Volume 105: How the Nelson Foundation Decided Its Fiduciary Duty Was to Its Mission
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Ten years ago, staff at the Nelson Foundation, a private foundation that serves Philadelphia’s youth, brought a new idea to the board: if racial equity and social justice shaped the foundation’s grantmaking, why shouldn’t they shape its investments?
Like most other organizations, the $24 million private foundation historically chose investments that would offer the best returns, not ones that would support its mission. Unfortunately, the board wasn’t quite ready to align its investments with its work.
“Learn more and come back to us with this,” Jenny Snyder, the current president and director of the Nelson Foundation, remembers the board saying.
First led by former president Mindy Aldridge and then taken up by Snyder, the team of two took that directive to heart. A decade later, the foundation switched investment advisors, rewritten its Investment Policy Statement (IPS), and carved out a target of 7% of its portfolio for local investments. Here’s how the Nelson Foundation made its mission and values part of how it invests its endowment.
From “talking the talk” to “walking the talk”
The Nelson Foundation supports young people and families in Greater Philadelphia, with a focus on equity and social justice. In 2022, it formally adopted a new mission that made those values explicit.
The work behind that change started several years earlier. During a strategic planning process, the foundation examined everything from grantmaking and banking to vendors and investments through the same values. Snyder says a turning point came during the racial reckoning several years ago, when the board considered making a public statement.
“We came to the realization that the fiduciary responsibility of the board and staff of the foundation is to the mission and not to making money in the markets.”
“They said they wanted to walk the talk,” she says.
The board didn’t want to make a statement it couldn’t back up a year later. The Nelson Foundation hired a strategic planning consultant with a DEI focus and spent months learning about the history of philanthropy, equity, and the role foundations can play in perpetuating inequity.
“We decided that we absolutely needed to become 100% mission aligned. More importantly, we came to the realization that the fiduciary responsibility of the board and staff of the foundation is to the mission and not to making money in the markets,” Snyder says.
Redefining fiduciary responsibility
The Nelson Foundation’s old Investment Policy Statement was almost entirely financial.
“It didn’t reference our mission and vision at all,” Snyder says.
Fiduciary responsibility had meant investing in a way that maintained the foundation in perpetuity and generated enough return to support its desired level of grantmaking.
Its new IPS, however, adds another requirement: investments must also reflect the foundation’s mission and values.
The Nelson Foundation still sets targets for returns, asset allocation, and grantmaking. Its new IPS, however, adds another requirement: investments must also reflect the foundation’s mission and values.
While searching for a new investment advisor, the Nelson Foundation created a separate mission-aligned investing strategy and added a temporary preamble to its existing IPS stating that, wherever possible, investment decisions would reflect its new mission, vision, and values.
When the foundation hired its new advisor, it incorporated those principles throughout the IPS.
A decade of learning
Getting the board comfortable with mission-aligned investing took years of learning.
The Nelson Foundation’s staff joined cohorts, attended conferences and ImpactPHL events, and invited leaders from other local foundations to speak at board meetings about what had worked and what had not. Snyder credits that peer learning with helping the foundation move forward.
“Peer pressure is an amazing thing,” she says.
The makeup of the Nelson Foundation’s board also changed. Over time, the foundation added more people with direct connections to the communities and organizations it funds, including grantee partners and former grantee board members.
Ten years earlier, the board had been weighted more heavily toward investment professionals. By the time the foundation revisited mission-aligned investing, the people around the table were more likely to put community outcomes at the center of the conversation.
“The proof is there now. We’re using all the same benchmarks and our portfolio is doing fine.”
The board also learned that mission alignment didn’t necessarily mean sacrificing returns. After roughly a year and a half with its new advisor, the Nelson Foundation’s assets have grown and its portfolio has continued to perform against the same benchmarks.
“The proof is there now. We’re using all the same benchmarks and our portfolio is doing fine,” Snyder says.
Finding a new, aligned financial advisor
The Nelson Foundation’s existing advisor couldn’t offer what the foundation was now asking for.
So, the foundation conducted a national search for a new investment advisor with its mission-aligned investing strategy as a guide.
Board and staff members evaluated applicants using scoring rubrics based on the foundation’s strategy and brought two finalists before the full board. They ultimately chose Westfuller Advisors, now Bivium Westfuller.
Snyder says the advisor has helped translate Nelson’s values into its IPS, investment managers, conduct due diligence, and support the foundation’s local impact investments. For a foundation with only two staff members, that support has been particularly important.
“I haven’t really had the capacity to be doing all this by myself,” Snyder says.
7% for Greater Philadelphia
The Nelson Foundation’s IPS allows as much as 10% of the portfolio to go toward local and catalytic investments. Its current target is 7%, which the foundation hopes to deploy by the end of 2027. For the foundation, “local” means Greater Philadelphia.
The Nelson Foundation finds local opportunities through other foundations, local investment groups, ImpactPHL, and community events. Snyder then puts potential investments through an initial screen followed, when warranted, by deeper financial and mission-related due diligence.
Recent investments include a $250,000 program-related investment in Kensington Corridor Trust and a $250,000 mission-related investment in Jounce Partners, a nonprofit providing educational support to public schools. Earlier investments included $100,000 in Ujima Developers and smaller investments in Women’s Community Revitalization Project and Weavers Way Co-op.
Snyder compares the local investment process to grantmaking. First the foundation determines whether something fits, then digs deeper into the financials and mission impact before taking it to the finance and investment committee for approval.
“Something is better than nothing”
The Nelson Foundation is still figuring out parts of the process. Its first mission-aligned investment required outside legal counsel, took more staff time than expected, and cost more to evaluate because the team was learning as it went. But making that first investment helped demystify the process.
“We didn’t have to have everything in place. We didn’t even have our whole mission-aligned strategy done before we started dipping our toe in the water. It doesn’t have to be all or nothing. In my opinion, something is better than nothing,” Snyder says.
“We’re more excited about the impact than the interest payments.”
For the Nelson Foundation, peer learning was crucial. Snyder also recommends asking an existing investment advisor what they can support and bringing in outside help when staff capacity is limited.
While the Nelson Foundation is still waiting for its first full impact report and hasn’t yet reached its target allocation, that hasn’t stopped the board from thinking differently about what success looks like.
“We’re more excited about the impact than the interest payments,” Snyder says.
Ten years after the board told staff to keep learning, Snyder gives much the same advice to foundations starting now.
“Once you see other people do it, and once you’re really digging into your values, it’s hard to say no to it after a while.”
Article by Ana Cvetkovic.