Investing for Maximum Impact:A Unified Investing Strategy for Foundation Asset Management

Jed Emerson, Generation Foundation, Copyright 2006

Moving from Grantmaking to Investing in Value Creation:

Foundations should not seek to engage in philanthropy alone, but rather to make use of philanthropy as one of a number of tools to invest assets in maximizing social and environmental benefit and impact, through the efficient allocation of capital.

+1

-1

+1-1

FinancialInvestments &

Numeric Returns

Social CapitalInvestments

& Social Returns

A Zero-Sum Dissonance:The Traditional Value Proposition

Quad A Quad B

Quad DQuad C

Economic Value

Social Value

Foundations Have the Potential to Manage Six Asset Classes in two groups:

Financial Assets Grants Debt Equity

Nonfinancial Assets Time - Basic Engagement Talent - Intellectual Property Network - Political Capital

Financial Tools:

Traditional Grants Recoverable Grants Program Related Investing Blended Value Investing Venture Capital Asset Alignment of Corpus with Mission Proxy Voting and Corporate Engagement

PRIs in the Blended Value Investment Spectrum

Fixe

d Income

Below-Market InvestmentsBelow-Market Investments

Gua

rant

ees

Sen

ior

Loa

ns

Sub

ordi

nate

d Lo

ans

Cas

hC

ash

Pub

lic Eq

uity

Private E

quity

Market Rate Market Rate InvestmentsInvestments

Adapted with permission from F.B. Heron Foundation’s “New Frontiers in Mission-Related Investing”

Program-Related Investments

Equ

ity

Gra

nts

Unified Investment Strategy Capital Allocation

Grant(Program)

AvailableCapital

Grant(Infrastructure) Grant

(Research andDevelopment, Seed Funding)

PRIs andRecoverable

Grants

FROI Risk Boundary

RiskFree Rate

TreasuryNotes

----------Community

CDs and Investment

Notes.

Traditional Diversified Investment Portfolio

EquityLinked

ZeroCouponBond

With SRIIndex

Options

VC FundOr AngelInvesting

Privateand PublicEquityInvesting

SociallyResponsibleAngel andSocialVentureCapitalFundInvesting

SROI Risk Boundary

A Unified Investment Portfolio

An Example of Unified Investing and Asset Allocation…

…at the F.B. Heron Foundation.

For more information…

Please see “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation,” as well as

the supporting annotated bibliography and other documents available at www.blendedvalue.org

Or contact Jed Emerson at jed.emerson@generationim.com