In addition to grantmaking, our investments are an effective tool for achieving positive impact. They include market-rate investments and below-market program-related investments. Our PRIs directly support our mission in the South, while our market-rate investments align with our values and adhere to our Investment Policy, which includes environmental, social and governance factors. These criteria include labor rights, climate impact, natural resource use, corporate governance, supply chain management, community impact and other best practices. We believe this investment approach is consistent with fiduciary responsibility, and we expect our portfolio to generate competitive market performance returns.
Our investment policy establishes a goal of spending 5.5 percent of a 12-quarter moving average of the market value of our endowment, allowing the fund to exceed the IRS-mandated 5-percent spending. In recent years, we have increased our grantmaking to help our partners respond to challenging shifts in their environments.
Here are some terms we frequently use to describe our approach to investing:
Community Development Financial Institution
Financial institution such as a community development bank, credit union, loan fund or venture capital fund with a mission to expand economic opportunity through credit, financial services and technical assistance in communities underserved by other financial institutions. The U.S. Treasury Department certifies CDFIs, enabling them to apply for federal grants and finance a broad range of activities.
Environmental, Social and Governance Factors
Guidelines to ensure investments promote sustainable, fair and effective practices and mitigate potential risks. Considerations include natural resource use, human and labor rights, community impact and corporate structure. The Babcock Foundation’s endowment is 100 percent invested according to these factors, a practice we refer to as values-aligned investing rather than mission investing, since our mission is focused specifically on poverty alleviation in the American South.
Capital intended to generate measurable social and environmental benefits as well as profit. These financial returns can be below-market as part of a foundation’s annual distribution strategy or market-rate as in the investment of its endowment.
A form of impact investing that advances an organization’s mission and programmatic goals.
An investment whose primary purpose is to advance a foundation’s mission rather than generate profit, influence legislation or fund a political campaign. PRIs are an IRS designation, and these investments are counted toward a private foundation’s annual five percent minimum distribution requirement. Once repaid, PRI returns are recycled into new investments.