Abstract

As the calls for responsible investing grow, universities will be asked about their endowments’ investment policies regarding impact investing, wherein endowments seek opportunities that provide investment returns and social impact. A common concern for the investment committees, however, is how to incorporate impact investments without compromising the goal of maximizing asset values and the benefit to its university. This paper offers a way forward. Using standard portfolio optimization models and a broader way to consider return, this paper suggests that an endowment can still meet the goal of maximizing expected value while investing with a purpose. It also offers examples of how to incorporate impact investing opportunities throughout the traditional asset classes in an endowment’s portfolio. The paper also addresses some reasons why endowments have been hesitant to incorporate impact investments. While other papers have addressed aspects of impact investing, this paper seeks to offer an accessible and holistic approach to the topic.

Highlights

  • The rising importance of responsible investing suggests that foundations and endowments are thinking beyond just what their portfolios can make; they are considering what their money can do

  • Mission Investors Exchange (Community Foundation Field Guide to Impact Investing, 2013) and the Institute for Responsible Investing (Wood & Hoff, 2008) for example discuss the benefit to fund raising from an impact investing framework and are among organizations that have published detailed guides about where endowments can allocate money

  • Chowdhry et al (2019) discusses how impact investing can blend with traditional investing to optimize outcomes, unlike this proposal, there is an implicit assumption that impact investors or “socially motivated” investors must sacrifice return

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Summary

1Metropolitan State University of Denver

Cite as: Schor, A. (2020). Return for Good: A Model for Impact Investing for Endowments. Metrpolitan Universities, 31(1), 24-43. DOI: 10.18060/23237 This is an open access article distributed under the terms of the Creative Commons Attribution License. Editor: Valerie L. Holton, Ph.D.

Introduction
Why Endowments
The Portfolio Fit
Portfolio Optimization
The Expected Return Calculation
Calculating S and C
The mission and investment policy statement
Process and people
Investment Opportunities
Implementation Roadblocks
Findings
Conclusion
Full Text
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