McKnight announces impact investment commitment of $200M to support transition to low-carbon economy, regional development
At a roundtable meeting today at the White House, The McKnight Foundation formally announced its commitment to invest an initial target of $200 million in investment strategies that align closely with McKnight’s mission while upholding important fiduciary standards. The White House convened the meeting of senior staff, investment firms, and foundations around the release of a new report by the U.S. National Advisory Board on Impact Investing, which aims to support the growth of impact investing and provide counsel to the global policy discussion.
“Over time, we expect a triple bottom line of financial returns, program impact, and deep program learning,” said board chair Ted Staryk of McKnight’s new investment commitment. “This represents an important evolution in McKnight’s overall philanthropic and investment strategies. Our decision to work across multiple asset classes and four key investment prongs provides a robust, flexible set of tools.”
McKnight defines impact investing as making investments (beyond grants) that generate financial return, uphold fiduciary duties, and align with mission to enhance credible influence, drive program learning, and advance program goals. McKnight developed the comprehensive investment strategies after a yearlong board and staff exploration, driven to align more of McKnight’s endowment with the Foundation’s long-term program goals. McKnight will focus initially on opportunities that accelerate the transition to a low-carbon economy and support sustainable regional development in Minneapolis-St. Paul. Driven by overarching interests in social, environmental, and economic sustainability, McKnight is committed to measuring the alignment and impact of its full asset base, even beyond the initial $200 million identified for impact investments.
Explained McKnight’s president Kate Wolford, “With this approach, we aim to amplify our philanthropic impact. Last year, McKnight granted over $86 million in support of program interests. With our expanded toolkit, we’ll be able to consider investments that advance innovations or help reach greater scale on pressing societal challenges in areas like energy efficiency and resource management.”
McKnight’s impact investments of $200 million (about 10% of its current $2 billion endowment) will be managed through four prongs with an initial target of $50 million each. In the first three categories, McKnight aims for market rates of return, or better:
- Public-Markets Mission-Related Investing: Primary goal is to
integrate strong social and environmental impact-oriented stock and bond
managers into McKnight’s existing portfolio.
- Private-Markets Mission-Related Investing: Will allocate
resources to private market funds targeting sustainability themes and program
- Mission-Driven Investing: Pursuit of direct investments aiming
for even higher programmatic fit and strategic impact.
- Program-Related Investing: Below-market rate investments will
target direct and catalytic impact deeply aligned with McKnight’s program
Impact investing is not completely new to McKnight. In the 1980s,
McKnight engaged in limited Program-Related Investments (PRIs), although the
field and McKnight’s approach are much more fully developed today. Since 2008,
McKnight has used ISS Riskmetrics to vote proxies on managed accounts. And
since 2009, McKnight’s most recent PRIs (currently totaling about
$21 million) have included investments in the Family Housing Fund, Greater
Minnesota Housing Fund, and The Conservation Fund. With program alignment as
its guide, McKnight also continues to vote its proxies on actively managed
accounts. McKnight also employs eight investment firms, representing over $1.3 billion of its portfolio, who are signatories of the UN Principles for Responsible Investment. This summer, the Foundation will fill a new staff position to manage program-related and mission-driven investments.
“The world of impact investing is changing in exciting ways,” added Ted Staryk. “With the right homework, and emerging research and policies like those announced today, foundations no longer need to choose between financial returns and programmatic returns. Increasingly, there are opportunities to accomplish both at once — aligned with mission and without concessions on returns. Our board feels that these opportunities represent some of our best platforms to maximize McKnight’s resources for the broadest and most lasting impact.”
Private Capital, Public Good, a new report by the U.S. National Advisory Board on Impact Investing, is available online at nabimpactinvesting.org. Learn more about today’s roundtable discussion on The White House Blog.
NOTE: McKnight does not accept unsolicited proposals for program-related or mission-driven investments.
ABOUT THE MCKNIGHT
Tim Hanrahan, McKnight Communications Director, 612-333-4220