Mission Investing*

Theory of Change

W e at the Wallace Global Fund see ourselves as a funder and supporter of social movements; to do this, we are committed to using all of the tools at our disposal to advance new ideas and strategies to achieve change. One way we do this is by maximizing the impact from our investment dollars in addition to our grants.

The way that corporations conduct their businesses has a huge impact on people and the planet. Therefore, we believe it is critical to consider whether the investments we are making are at odds with our mission. If there is a disconnect between the two, then we are not achieving the maximum impact that we could be.

In order for our investment choices to overlap with our grantmaking objectives, our investments are 100% free from fossil fuels and 10% of our portfolio goes into high impact investments that offer solutions to climate change and innovative reproductive health technologies. Doing this ensures that 100% of our capital and energy is going towards the goals that we think are essential for maintaining a livable planet.

“If your investments are driving the problem that you’re asking your grantees to solve, that’s a problem.”

– Ellen Dorsey
Putting the Freeze on Global Warming,” Moyers and Company, April 25, 2014

Our Approach to Mission Investing

W allace Global Fund’s board has determined that our fiduciary duty is to align both our investments and our grantmaking strategies. This enables WGF to advance our mission not only through grants, but also by leveraging our dollars into sustainable, mission-based investments.

Our approach to mission investing includes three components:

ESG Incorporation

We apply environmental, social, and governance (ESG) criteria in addition to financial criteria when making decisions about our investments.

 

We avoid investing in companies whose operations do not align with the mission of WGF. This means that we exclude investments in all fossil fuel companies, gold mining companies, and companies that specialize in building or operating private prisons. This is often called negative screening.

 

We intentionally invest in companies whose policies and practices meet our list of positive ESG attributes, or who demonstrate that they are “best in class” compared to their sector peers. For example, we evaluate companies based on their commitment to energy efficiency, waste reduction, and promotion of industry standards around sustainability issues. Nearly three quarters of our investments fall within this positive ESG screening.

Shareholder Advocacy

Wallace Global Fund may engage in dialogue with companies, file shareholder resolutions, or participate in multi-stakeholder coalitions in order to affect changes in company policies and practices. This means that sometimes, for strategic purposes, WGF may own companies that would not normally fit our ESG criteria.

High Impact Investments

To maximize impact, we allocate a portion of our portfolio to investments that advance our core mission while also generating financial returns. High impact investments focus on supporting social justice, environmental sustainability, human and labor rights, healthy communities, and civic engagement. Their returns can be either market-rate or below-market.

 

This includes direct investment in companies that can have a transformative impact on our target priorities. See Impact Investing Case Studies to learn more.

 

WGF has invested 10% of its endowment in these high impact areas.

RESOURCES FOR GETTING STARTED WITH MISSION RELATED INVESTING

Sustainability Strategies

Wallace Global Fund evaluates our investment managers based on a “sustainability spectrum.” Those investments that pursue positive impacts and shareholder engagement are rated more highly than those that do not incorporate ESG criteria at all or that apply only negative screening criteria. The spectrum includes five main categories with increasingly proactive ESG investment strategies, shown below in the spectrum of light to deep green:

Spectrum
Key

No Screening
No Screening
No Screening
Not having an ESG strategy means that your money may be in investments that potentially go against your mission.
Negative Screening Criteria
Negative Screening Criteria
Investments avoid companies whose operations do not align with the mission of WGF. See section on ESG Incorporation section above to learn what we exclude.
Best of Class Screening
Best of Class Screening
Best of Class Screening
Investments in companies demonstrating sector leadership, despite the overall ESG record. We may increase our impact by also using shareholder dialogue and engagement to influence a company’s board and management.
Positive Screening Criteria
Positive Screening Criteria
Positive Screening Criteria
Investments in companies demonstrating leadership around particular ESG criteria. We may increase our impact by also using shareholder dialogue and engagement to influence a company’s board and management.
High Impact Investing
High Impact Investing
Investments focus on positive social impacts in addition to financial returns. See the High Impact Investing section above. This category also meets the Clean Trillion definition.

BEFORE MRI STRATEGY APPLIED:

12/31/10

pie-chart-12-31-10_v2

MRI STRATEGY IN PROCESS:

3/31/11

pie-chart-3-31-11_v2

AFTER MRI STRATEGY APPLIED:

6/30/15

pie-chart-6-30-15_v3

The above pie charts show the evolution of our ESG strategy since the end of 2010.

Wallace Global Fund Mission Investing Timeline

Wallace Global Fund began the process of converting to a fully activated mission investing portfolio in 2009. After two years of internal discussions and evaluations of investment advisors, we began to move forward with aligning our investment holdings with our values and programmatic priorities. Below you can follow some of the milestones along our journey.

