Because a ‘monetaristic’ view of foundations as earning and spending machines (the greatest is the best) is far from reasonable.

The amount of money a foundation earns and spends every year is likely to affect the impact it has on its beneficiary community. But as we know a small investment can get higher returns than a large one. This applies especially to philanthropy, where the impact of a project depends mainly on the project design. This is why, as philanthropy matures, foundations tend to focus more on the measurement of impact (the reality) instead of money (a symbol).

A foundation can produce social impact by means of its assets as well as its grants. So we need to be confident that we do not destroy more social value with our investments than we create with our grants, otherwise it could happen that the foundation’s activity overall represents a burden for society.

A foundation’s fiduciary duty therefore requires it to measure the impact of both grants and investments, or at least to minimize the negative impact of investments by adopting SRI rules for 100 per cent of its assets. Investing 10 per cent of its assets in impact investments is simply not enough.

About the trade-off between divesting and engaging, I do not see the problem. Can anyone deny the influence over the industry of a group of large investors announcing divestment and its rationale?

Now I come to market performance. Generalizing from what Dorsey and Mott say in their article, divesting from non-SRI companies does not imply a sacrifice in terms of market performance. The reason is simple: when a large change in collective consciousness happens, it affects every aspect of human life; the economy is not a world apart. During the last three years the index of companies blacklisted by the Cariplo Foundation (for violations of international treaties on human dignity, the environment and weapons of mass destruction) has underperformed the market by more than 40 per cent, while the CDP indices of companies that excel in transparency about their environmental impact overperformed by over 30 per cent.

I have two questions about disinvestment. First, should a foundation divest from each fossil fuel company of the 200 or maintain the best in class among them, also according to qualitative criteria? Second, where should a divesting foundation invest? Is it a matter of instruments (green banks, green bonds, etc) or of real projects that will promote a new sustainable society and economy?

I have no answer at the moment but I think that, as individuals and foundations, we cannot delay an effective answer and action.

Francesco Lorenzetti
Chief financial officer, Cariplo Foundation
(written in a personal capacity)