Mission investing

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Under Mission Investing refers to investments in which the investor in addition to the return on achieving followed an additional, often ideological purpose. Often the term mission-based investing, mission-related investing or purpose-oriented investment is also used. Related technical terms are “sustainable investments”, “impact investing” or “ venture philanthropy ”. However, their delimitation often remains diffuse. The forms of mission investing range from excluding investments that potentially cause damage to targeted direct investments in the interests of the investor (in the case of foundations, for example, linked to the foundation's purpose).

Sustainable investments

A frequently chosen form of implementation are exclusion criteria. Here are bonds or shares excluded from institutions acting against the objectives of the investor. The exclusion of arms or tobacco producers is common. In many cases, the exclusion of entire economic sectors leads to a further conflict of objectives. This is exemplified by the cement industry. Although this is environmentally harmful, it is essential for the economic development of a country. One possible way out is the “best in class” approach, in which investments are made in the most sustainable companies in all sectors of the economy. In this way, incentives are also created in non-sustainable industries to operate more ecologically and socially. With the best-in-class approach, the asset manager should report regularly on how sustainable the portfolio is in comparison to the overall market and which branches of the economy or practices are bindingly excluded.

Impact investing

Impact investing goes one step further. These include, for example, investments in microfinance through foundations from development cooperation or investments in solar power plants through environmental protection organizations. The investments can either be made directly by the foundation or via product providers. In the case of direct investments, the foundation grants loans or participates in organizations that are eligible for funding. A big challenge is a sufficient diversification of the investments. In order to be able to invest in a large number of projects, an appropriate amount of assets is necessary. In addition, the internal effort (in the case of direct investments) or the amount of the fees (in the case of investments via financial service providers ) should not be underestimated. Should a foundation develop its own impact investments or use third-party providers? The advantage of direct investments is obvious: the more the plants can be involved in the foundation's funding activities, the better they can be coordinated with the existing projects and programs. The dangers, however, are a lack of diversification, a risk that is difficult to assess and - above all - a lack of liquidity . If the foundation lacks the necessary know-how and internal resources for direct investments, an indirect solution using tradable investment funds is the obvious option anyway. In this case, however, special attention must be paid to the amount of the fees and the impact measurement.

Venture Philanthropy

A foundation invests - similar to impact investing - also in non-profit institutions. In addition, however, she is prepared to take the risk of a total loss. In this case the investment would become a donation. One example is loans to non-profit organizations to be set up (e.g. setting up a company that employs disadvantaged people). Such investments are tied for several years and should only be made if there is a willingness to forego a repayment of the capital. It is also important to clarify the question of whether any subsidiaries are tax-exempt.

Constant weighing of effects and costs

With all Mission Investments, the analysis of possible investments is associated with additional costs. It can be assumed that these costs will not be compensated by an additional return. It is therefore essential for investors to look at return and impact together. The goal of many investors is that the additional costs are no more than the additional effect that is achieved with Mission Investments. Otherwise, the traditional model with purely return-oriented investments and purpose-oriented funding contributions would be preferable.

Web links

Individual evidence

  1. ↑ a b Riesen Lukas / Neubert, Luzius 2014: The 1 × 1 of Mission Investing. In: Die Stiftung Special 2014, page 56 ff. Online
  2. ↑ Schneeweiß, Antje / Weber, Melinda 2012: Mission Investing in the German Foundation Sector. Impetus for effective foundation assets. Foundation study. Published by the Federal Association of German Foundations. Berlin. Page 20 Online