Starting Point

Steps

Read more in the guidebook

 

STEPS FOR IMPLEMENTING AN IMPACT INVESTMENT STRATEGY

While there is no ‘magic machine’ to help your foundation start impact investing, there are clear steps to be taken.

These steps are based on the experience and practice of many other foundations. Your foundation may not follow these in the exact order presented here, and that’s OK. As someone directly involved in the daily realities of your organization, you are in the best position to adapt this roadmap to your context. Use this course of action as a “stepping stone” to move your organization forward.

STEP 1: DEVELOP A PRELIMINARY VISION

Developing a preliminary vision for impact investing is a natural starting point for a mission-driven organization.This is an opportunity to reflect and be creative. Similar to exploring how granting programs can help realize a better world through charity, take time to think through how impact investing can unlock additional resources for your foundation’s mission. Your goal is to envision how impact investing can add value to the foundation’s mission and to your community. As needed, involve colleagues, advisors or consultants to help you.

STEP 2: SECURE BUY-IN FROM YOUR BOARD

To get your board’s support for impact investing, it is important to understand the needs of your board members. Take time to get to know your colleagues’ decision-making processes, their motivations, and how they deal with change and innovation. With this in mind, make sure you understand the context and purpose of every communication. Doing so enables you to craft an approach that speaks to the needs, interests and potential concerns of the board.

Prior to developing a proposal or request, ask yourself:

  • Are you seeking approval to research the ways impact investing can benefit your foundation?
  • Are you trying to secure a mandate from the board to develop a full strategy?
  • What is the type and depth of support you are seeking?
  • Do you need the coaching of outside experts or consultants to develop it?
STEP 3: DEVELOP STRATEGY

Every foundation will have a unique impact investing strategy. Guided by your vision and mission, your strategy will evolve over time as you gain experience. Many foundations take incremental steps that allow them to pause, assess and design for their next stage.

As you develop your plan, be mindful of the foundation’s day-to-day realities. Access to internal and external expertise will play a key role in the development of your strategy. Your goal is to build an actionable plan that allows you to move forward and learn from experience, while implementing processes that lay the foundation for long-term success.

STEP 4: FORMALIZE GOVERNANCE

In a charitable foundation, governance is the system of stewardship of the assets and purposes of the foundation for public benefit. Creating this framework ensures that your foundation is guided by consistent, organization-wide decision-making and accountability systems. Considering governance early will allow you to implement your impact investing program with the foundation’s existing investment governance framework in mind.

STEP 5: DETERMINE YOUR IMPACT MEASUREMENT APPROACH

Impact investments are expected to produce a desired social or environmental outcome. Developing an impact measurement approach will help you determine if you are producing the outcomes you intended, and whether an investment has performed in line with your expectations. Be prepared to monitor the investments in your Impact Investing program for financial and impact performance.

STEP 6: ASSESS YOUR MANAGEMENT CAPACITY

As discussed in Step 3, it’s important to find the right people and roles to manage your impact investing portfolio. Over the long term, an impact investing program will usually be managed in house or outsourced to a portfolio manager. Many foundations delegate the management of a portfolio of more passive investments to an Impact Investment committee, while others work with trusted external experts to conduct initial due diligence on investments.

As you adopt a strategy, you will build the capacity to act. This involves deepening and formalizing relationships as you learn how Impact Investing will operate in your organization and among your service providers.

STEP 7: INVEST AND LEARN

Once you have made the decision to include impact investments in your foundation’s investment portfolio, your organization will join the ranks of dozens of Canadian foundations that are successfully impact investing.

At this stage, you will be looking to make investments. You”ll also be developing the systems needed to monitor your investments. This will help you learn to refine your strategy as you measure financial results and social and environmental impact.

More detail regarding these steps can be found in the guidebook and in a separately downloadable ‘roadmap’ module.