New Terrain: In Search of Social Justice Impact Investing

photo: Hafiez Razali/shuttetrstock

photo: Hafiez Razali/shuttetrstock

Impact investing is still a fledgling practice in mainstream philanthropy, but its popularity is growing in a big way. While there are lots of enthusiastic proponents out there—extolling the idea of putting more wealth to work, or making an impact and making money—others (including on this very site) are questioning how deeply foundations should be diving into this approach. 

At the same time, just as with grantmaking, the value in impact investing all comes down to the details.

For many institutions, especially those with social justice missions, there are big questions about how exactly to execute a hugely varying set of tactics that get lumped under the same rubric of impact investing. One of those institutions is the Jessie Smith Noyes Foundation, a small and progressive family foundation with a strong mission for social change—and a $55 million endowment it’s trying to put to best use.

The funder recently released a white paper detailing its unconventional effort to hire an investment advisor, and in the process, increase the sector’s understanding of how investing for social justice works. The report found that the field currently offers a lot more opportunity than in previous years, and that foundations don’t need to sacrifice investment performance to make an impact.

At the same time, Noyes came across notable shortcomings in the advisor community, particularly around diversity and understanding of how to address social justice issues. It’s important that foundations take impact investing on, Noyes reports, but they’ll need to be diligent and work together to get social justice investing right. 


The white paper came out of Noyes’s seven-month search for an advisor, the latest step in a 30-year effort to align its investments with its mission—currently to support grassroots organizations and movements working for environmental, social, and economic justice. The funder decided to try something different, posing a number of challenging questions to the impact investment field through an open call for LOIs. The foundation ultimately settled on Threshold Group (which was bought out by another firm not long after they made their decision), but the 34 formal and dozen informal responses from a variety of advisors shed some light on the state of the field. 

The Good

For starters, Noyes found a lot going on in impact investing, with options for those looking to get involved “significant and growing.” There are many newcomers and impact investing specialists out there, and large, mainstream firms offering services. “For those new to building a mission-aligned endowment, it means the path forward will be smoother than in the past,” the report states. 

Also of note, the responses they received from advisors assured Noyes that impact investing doesn’t mean they have to sacrifice discipline or performance. “Candidate firms did not support a long-held notion that achieving social and environmental impacts necessitates a reduction in financial performance. Advisors asserted that ESG and impact investing strategies can match or exceed the performance of traditional investment strategies.”

The Bad

There are still a lot of gaps in understanding and options within impact investing. The concept of "social justice investing" itself is still quite nebulous, and the responses Noyes received were in some cases disappointing. Respondents’ analyses and expertise seemed to vary widely, with some “demonstrating a limited understanding of how to address social justice issues through investments.”

One big finding was that among the advisors themselves, diversity was—not all that surprisingly—lackluster. Just 26 percent of the applicants were women-led firms, and 12 percent were minority-led firms, which “raises concerns about cultural awareness in the industry.” They also saw gaps in investment opportunities when it came to certain specific issues, such as racial justice, and women’s reproductive rights and health.

As we've noted before, the missions of some foundations are more easily advanced through impact investing than others. This is especially true for funders working in areas like housing, workforce development and climate change, where there's a clear role for market-based solutions.  

The Way Forward

Noyes also came out of the process with some input and ideas about how those pursuing impact investing for social justice might proceed. 

For one, it’s important to clearly define goals and criteria, so the board and financial team agree on what they’re getting into and what they want. They also heard from the majority of respondents that instead of focusing on any one tactic—screening problematic investments, shareholder engagement and activism, community investing, program-related investments, etc.—the way to success is through a combination of these tools. Effectiveness also requires a lot of engagement with advisors and fund managers.

Another recurring theme is that future success in the field will have a lot to do with how well peer foundations and even their grantees collaborate. Knowledge sharing and transparency will be important, as well as collaborative investments to pool resources, and working with grantees and other funders to discover new opportunities. 

At the end of day, Noyes is a big believer that this is something foundations need to grapple with, though it is demanding. “Aligning investments with philanthropic values can be challenging, but is necessary to deepen grantmakers’ impact.”

There’s plenty more analysis and advice in the full white paper, which can read in its entirety here