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Mission-Related Investing Gains Traction

Climate change is a top consideration for 41% of colleges and universities surveyed.

Mission-related investing (MRI) is gaining strong momentum among non-profit institutional investors, with 31% making investments aligned with environment and climate change, healthcare, housing, job creation, and education, according to a survey by Cambridge Associates, a global investment firm. None of the investors surveyed expect to decrease their allocations.

It’s no secret that public demand has been high for colleges and universities to divest from fossil-fuel related investments, and the survey found climate risk a top consideration for 41% of colleges and universities and 30% of foundations.

Most of their investment strategies involve negative screens, but investors anticipate proactively seeking ESG and environment/climate change opportunities in the future. Respondents said their biggest challenges are lack of adequate mission-related investment options and their own resource constraints.

“The good news for mission-related investors is that we’re seeing a proliferation of ESG and impact investing strategies coming to market, so this product supply problem is becoming less of a barrier to entry over time,” Jessica Matthews, managing director at Cambridge Associates and head of the firm’s Mission-Related Investing Practice, said. The firm tracks 1,000 MRI funds.

The survey, fielded in 2016, included 159 non-profit institutional investors of foundations, colleges and universities, religious institutions and pensions from the United States, Italy, Japan, New Zealand, Switzerland and the UK.

Of the respondents, 44% have increased their mission-related allocations recently and 62% expect to grow it within five years.

It’s still early for investors to have solid performance data to review, but in 2015, Cambridge worked with the Global Impact Investing Network to study the financial performance outcomes for private equity and venture capital funds with an impact lens. “That first report, issued in the summer of 2015, did demonstrate that in many cases, impact investing funds had performed in line with comparable benchmarks that we pulled from our own database,” Matthews told CIO.

When it comes to measuring social impact from investments, firms have different approaches. “Our view is that there is no one-size-fits-all; we’re not going to come up with a score,” said Matthews, who considers measuring impact part of due diligence. It’s “understanding the impact the manager intends to have,” she said.  

| Christine.Giordano@strategic-i.com | 212-217-6929