Only 5% of U.S. Foundations Invest for Impact, Study Finds
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Only 5% of U.S. Foundations Invest for Impact, Study Finds

By ABBY SCHULTZ
Sat, Mar 2, 2024 7:00amGrey Clock 4 min

Few of the U.S.’s philanthropic foundations invest their endowment assets—totalling an estimated US$1.1 trillion—to create positive social and environmental change in addition to high returns, potentially limiting or even counteracting the good such organisations do.

Exactly how few isn’t precisely known. But Bridgespan Social Impact, a subsidiary of the New York-based Bridgespan Group along with the Capricorn Investment Group, a Palo Alto, Calif.-based investment firm founded by Jeff Skoll , the first president of eBay, and the Skoll Foundation, also in Palo Alto, attempted to “get the conservation started,” with a study of 65 foundations with a total of about US$89 billion in assets, according to Mandira Reddy, director at Capricorn Investment Group.

The top-line conclusion: 5% of the primarily U.S.-based foundations surveyed invest their assets for impact. Most surprising is that 92% of these organisations, which have assets ranging from US$11 million to US$16 billion, are active members of impact investing groups, such as the Global Impact Investing Network and Mission Investors Exchange.

“If there’s any pool of capital that is best suited for impact investing, it would be this pool of capital along with family office money,” Reddy says.

The study was also conducted “to draw attention to the opportunity,” she said.

“We want to redefine what philanthropy can achieve. There is massive potential here just given the scale of capital.”

Foundations are required by the U.S. Internal Revenue Service to grant 5% of their assets each year to charity; in practice they have granted slightly more in the last 10 years—an average of 7% of their assets, according to Delaware-based FoundationMark, which tracks the investment performance of about 97% of all foundation assets.

The remaining assets of these foundations are invested with the intention of earning the “highest-possible risk-adjusted financial returns,” the report said. Those investments allow these organizations to grant funds often in perpetuity.

Capricorn and Bridgespan argue that more foundations, however, need to “align their capital with their missions,” and that they can do so while still achieving high returns.

“Why wait to distribute resources far into the future when there are numerous urgent issues facing the planet and communities today,” argue the authors of a report on the research, which is titled, “Can Foundation Endowments Achieve Greater Impact.”

The fact most of the foundations surveyed are very familiar with impact investing and yet haven’t taken the leap “highlights the persistently untapped opportunity,” the report said. It details some of the barriers foundations can face in shifting to impact, and how and why to overcome them.

Hurdles to making a shift can include “beginner’s dilemma”—simply not knowing where to start—and a misperception on the part of large foundations that impact investing is “too niche,” offering opportunities that are too small for the amount of capital they need to allocate. Other foundations are too stretched and don’t have the resources to add capabilities for making impact investments, the report said.

One of the biggest concerns is financial performance. Some foundation leaders, for instance, worry impact investments lead to so-called concessionary returns, where a market rate of return is sacrificed to achieve a social or environmental benefit. Those investments exist, but there are also plenty of options that offer financial returns.

The authors make a case for foundations to “go big,” into impact to realize the best outcomes, and to take a portfolio approach, meaning integrating impact principles into how they approach all investments. To make this happen, foundations need to incorporate impact into their investment policy statements, which determine how they allocate assets.

It will be difficult for foundations that want to shift their assets to impact to pull out of investments such as private-equity or venture-capital funds that can have holdings periods of a decade. But with a policy statement in place, a foundation’s investment team can reinvest this long-term capital once it is returned into impact investing options, she says.

“The transition doesn’t happen overnight,” Reddy says. “Even if there is a commitment for an established foundation that is already fully invested, it takes several years to get there.”

The Skoll Foundation, established in 1999, revised its investment policy statement in 2006 to incorporate impact. According to the report, the foundation initially divested of investments that were not in sync with its values, and then gradually, working with Capricorn Investment, began exploring impact opportunities mostly in early-stage companies developing solutions to climate change.

