An ongoing debate regarding values-aligned investing (“VAI”) is whether or not one must sacrifice financial return in order to generate a positive non-financial return. Our position on this matter is best explained through tangible data points. Please see below for a recap of how the foundation’s unique VAIs performed in 2019.

• The Wellington Global Impact Fund invests in the equities of U.S. and non-U.S. companies whose primary purpose is to address the world’s major social and environmental challenges. As the name implies, we classify this investment as an impact investment within VAIs. In 2019, Wellington Global Impact (net +29.8%) relatively outperformed its benchmark, the MSCI ACWI Index (+27.3%) by +2.5%. 
• The foundation also purchased a 5-year taxable Charlotte Housing Bond on August 7, 2019. This investment is classified as a mission-related investment (“MRI”) within VAIs since it specifically aligns with the foundation’s mission, namely it’s focus on vibrant communities. Even though it has only been a few months, the Charlotte Housing Bond (net -1.0%) relatively underperformed both the Bloomberg Barclays Municipal Bond 5-Year Index (+0.3%) and Bloomberg Barclays U.S. Aggregate Index (-0.1%). 
• As highlighted in a previous article, the foundation also owns two Self-Help Women & Children CDs, which are categorized as MRIs provided alignment with education and vibrant communities, two of the foundation’s three areas of focus. Given the short duration of CDs it is more appropriate to compare yields as opposed to returns. The 12-Month Self-Help Women & Children CD annually yields +1.8%, outperforming Bank of America’s 13-Month Featured CD at 1.4%. Similarly, the 24-Month Self-Help Women & Children CD annually yields +1.9%, beating Bank of America’s 25-Month Featured CD at 1.0%. 

At the time of writing this article, Barron’s published its list of the 100 most sustainable companies in the U.S. In 2019, if you held a portfolio comprised of stock in each of these 100 companies, then you would have generated an average return of +34.3%, relatively outperforming the S&P 500 Index at 31.5%. In fact, 55 out of these 100 most sustainable companies beat the index on an individual basis. 

In summary, sometimes a VAI will financially underperform (e.g. the Charlotte Housing Bond), while still generating a positive non-financial return. However, our experience demonstrates that VAIs outperform both financially and non-financially the majority of the time. 

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Brittany Priester

Portfolio Manager

In mid-November, the entire foundation team attended the 50^th annual meeting for the Southeastern Council of Foundations (“SECF”). The foundation has been a member of this organization since 2016, and we find the annual meeting especially thought provoking. Below are highlights from the two conference sessions I enjoyed most:

Failing Forward: Learning from Failure as a Regular Discipline

In this breakout session, three foundations shared unsuccessful philanthropic initiatives resulting in lessons learned, which educated the over capacity audience. A common overarching theme across the three foundations’ failed experiences was the underinvestment in research at the onset. For instance, one foundation created a program to solve a problem that did not actually exist. If the foundation had communicated with individuals at the front end, rather than being disengaged and working top down, it would have avoided the pitfall of attempting to solve a nonexistent problem. 

One of the speakers, Rev. Cory Anderson with the Winthrop Rockefeller Foundation, shared the following quote, which I believe nicely encapsulated this session on learning forward:

“You do not know the words to your favorite song the first time you hear it.” 

Change the Story, Change the World 

Andy Goodman with The Goodman Center led a keynote session on storytelling as the most powerful form of communication provided stories help us remember. For instance, NUMBers make us numb, whereas STORies help us store information. Goodman advises that any good story must answer the following six questions:

1. Who is it about? People identify with people.
2. What does she want? In other words, what is the main character’s goal?
3. What stands in her way? (e.g. an obstacle or barrier)
4. How does she respond? With regards to a foundation telling a story, this step would inform the listener about the organization.
5. What happens? (i.e. success or failure)
6. What does it mean? (i.e. What is the larger lesson?)

Goodman closed his presentation with the following quote, which captures the significance of storytelling.

“If I look at the mass, I will never act. If I look at the one, I will.” – Mother Theresa  

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Brittany Priester

Portfolio Manager

Recently, within a single week, I received two separate calls, one from a community foundation and another from a family foundation, both based in North Carolina, inquiring how to get started with values-aligned investing (“VAI”). As the volume and frequency of VAI-related conversations increases, it is evident the strategy continues to gain support in the marketplace. Provided my real-time interaction with these local organizations, I would like to share the advice I gave to them with all of you as well. 

Aligning with our experience, the first step I recommend an organization take in order to get its toes wet with VAI is to purchase a certificate of deposit (“CD”) through Self-Help Credit Union. Specifically, Self-Help offers the following three CDs, which generate either an environmental or social impact in addition to providing a competitive financial return:

• Green Term Certificate
• Women & Children Term Certificate
• Go Local Term Certificate

Additional information available at: https://self-help.org/personal/accounts/certificates 

Self-Help is backed by the National Credit Union Administration (“NCUA”), which insures deposits up to $250,000 per entity, similar to how the Federal Deposit Insurance Corporation (“FDIC”) insures bank deposits up to $250,000 per entity. In other words, a CD issued by a credit union bears comparable risk to a CD issued by a bank. 

As of November 2019, a 12-Month Self-Help Women & Children CD yields 2.12%; whereas a Bank of America 13-Month CD yields 1.50%. Similarly, a 24-Month Self-Help Women & Children CD yields 2.22%; whereas, a 25-Month Bank of America CD yields 1.30%. 

In summary, a Self-Help CD will relatively outperform a bank CD both financially and non-financially (i.e. social/environmental impact) while taking the same amount of risk.

When it comes to execution, The Gambrell Foundation prefers to accept the market-rate offered. In this scenario, the foundation would purchase a 12-Month Self-Help Women & Children CD yielding 2.12% and classify it as a Mission-Related Investment (“MRI”) provided it generates a market-rate return and aligns with the foundation’s unique mission. Another approach is to accept a below-market return on this CD and classify it as a Program-Related Investment (“PRI”). For instance, a foundation’s policy could be to accept half the market rate, in which case it would invest in the 12-Month Self-Help Women & Children CD earning a rate of 1.06% (=2.12%/2). 

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Brittany Priester

Portfolio Manager