Giving Compass' Take:

• The author explains how the Russell Family Foundation adopted the practice of impact investing, growing their mission-aligned giving from 7 percent to almost 75 percent. 

• The foundation ensured that their impact investments were aligned with their philanthropy goals, but did note that it was one of the more complex parts of the process. What other challenges do philanthropists face when switching giving practices?

• Read more about impact investing to understand this practice better. 

For social entrepreneurs seeking financing, one notable trend is the movement for foundations to go all in or thereabouts. That means a small, but growing, number of philanthropic organizations are moving most, or all, of their money into impact investing.

Now, The Russell Family Foundation, one such foundation, just came out with a report outlining its four-year effort to move from 7% to almost 75% mission-aligned investments, with financial returns that beat market benchmarks by nearly 3%, according to CEO Richard Woo.

Their efforts started in 2004, with a $1 million carve-out from the endowment to learn about what would soon be called impact investing and a series of mission-aligned investments. Then, the organization created what it called its Mission Related Investment Committee (MRIC), bringing together program staff and investment advisors to coordinate efforts. Several years of analysis followed, conducted by a financial advisory firm and, eventually, the foundation created a menu of investment approaches. The upshot: It achieved nearly 75% mission-aligned investments in four years.

The investment approach rests on five levels of impact. First is negative screening. Second is tilting toward positive screens—say, not just eliminating fossil fuels, but taking on more clean energy. Third is integrating ESG factors, making sure that, for example, the foundation doesn’t inadvertently increase investments in ways that raise its carbon footprint.

The last two involve more complexity. The fourth is all about themes—looking for investments that align with philanthropic goals, like sustainable forestry, affordable housing or other place-based investing. The last, and trickiest, level involves program-related investments, which have the highest level of alignment with impact goals and the greatest financial risk—investments Woo describes as “catalytic.”

“There may be a lower return, but potentially also an outsized environmental or social return,” he says.

Read the full article about impact investing by Anne Field at Forbes