“As the team gained more knowledge and experience in this work, and as more investment opportunities arose, the impact-aligned portfolio expanded across different asset classes, issue areas, and fund managers,” the report said.

As of 2022, 70% of the Skoll Foundation’s assets are in impact investments addressing climate change, inclusive capitalism, health and wellness, and sustainable markets.

Capricorn, which manages US$9 billion for foundations and institutional investors through impact investments, constructs portfolios across asset classes. In private markets, this can include venture, private equity, private credit, real estate, and infrastructure. There are also impact options in the public markets, in both stocks and bonds.

“Across the spectrum there are opportunities available now to do this in an authentic manner while preserving financial goals,” Reddy says.

Of the foundations surveyed, about 15, including Skoll, have 50% or more of their assets invested for impact. Others include the Lora & Martin Kelley Foundation, the Nathan Cummings Foundation, the Russell Family Foundation, and the Winthrop Rockefeller Foundation.

Though not part of the study, the California Endowment just announced it was going “all in” on impact. The organisation has US$4 billion in assets under management, which likely makes it the largest foundation to undergo the shift, according to Mission Investors Exchange.

Although the researchers looked at a fairly small sample set of foundations, Reddy says it provides data “that is indicative of what the foundation universe” might look like.

“We cannot tell foundations how to invest and that’s not the intent, but we do want to spread the message that it is quite possible to align their assets to impact,” she says. “The idea is that this becomes a boardroom conversation.”



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Millennials Are Coming for Your Golf Communities

Living on golf courses has surged in popularity since the pandemic. Many courses have upgraded facilities and broadened amenities. Now the 40-year-olds want in too.

By JESSICA FLINT
Sun, Apr 21, 2024 8 min

Gabrielle Sloan, 30, and her husband, Brandon Sloan, 30, never thought they’d live on a golf course. Gabrielle doesn’t even play golf—yet, at least.

But in January 2020, the Sloans spent $660,000 to buy a three-bedroom, roughly 1,960-square-foot ranch house on approximately 0.25 acres that backs up to the course at Tequesta Country Club, a private golf club in Tequesta, Fla., a village on Palm Beach County’s northern border.

Gabrielle and Brandon Sloan with their son and dog at their house in Tequesta, Fla. PHOTO: JAMES JACKMAN FOR THE WALL STREET JOURNAL

“We loved how family-friendly the neighbourhood is,” says Gabrielle, noting that the club is catering to a younger crowd. “That lifestyle is something we wanted.”

Across the U.S., millennials like the Sloans are moving to where the grass is greener: private golf communities. “Millennials are starting to solidify their lives,” says Cindy Scholz, a real-estate broker with Compass in New York City and the Hamptons, on New York’s Long Island. “And they are strategically using real estate to shape their lifestyles.”

In Texas, about 10 miles west of downtown Austin is Barton Creek, a community where the Barton Creek Country Club is a selling point. “Before the pandemic, millennials were sporadically buying in Barton Creek,” says Stephanie Nick, a Douglas Elliman sales agent. “Now it’s a full-bore, ‘let’s get going on the country club lifestyle’ movement.”

In Barton Creek, Nick says millennial house hunters typically budget about $3 million to $4 million. In 2023, she sold a millennial a four-bedroom, 5,500-square-foot house for $3.5 million. Recently, she showed a $5 million house to a young couple with one child.

Nick believes millennials—born between 1981 and 1996—are tired of paying more for less in the city. In Austin, $3 million might buy a roughly 3,000-square-foot house on a small parcel, she says, whereas that same price in Barton Creek might buy a 5,000-square-foot to 6,000-square-foot house on a half to one acre in a community with easy access to four 18-hole golf courses, tennis, workout facilities, swimming and more.

