I’ve heard the term ‘participatory investing’ used a lot lately, often in ways that miss the bigger picture.

But participation, according to those who study it, is about shifting power, and participation in investing forces us to look at who holds power in the economy. That means thinking about four key questions for participatory investing:

  • Who decides which investments are made?
  • Who benefits from the wealth created through those investments?
  • Who has access to investment opportunities?
  • Who gets to decide who is ‘worthy’ of receiving investments?

A serious inquiry into all four of these questions becomes a call for a full transformation of our economic system. This piece is an attempt to map what this looks like across these four dimensions and to point toward the work already happening to build an economy that serves people and the planet.

Philanthropy’s Big Miss

Let’s start with the most obvious case in terms of participatory investing. Philanthropic foundations and trusts exist to serve communities, yet philanthropy’s best kept secret is that the vast majority of their assets (roughly 95 percent) sit in conventional investment portfolios with no meaningful benefit to, or input from the communities they exist to serve.

Participatory grantmaking—ceding decision-making about grants to these communities—has become more widely known in recent years, but when it comes to how foundations actually invest their assets, participation is practically non-existent.

There are glimmers of progress in the form of participatory investing. The Endowments Investing Challenge, an initiative by six UK foundations, ran a participatory process this year to select an investment service provider for a £50 million pool. A panel of seven young adults aged 18–25 from across the UK participated and made the final decision prioritising an investment strategy that goes beyond doing no harm, to one that positively contributes to future generations.

This is one step toward transparency in how endowments are managed. In addition, a few progressive foundations, such as Kataly Foundation and SK2 Fund, have 100 percent mission aligned endowments, which is a wonderful example for the wider field. Yet, in most cases, foundations still decide where to invest without input from their communities, and true participatory investing is a rarity.

Read the full article about participatory investing by Kelley Buhles at Alliance Magazine.