A Message from Confluence Philanthropy’s CEO, Dana Lanza
National leadership changes and resulting regulatory upheavals seek to upend the values-aligned investing industry. But despite the uncertainty ahead and the changes still to come, values-aligned investors intend to remain steadfast in their commitment to Peoples, places, and our planet. A change in strategy is not defeat.
Although values-aligned investors will respond to this moment differently, the sector is evolving. Confluence members will not abandon a commitment to solving climate change nor equitable opportunities for diverse investment managers. Many of the organizations in our membership are led by women, and we will not step down from leadership. We know that the world needs female and diverse leadership now more than ever before. As investors stay the course, the next four years will continue to demonstrate that it is not necessary to sacrifice returns to align capital with positive impact. The challenges that we face as a sector will sharpen our communication and business skills, galvanize our commitments, force our relational growth, and deepen our friendships. All these skills build resilience, and we are planning for a new economy. We are not stuck in the past, hooked on dinosaurs.
In fact, the challenges that we face are the testing ground for the future. New economic models and businesses will emerge from mutual aid societies; values-driven investors will partner alongside unusual bedfellows in the wake of climate disruption; and community stressors will inspire a new generation of young, visionary leadership. The job of philanthropy is to facilitate the creation of social innovation and endowments can invest alongside these changes with their values as a ballast. Make no mistake, no philanthropy would have chosen such aggressive disruption, but diversity, equity, and inclusion will thrive in its wake. Disruption is like a magical spell, once you set it in motion, you cannot control what will happen next. Patience is the practiced virtue of the values-driven investor.
From our members, here are a few mission-aligned investing trends to watch out for as we enter 2025. We encourage you to share your perspectives as well as we move together over the next year.
In Kinship,
Dana
From Confluence Philanthropy Members: What to Watch in 2025
Stephen Heintz, President and CEO, Rockefeller Brothers Fund:
“Mission-aligned investors need to focus their attention—and their resources—on measurement.”
Industry groups have faced challenges in establishing standardized metrics that effectively convey the stories of a broad range of investors. Critics have exploited this gap to create regulatory barriers for investors who want to integrate sensible environmental, social, and governance considerations into their portfolio management.
First, asset holders must work in coalition with industry groups and other investors to identify clearer and more engaging ways to demonstrate the value of our mission-aligned investment strategies. Second, in the absence of accepted industry-wide metrics, investors should embrace proactive, profound transparency regarding both their financial returns and mission-related impacts.
Fortunately, a wide range of rubrics and templates for assessing impact already exist for investors to customize to their specific needs. At the Rockefeller Brothers Fund, we mandate that our mission-aligned investments generate market-rate financial returns while pursuing positive social or environmental impact. We provide regular updates on our overall endowment performance, fossil fuel divestment progress, and impact, ESG, and GREL (gender and racial equity lens) investment values. We also measure and report bi-annually on our impact and ESG portfolios using the Impact Management Project’s Five Dimensions of Impact, the United Nations’ Sustainable Development Goals (SDGs), and the Global Impact Investing Network’s IRIS+ System.
Tax-exempt endowments have a special responsibility to advance standardization and transparency to remain accountable to the taxpaying public that subsidizes their existence. By testing and improving mission-aligned investing measurement approaches and sharing both our successes and failures, we can not only build public trust in our institutions but also contribute to the development of measurement standards that can help generate broad buy-in to mission-aligned investing practices and principles.
Katherine Pease, Managing Director, Pathstone:
“In the coming year, as more foundations and donor-advised fund holders consider their grantmaking and, increasingly, their investment strategy, critical questions about Purpose, Payout, and Perpetuity are inevitable.”
Questions of how and when legacy and donor intent and tax considerations should drive strategy have been swirling in philanthropy for decades. The National Center on Family Philanthropy’s 2025 Trends report found that 13% of family foundations plan to spend out their assets within a generation, an increase of 50% over 2020. The same report found that 71% percent of family foundations are spending more than the required 5% payout rate. Clearly, there is a quiet shift taking place. We believe this trend needs to be elevated and, more importantly, examined for its potential to create change.
In the wealth advisory community, we are keenly aware of the ongoing wealth transfer taking place between the Baby Boom generation and their children. Increasingly, we are in active dialogue with NextGen philanthropists and investors as they reflect on the purpose of their wealth; whether the model of investing assets for maximum return to ensure a steady 5% payout that protects the purchasing power of their philanthropic capital is the best model for them, and whether they should hold onto their philanthropic capital in perpetuity.
In recent conversations with foundations and DAF holders, we have heard consistent themes that are influencing the shift in perspective on the three Ps:
First, some NextGen donors are deeply troubled by the inherent power imbalance that sits between investors and grantors and the organizations and companies they support. This discomfort is amplified when it comes to wealth inheritors who sometimes question why they should be able to make decisions about where and how money is invested when they didn’t earn the wealth initially.
A second driver motivating some investors and philanthropists who have an interest in social and environmental issues is a profound sense of urgency about the climate crisis, social inequality, and the wealth gap. Many investors and grantors feel the Purpose of their wealth is to make a lasting impact now, rather than holding onto their wealth for future generations.
A third contributing factor is a growing belief that change must be led by the people who are most deeply impacted by social, environmental, and economic challenges, not by philanthropists and investors who may – or may not – understand the actual consequences of grants and investments and what is truly needed to create systemic change.
While questions about purpose, payout, and perpetuity are not new in 2025, what is new is a growing belief among NexGen philanthropists that there is an urgent need to question the assumptions underlying various practices that have undergirded philanthropic and investment practices for too long. In 2025, we anticipate a growing interest in the exploration of new practices among foundations and impact investors that will spur new thinking about the best ways to achieve one’s Purpose.
Disclaimer
Confluence blogs may contain external links to other resources and comments or statements by individuals who do not represent Confluence Philanthropy, Inc. Confluence Philanthropy, Inc. makes no representation whatsoever regarding the content that you may access as a result of our blog, nor the statements of any third parties whose comments may be expressed therein.