In Georgia, Mary Catherine Smith, a real estate agent with Corcoran Classic Living, says millennials are moving to Jennings Mill Country Club, less than five miles south of downtown Athens. In March, Smith listed a typical Jennings Mill property—a five bedroom, 4,984 square foot house on 1.07 acres—for $965,000.

One reason Smith thinks young homeowners gravitate to the club is for its social life. “Many Jennings Mills residents have golf carts,” she says. “They’ll trolley around together on the weekend.”

“There are millennials who have never picked up a golf club, and a country club neighbourhood is still the only place they want to be,” says Byron Wood, a real estate agent with Sotheby’s International Realty – Westlake Village Brokerage, about 10 miles from Los Angeles’s city limits.

Millennials moving to private golf communities is a trend that might have seemed unthinkable before the Covid pandemic, when such enclaves seemed destined for the rough due to waning interest in the sport, especially among young people.

Then an unlikely coincidence occurred.

A bucket of balls at the Bermuda Dunes Country Club. PHOTO: OLIVIA ALONSO GOUGH FOR THE WALL STREET JOURNAL

Golf play surged during the pandemic and continues to grow: In 2023, more golf rounds were played than any other year on record, according to the National Golf Foundation.

Meanwhile, since the Great Recession, there are private golf clubs that have been transforming themselves into amenity-rich lifestyle hubs, whose resort-style pools, sports facilities, fitness centres, dining and social programming have broad appeal, says Jason Becker, co-founder and CEO of Golf Life Navigators, an online platform that connects golfers to golf clubs and golf communities across the U.S.

At the same time, during the pandemic, millennials started turning 40 years old. Research from Club Benchmarking, a private golf club business intelligence firm, shows that the average age of new private golf club joiners is early 40s, says Michael J. Timmerman, the company’s chief market intelligence officer.

That means at the same time golf and private golf clubs came back into style, the next generation of Muffys and Skips were primed to start their country club years.

Consequently, the NGF has seen a shift toward younger private golf club members on the heels of the pandemic. Since 2019, the number of golfers at private golf clubs has increased by approximately 25%, from just under 1.5 million to 1.9 million, according to the NGF. Adults under the age of 50 comprise 60% of those memberships, with young adults, ages 18 to 34, representing about 30%. The latter can include adult children of members, typically up to a certain age.

There is no one-size-fits-all U.S private golf club community. Some clubs have housing within their gates; other clubs are integrated within regular residential neighbourhoods. Roughly speaking, a top-tier club’s golf initiation fee could be $250,000 or much more, with annual dues in the mid-tens of thousands and up. However, there are also clubs with golf initiation fees and annual dues in the low thousands or less. Typically, there are lower-priced membership options that don’t include golf, such as social or pool- and tennis-only memberships.

In December 2021, Tyson Hawley, 37, and his wife, Maital Hawley, 40, paid $1.15 million for a turnkey four bedroom, 4,272 square foot house on 0.4 acres backing up to the golf course at the Bermuda Dunes Country Club. It’s located in California’s greater Palm Springs area, which has more than 110 golf courses, of which more than half are private.

“I leave my house and I’m on my club’s first tee in two minutes,” Tyson Hawley says. Hawley is a real estate agent with Desert Sotheby’s International Realty. He says within a prestigious desert club’s gates, houses might be in the multi-millions. However, there are lower priced golf community options that work for his millennial buyers, who typically have house budgets of about $800,000 to $1.2 million, he says.

undefined “It is very possible to buy a house at $350 per square foot in a golf community and be super pumped about what you get for your membership,” he says. “There are clubs that understand that millennials are in a season of their lives where they can’t hang with the big dogs paying $250,000 for an initiation fee.”

Golf Life Navigators’s Jason Becker says some private clubs have invested in their amenities, golf course and branding, while others have not and rely upon their historic status. “Millennials are very cautious by nature in terms of their finances and investments,” Becker says. “Industry officials are seeing very in-depth questions coming from millennials pertaining to the club’s financial health and long-term plan to remain healthy.”

