundations sought returns so as to have more money to give away. But now nonprofit leaders such as Clara Miller of the F.B. Heron Foundation have decided to go instead for social-impact investing, with the goal of generating a social or environmental effect alongside a financial return. “If we were just doing good work for a limited number of people, we would never eliminate poverty,” Ms. Miller told Crain’s last month. “We wanted to be influential beyond our own giving. We wanted to get others into this mindset.”
Yet mission-based investing also can create serious distortions in the market. For foundations like Ford, whose mission has long been entangled with encouraging more federal spending on a variety of programs, the potential for harm is significant.
Fifteen years ago, for example, the foundation invested $2 million in the Bay Area Equity Fund, a backer of the electric-car company Tesla, according to a recent article in the Chronicle of Philanthropy. “The foundation declined to provide details,” the article continues, “but estimates suggest the fund’s value grew 24 percent, while its investment in Tesla alone increased more than tenfold.”
What’s odd about this is that Tesla is still not selling cars at a profit, but....
James Piereson is president of the William E. Simon Foundation and a senior fellow at the Manhattan Institute. Ms. Riley is a senior fellow at the Independent Women’s Forum.