  • 2009

    The Wallace Global Fund Board evaluates incorporating ESG factors into the foundation's investment portfolio and decides to shift to a more comprehensive mission-related investment strategy.

  • 4th Quarter 2010

    Wallace Global Fund hires RBC Wealth Management to review the portfolio and develop a plan to transition assets to an ESG focus. The ESG Investment Policy Statement is drafted to codify these goals, including a 100% restriction on coal investments and a “Best of Class” screen on the environment. A new investment committee is formed to advise the organization on its ESG investment policy.

  • 1st Quarter 2011

    After initial implementation of the new policy, the percentage of Wallace Global Fund’s portfolio without ESG criteria drops from 91% to 12%.

  • 2nd Quarter 2011

    The investment committee approves a revised Investment Policy Statement. It includes an initial target of 5% for High Impact Investments.

  • 1st Quarter 2013

    Wallace Global Fund shifts divestment focus from coal to all fossil fuels. As part of this, WGF creates an investment sub-committee to focus on investing in climate solutions within its fossil-free portfolio. WGF also approaches the rest of its investment managers about meeting the fossil-free standard.

  • 4th Quarter 2013

    Wallace Global Fund approves its first high-impact mission-related investment in women's reproductive health, a direct private equity investment in a reproductive health technology company.

  • 2nd Quarter 2014

    Wallace Global Fund makes its first high-impact investment in renewable energy in sub-Saharan Africa.

  • 4th Quarter 2014

    Wallace Global Fund’s portfolio is up 4.65% for the year 2014 vs. the benchmark return of 4.28%. Wallace Global Fund also approves liquidating its final commingled fund with exposure to fossil fuels.

  • 2nd Quarter 2015

    The Wallace Global Fund portfolio is 100% free of fossil fuels.

“If you own fossil fuels, you own climate change.”

– Ellen Dorsey
The Logic of Divestment: Why we have to kiss off Big Carbon Now,”
Rolling Stone Magazine, January 14, 2015.

Divest-Invest

I n 2010, as the Wallace Global Fund began aligning our portfolio with our mission, we set as a priority withdrawing from fossil fuels, beginning first with coal, then moving to oil and gas.  Simultaneously, WGF began discussions with student and climate activists about the applicability of the movement for divestment from Apartheid South Africa to the climate issue, particularly in its ability to raise political consciousness and push for change across industries. In 2010 WGF began grant funding  for activities to test and support such a divestment campaign, including commissioning financial analysis on divestment’s impact on the fossil fuel industry.  This was followed in 2011 by support for early stage campaigning by student activists on target campuses. Those initial activities were given tremendous lift when Bill McKibben published ‘Global Warming’s Terrifying New Math’ in Rolling Stone Magazine, that linked the idea of the ethical call for divestment to the financial risks to investment portfolios associated with climate change. The movement exploded, spreading rapidly across college campuses, to other sectors, and globally.

In 2013, WGF launched a new initiative building from the efforts of colleges, pensions, and hospitals. This initiative, Divest-Invest Philanthropy, seeks to encourage and support foundations, donors, and family offices to divest from fossil fuels and to invest in solutions to combat climate change. To date, over 110 foundations with more than $10 billion in assets have joined this initiative.

As of 2014, Wallace Global Fund is fully divested from all fossil fuel companies. As part of our investment policy, we seek to invest in companies that advance a fossil fuel free economy, whether via renewables, energy efficiency, clean tech companies, or energy access and community investing, which helps create social enterprises, small businesses and nonprofits at the local level.  Some examples of our investments include:

North Sky Clean Tech Fund
North Sky Clean Tech Fund
This fund is focused on the clean tech space. Some of its successful investments have included Tesla Motors, Power-One, Agility Fuel Systems, and Verengo Solar. The value of Renovate America, which provides low-cost financing for renewable energy systems, has increased 40%.
New Alternatives Fund
New Alternatives Fund
The first environmental mutual fund, New Alternatives Fund (NALFX) focuses on renewable energy, recycling, pollution prevention, and conservation. Some of its global investments include Whole Foods, Vestas Wind Systems, American Water Works, and Panasonic; the fund also holds cash in several banks and credit unions that are focused on providing loans for low income housing and small businesses.
Generation Credit Fund
Generation Credit Fund
This global fixed income fund, chaired by former vice president Al Gore, focuses on making loans to sustainable companies and opportunities. Still in its early days, the fund has made loans for fruit and vegetable processing technology and for solar and residential energy efficiency suppliers.