Becker says there are, of course, golf communities where there aren’t many younger members, specifically those in the U.S.’s Southeast or Southwest that are geared toward retirees or second-home owners. “There’s just so much demand from the baby boomers,” says Becker, noting that since the pandemic, generally speaking, membership wait lists are now lengthy, fees associated with being a member are up, attrition rates are down and tee time availability is compressed. He added that the cost of being a member at some clubs can be prohibitive for younger people, especially in an era when the average initiation fee at a private club has increased 50% to 70% since 2021. In the Sunbelt, the average age of private golf club searchers is between ages 55 to 57, according to Golf Life Navigators’s data.

That’s not a hard-and-fast rule, though. In the Phoenix area, Lisa Roberts is a real-estate agent with Russ Lyon Sotheby’s International Realty. She is working with a young millennial couple at McCormick Ranch Golf Club, in Scottsdale. They recently went into contract for $1.1 million on a three bedroom, 2,550 square foot house on 0.21 acre. “They plan to upgrade once they have children and a more established income,” Roberts says, “but this house lets them lay a foundation within the club’s gates now.”

Becker says whether younger people will be battling generational stereotypes hinges on the club’s culture, which sets the tone for all members. “It is up to the club’s board and management team to lead the way of established culture, such as playing music on the golf course or wearing a hat in the clubhouse,” Becker says. “For younger, new members, the club’s culture has to be understood or frustration will likely surface.”

Club Benchmarking’s Michael J. Timmerman says, “It really depends on how the club is designed, whether the club wants to focus on programming that will attract different members.” Timmerman adds that clubs catering to younger members and families will develop social programming specifically tailored to that age group.

Around the communities of Monterey and Carmel on California’s Central Coast, there are storied golf courses including the public Pebble Beach Golf Links and the private Monterey Peninsula Country Club. Nic Canning, managing partner at Canning Properties Group with Sotheby’s International Realty – Carmel Brokerage, says retirees and second-home owners typically live around these premiere courses, where he says properties can range from roughly $15 million to $35 million around Pebble Beach, and $3 million to $10 million around MPCC.

However, the area is rich with golf—there are roughly a dozen public courses and a half-dozen private clubs—and Canning has seen an influx of millennials buying in  family-friendly private golf communities such as the Club at Pasadera, Santa Lucia Preserve and Tehama Golf Club, and the semi-private Carmel Valley Ranch. He says since the pandemic, the area has particularly attracted tech workers migrating from Silicon Valley, with San Jose being only about 70 miles north.

At these clubs, Canning has recently sold millennials properties such as a three bedroom, 2,717-square-foot house on approximately 0.23 acres for $3.792 million, and a house with roughly similar specs for $2.7 million. Another house that has three bedrooms and 4,396 square feet on 13.3 acres just sold to a millennial for $4.42 million.

“Millennials are less driven by ocean views and care more about the community, the school district and access to things like restaurants, grocery shopping, trails and beaches,” Canning says.

Similarly, millennials want to equip their private golf-club houses a certain way. Kate O’Hara, CEO and creative director of O’Hara Interiors, which is based in Minneapolis and Austin, says the country club houses her firm works on might include everything from golf-simulator rooms and yoga studios, to outdoor-access showers and expanded mudrooms for equipment storage.

Back in Tequesta, Fla., the Sloans spent about $150,000 to optimise their house to fit their lifestyle, including adding durable furnishings and built-in cabinetry and jazzing up their outdoor entertaining area. They did so with the help of local interior designer Victoria Meadows Murphy, 35, who has a knack for taking the Bob Hope vibes out of country club homes without losing the martini spirit.

Meadows Murphy and her husband, Evan Murphy, 35, are building their own house, a project budgeted at $2.8 million, on a tear-down lot on the Sloans’s same golf course. “It’s exciting seeing the turnover of houses as young people are moving in,” Meadows Murphy says.

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