The Gates of Ethical Investors
In response to this weekend's articles criticizing the Gates Foundation for investing in companies that had policies in place that were at odds with the foundation's funding goals, the world's largest foundation announced this week that they will now begin a "methodological review of its investments to determine whether it should pull its money out of companies that are doing harm to society". To be fair, the foundation claims that this review had nothing to do with the critical articles, but no one in their right mind would believe that. The articles hit this weekend, and three days later, the foundation issues a press release stating that they're reviewing the policies. A coincidence? That's silly.
So what's the real problem here? It's a case of the foundation's program officers and investment strategists simply not being on the same page. This is an all-too-common practice in a sector where one side of the organization is charged with saving the world, and the other needs to raise money to support the do-gooders. For example, the L.A. Times revealed that the Gates Foundation invested in an Italian oil company blamed for massive pollution in Nigeria, one of the countries in which the foundation has worked hard to improve the public health. In another case, the foundation invested in a mortgage company accused of predatory lending, while at the same time, they approved more than $1 million in grants to a Seattle nonprofit that counsels victims of such lending practices.
The COO of the Gates Foundation admitted that the foundation's current method of investing its assets is "not 100 percent effective."
This is not a problem confined to the Gates group. All foundations (and to a lesser extent, public companies) struggle with this tension between investing in the future and making money. From it comes the birth of socially-conscious investments, and firms like PAX. If the Gates Foundation decides to go this route and adopt a stringent mission-related investment policy, it has the potential, given its massive size and huge profile, to serve as a leader and convince other large foundations to follow suit. In that way, they could do as much good with their investment policies as they can with their grants.
So what's the real problem here? It's a case of the foundation's program officers and investment strategists simply not being on the same page. This is an all-too-common practice in a sector where one side of the organization is charged with saving the world, and the other needs to raise money to support the do-gooders. For example, the L.A. Times revealed that the Gates Foundation invested in an Italian oil company blamed for massive pollution in Nigeria, one of the countries in which the foundation has worked hard to improve the public health. In another case, the foundation invested in a mortgage company accused of predatory lending, while at the same time, they approved more than $1 million in grants to a Seattle nonprofit that counsels victims of such lending practices.
The COO of the Gates Foundation admitted that the foundation's current method of investing its assets is "not 100 percent effective."
This is not a problem confined to the Gates group. All foundations (and to a lesser extent, public companies) struggle with this tension between investing in the future and making money. From it comes the birth of socially-conscious investments, and firms like PAX. If the Gates Foundation decides to go this route and adopt a stringent mission-related investment policy, it has the potential, given its massive size and huge profile, to serve as a leader and convince other large foundations to follow suit. In that way, they could do as much good with their investment policies as they can with their grants.
posted by Trent Stamp at 11:35 AM
3 Comments:
with respect to your column Is Your Foundation Smart or Just Rich, and this one as well:
It is wise for someone to point out to the Gates Foundation that they might be struggling due to the fact that they are not choosing their leaders wisely. Mr. Vander Ark was not a success as a school superintendent, perhaps as a businessman, I don't know. You are not going to get creative people to re-structure schools from the typical business model. Business and ethics many times do not even belong in the same sentence! I am sure it is frustrating for Bill Gates. I am sure he does not want to throw money at the wind, but he needs to look to a different pool of people to help him out.
I see the investments in those "bad" companies as not necessarily a bad thing. Do those companies hire locals? Do they help improve the local economy? Often times, bad companies do good things and good companies do bad things
Trent, it would be great if you could submit a post to the new Giving Carnival. The first edition will cover the debate surrounding the Gates Foundation investment policy. You can read all about The Giving Carnival here.
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