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 grant making objectives, our investments are 100% mission aligned, 100% free from fossil fuels, and 15% invested in climate solutions. Additionally, 5% of the Fund’s portfolio goes into high impact investments focused on energy access and energy justice, community regeneration, and women’s rights and empowerment.
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:
RESOURCES FOR GETTING STARTED WITH MISSION RELATED INVESTING
Mobilizing More for Mission: Re-designing Wallace Global Fund’s Endowment – A case study that outlines how organizations can re-align their entire portfolio with their mission.
- Confluence Philanthropy is an international organization of institutions committed to mission investing. Confluence supports its members through webinars, trainings, networking, and events.
- Mission Investors Exchange is a network of foundations and mission investing organizations that provides resources, trainings, and networking opportunities around mission investing.
- US SIF: The Forum for Sustainable and Responsible Investment is a membership association for institutions and individuals engaged in sustainable, responsible, and impact investing. US SIF publishes research and resources on a range of SRI issues, including Unleashing the Potential of US Foundation Endowments and the bi-annual Report on US Sustainable, Responsible and Impact Investing Trends.
- Divest-Invest Philanthropy is a coalition of foundations divesting from fossil fuels and switching to clean energy investments. They have joined colleges, pension funds, faith groups, and other institutional and individual investors who are doing the same. Wallace Global Fund is a founding member of the Divest-Invest Initiative.
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:
BEFORE MRI STRATEGY APPLIED:
MRI STRATEGY IN PROCESS:
AFTER MRI STRATEGY APPLIED:
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.
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.
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:
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:
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.
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
ESG Investment Policy
The investment committee:
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.