Impact Investing

A long with investment in solutions to climate change, Wallace Global Fund has also targeted other areas that align with our programs for impact through our investments. We have committed to carving out at least 5% of our portfolio for “high impact investments” – direct investments that have the potential to make meaningful change for people and communities. We have three areas of focus: Africa, sustainable technology, and women’s rights. Some examples of these investments are below:

Africa and South Africa
Africa and South Africa
Africa Renewable Energy Fund: Wallace Global Fund seeks to have a “global impact,” with a particular focus on supporting organizations in Africa. The Africa Renewable Energy Fund, launched in March of 2014 with $100m, is focused on Sub-Saharan Africa, where many lack access to long-term energy infrastructure. AREF is trying to change that by targeting pre-construction wind, small hydro, solar, biomass, geothermal, and solar energy projects. Funding from Wallace Global Fund helps to reduce the cost of energy and allows renewables to become a major energy source in Africa.
Promoting Climate-Related Technology Solutions
Promoting Climate-Related Technology Solutions
SJF Ventures: We believe it is critical to invest in technologies that provide solutions to challenges such as environmental degradation, socio-economic disparities, and gender inequities. Along with addressing these issues, Wallace Global Fund also considers how these new technologies both support and integrate into local communities and cultures. SJF Ventures seeks to do this by investing in technology-enabled healthcare, clean tech, recycling, and energy efficiency companies in the US. One recent investment is NEXTracker, Inc, a designer and manufacturer providing solar photovoltaic trackers for solar plants. This allowed the company to double its manufacturing capacity and expand its team across five continents.
Investing in Women, Human Rights, and Social Justice
Investing in Women, Human Rights, and Social Justice
Bioceptive: Gender equality, improving access to reproductive health, and education are all important areas where Wallace Global Fund seeks investment opportunities. One way we are doing this is through investing in Bioceptive, a women’s health company that is focused on next generation intrauterine devices (IUDs). Thanks to this device, women will be able to gain control of their reproductive health at a lower cost, particularly in the developing world, where access to these services is difficult. Through WGF's investment, the company was able to achieve clearance from the US Food and Drug Administration at the beginning of 2015 for its suction cervical retractor–this will provide a new and less painful option for women undergoing this procedure.

MISSION INVESTING AND GRANT-MAKING FOR WOMEN AND GIRLS

Increasingly, Wallace Global Fund is blurring the line between grants and investments. One example of this is the foundation’s approach to gender and women’s empowerment. WGF has been actively involved in creating a community of practice around these issues, resulting in a state of the field report, with insights from investors, development practitioners, foundations, and women’s rights groups. Among other takeaways, the report demonstrates how grant-making and mission investing can be harmonized to strengthen social impact. For example, Root Capital used foundation grants to conduct research on the impacts of gender in the businesses with which it was working. This research resulted in the Women in Agriculture Initiative, which uses Root Capital’s financial services and investment products to increase economic opportunities for women throughout agricultural value chains. WGF hopes to continue its work of combining grant-making and investment in ways that can positively benefit women and girls.

WGF Financials

W allace Global Fund is committed to increasing financial transparency and helping to pave the way for other foundations interested in mission investing. Please review the following resources for more information on our investments.

ASSET ALLOCATION AS OF 6/30/2015

Asset Allocation as of 6/30/15

The investment committee:

Matt Gelfand

Matt Gelfand is a Senior Economist, Senior Investment Advisor, and a Managing Director of Rockefeller & Co. He has been responsible for overseeing the assets of major pension plans, foundations, and endowments for over twenty years.

Julie Gorte

Julie Gorte, Senior Vice President for Sustainable Investing at Pax World, is an expert in both ESG security analysis and gender lens mission-related investing.

Scott Fitzmorris

Scott Fitzmorris, an environmental and social justice advocate, is co-chair of the Wallace Global Fund board, and also co-chair of the investment committee.

Scott Wallace

Scott Wallace is co-chair of the Wallace Global Fund and co-chair of the investment committee. Previously, he worked as a lawyer, first for two U.S. Senate committees, and then as lobbyist for nonprofits focused on individual rights.

Wayne Silby

Wayne Silby, is the Founding Chair of Calvert Funds, the largest US-based socially responsible investment firm, the Chairman of Calvert Foundation and ImpactAssets, and a Co-Founder of Social Venture Network and Syntao, a CSR consultancy in Beijing.

In addition to the members named above, Tom Van Dyck, Catherine Chen, Daryn Dodson, and Ellen Dorsey serve as staff members on the investment committee.

* Wallace Global Fund is not (i) a person or group that makes investment recommendations or conducts securities analysis in return for a fee, whether through direct management of client assets or via written publications or (ii) a person engaged in the business of effecting transactions in securities for the account of others.  The Wallace Global Funddoes not make any recommendation pertaining to any investment, whether in general or in any specific fund.  The funds identified in this website are cited for purposes of education and transparency only
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