Investing In and For Good

January 12, 2018

The word “philanthropy” usually brings to mind the act of giving in support of a worthy cause. And this description is, of course, true.

At its core, however, philanthropy is much more. As entrepreneur and philanthropist Eli Broad famously said, “Charity is just writing checks and not being engaged. Philanthropy, to me, is being engaged….”

Once upon a time, check-writing was the hallmark of charitable giving, and conversations about giving revolved around doing good by selecting worthy causes. Nothing is wrong with this approach, and few can deny the world-changing impact it’s had over the years—from transforming local communities to changing the global landscape.

Indeed, the Community Foundation of New Jersey (CFNJ) has long incorporated this philanthropic approach in its mission, helping donors give more than $50 million annually from donor advised funds to charitable organizations. CFNJ also offers individuals multiple in-house investment options to help them grow their donor advised fund balances and expand their ability to have an impact on the communities and causes closest to their hearts.

But as individuals increasingly seek to engage more not only in the product of their giving but also in its process, traditional approaches to philanthropy are changing.

Responsible Investing Gaining Popularity

CFNJ has long thought creatively about the ways donors may deploy their assets – from an online giving portal to venture philanthropic opportunities – and now offers a socially responsible investment option as a further extension of the meaningful ways to give and invest.

The Parnassus portfolio allows individuals to “do good” with their investments even before they “do good” with their charitable giving and grantmaking by investing in companies whose business models advance a culture of social responsibility. It empowers individuals to make a positive difference through how their dollars are invested even before these dollars are issued as grants to worthy causes.

And, importantly, the portfolio responds to fund-holder demand. According to Parnassus Investments, “[in] the mutual fund business, 2016 saw record net flows to ESG (environmental, social, and governance)  funds, with more than double the gains of the two prior years—and 2017 is on track to surpass the assets gathered last year.”

The Parnassus portfolio invests with low turnover and high conviction in approximately 40 holdings that meet rigorous environmental, social, and governance criteria (click for more on ESG criteria). Companies included in this portfolio have demonstrated records of excellence in corporate governance and business ethics; corporate culture and employee benefits; stakeholder relations; environmental impact; and products, customers, and supply chain.

For example, these companies place high value on natural resources and care deeply for energy efficiency and waste and pollution control. They also prioritize people—from employees and customers to community neighbors and stakeholders. Additionally, these companies are committed to organizational integrity, which encompasses areas including executive pay, leadership responsibilities, and financial accountability and transparency.

These ESG criteria have already transformed the corporate landscape—and philanthropists have a role to play in continuing this transformation.

Individuals who choose to invest in the Parnassus portfolio reap the benefits of growing their funds and grantmaking capacity—all while supporting socially responsible companies.

An Opportunity to Amplify Impact

This type of responsible investing enables philanthropists to amplify their total impact. So often, individuals desiring to have a transformative impact in a certain area or leave a legacy that will last long into the future spend significant time focusing on the “visible” product of grantmaking—or the small tip of the iceberg—but far less time considering how funds are invested before they are given away as grants—the much larger portion of the iceberg that remains largely unseen.

The Parnassus portfolio gets below the surface and infuses the spirit of philanthropy into the rest of the iceberg.

For our organization, the Community Foundation of New Jersey, offering the ESG investment opportunity is a straightforward way to better serve our fundholders. Our Investment Committee studied the different options to invest responsibly, and we’re proud of this expanded offering.

While the Parnassus portfolio represents an addition to CFNJ’s existing in-house investment options, it’s a further realization of CFNJ’s mission: to support charitable giving that is inspired by its donors, targeted at making communities stronger, driven by creative solutions, and effective in achieving lasting change.