A £72bn question: Investing foundation endowments for impact

Jul 20 2022 · 7 minute read

According to the Association of Charitable Foundations’ Foundation Giving Trend report, the largest 300 endowed charitable foundations in the UK have over £72bn in total assets[1]. Unfortunately, most of these assets are invested in mainstream capital markets with little consideration of impact.

While foundations and charities have started to recognise that ESG issues are material to endowment’s financial performance, there is a growing recognition that simply moving towards responsible and sustainable investment strategies will be insufficient for meeting our climate and social objectives[2].

In this post, we provide background on impact investing endowments among foundations, bust some of the common myths around impact investing, and call on foundations to put more of their endowments to work in addressing social and environmental challenges.

Foundations have started to allocate their endowments toward impact investments to achieve their missions

A group of pioneering foundations have already started transitioning their endowments toward impact investments. Toniic’s T100 study lists 18 foundations that have committed to ensuring 100% of their investment portfolios are aligned with their charitable missions[3]. Snowball co-owners and investors The Golden Bottle Trust and the Panahpur Trust have also committed their entire investment portfolios to achieve an intentional positive social and environmental impact.

However, as key sector bodies such as the EIRIS Foundation, the Association of Charitable Foundations, ShareAction’s Charities Responsible Investor Network and the European Venture Philanthropy Association (EVPA) are calling for foundations to allocate more of their endowments toward investments that generate a positive impact, more foundations are considering how they can use their endowments to further their charitable missions.

Persistent myths and status quo thinking prevent foundations from investing their endowments in impact investments

According to the Impact Investing Institute’s report on Investing with Impact in the Endowment, there remains a lack of impact investing from endowments by UK foundations due to a few misperceptions related to impact investing.

Foundations can legally use their endowments to make impact investments

Legal experts now agree that endowed charities are permitted to invest their endowments to seek both financial and mission-aligned social or environmental returns, including lawyers from the law firms Bates Wells and Herbert Smith Freehills[4]. The legal basis for investing a foundation’s endowments in impact-focused assets was also further clarified by the landmark High Court judgement of Butler Sloss V Charity Commission[5]. (See here for Bates Wells’ explanatory note highlighting the ten key legal principles the judge outlined applying to charity trustees when investing).

Impact investments can obtain market-rate returns

There is now a good evidence-base demonstrating that risk-adjusted market rate of returns and impact co-exist. For instance, the Global Impact Investing Network’s 2020 Annual Impact Investor Survey of 294 impact investors found that 67% of respondents were able to obtain risk-adjusted market-rate returns[6]. (Remember here that many impact investors intentionally invest for below-market-rate returns). And 88% of respondents said that their investments’ financial performance was either in line with or exceeded their expectations.

Products exist that can make impact investing less complicated

Making direct impact investments is a more technical exercise than regular or ESG investing as it requires the ability to assess both its potential financial performance and its potential social or environmental impact. However, there are now many funds that can make investments on a foundation’s behalf across a range of asset classes -including venture capital, private equities, public equities, fixed income and credit, and real assets.

Foundations need to ‘lead, not lag’ the impact investing movement to meet the challenges we face

At a time when global inflation is compounding the effects of poverty and Europe has just experienced record-breaking temperatures, we are reminded that we exist at a pivotal moment for diverting more investment toward meeting social and environmental challenges. The urgency of these issues means now is the time to put the remainder of the £72bn in foundations’ endowments to work.

We strongly echo the call of the former CEO of The Heron Foundation, Clara Miller, to investment decision makers of charitable foundations to lead, not lag when it comes to aligning investments with our social and environmental goals.[7]

There are clear leaders in the market thinking completely differently, such as Colin Baines, Investment Manager at Friends Provident Foundation who together with trustees and investment committee has developed a new target portfolio for the foundation’s endowment as part of a strategy review to increase the role of investments in achieving their mission. "Friends Provident Foundation are increasing impact allocation from 8% of their endowment to 30%. The estimated income forgone is estimated to be only 0.45%, equating to a grant or two per year. This is more than worth it for the additional mission value a whole endowment approach brings. You wouldn’t get this level of impact though a couple of extra grants".

CEO of Friends Provident Foundation Danielle Walker-Palmour in the Association of Charitable Foundation’s Pillars of Stronger Foundations report on investment affirmed:

A stronger foundation must use its charitable funds even more effectively to meet the challenges facing us – inequality, global pandemic, climate crisis and loss of biodiversity, unprecedented revenue challenges to arts and social organisations and an economy undergoing a range of rapid transitions. Some of these challenges are existential and there is very little time left in which to act.[8]

If you are a trustee or investment decision maker at a foundation, and would like to align your investments with your mission, join a peer learning event hosted by Friends Provident Foundation and The EIRIS Foundation, designed to share learning and practical resources to progress beyond "do no harm" investing to instead make investments which contribute to the transition to a fairer and more sustainable economy, whilst generating competitive financial returns.


If you would like to learn more about Snowball as a product for foundations who want to invest for impact, risk and return, please contact Laura Boyle, Head of Stakeholder Engagement on laura.boyle@snowball.im

"We invested in Snowball because we not only wanted a superior impact investment product but also a better way of approaching investment generally.”
Colin Baines, Investment Engagement Manager, Friends Provident Foundation
“Our Investment committee felt that Snowball provided a unique offering to the market in impact investing. The EIRIS. Foundation supports this and would like to promote it as a responsible investing option for charities.”
Peter Webster, CEO, EIRIS Foundation
“Mainstream markets are not servicing the interests of investors or the public anymore. Impact investment is the answer.”
Alexander Hoare, Trustee, Golden Bottle Trust



[1] Association of Charitable Foundations (2021) Foundations Giving Trend 2021: https://www.acf.org.uk/common/Uploaded%20files/Research%20and%20resources/Research/Foundation%20Giving%20Trends/ACF179%20Foundation%20Giving%20Trends%202021_Design_DigitalVersion_v3.pdf

[2] Foundation Responsible Investment in Charity Pooled Funds 2021: https://eirisfoundation.org/wp-content/uploads/2021/02/Charity-Pooled-Funds-Report.pdf

[3] Toniic (2020) T100 Focus Report: Foundations on the Road to 100%: https://toniic.com/download/download-t100-focus-report-foundations-on-the-road-to-100/?wpdmdl=1911&refresh=62cd0ac0e314e1657604800

[4] Impact Investing Institute (2022) Investing with impact in the endowment: Why do it and how to get started: https://www.impactinvest.org.uk/wp-content/uploads/2022/02/Investing-with-Impact-in-the-Endowment.pdf

[5] Bates Wells (2022) Butler-Sloss V Charity Commission: Understanding trustee investment duties and powers in the new landscape: https://bateswells.co.uk/updates/butler-sloss-v-charity-commission/

[6] Global Impact Investing Network (2020) 2020 Annual Impact Investor Survey: https://thegiin.org/research/publication/impinv-survey-2020

[7] Clara Miller (2021) “Trouble in Paradigm: Foundations’ Bargain with the Devil”, Non Profit Quarterly: https://nonprofitquarterly.org/trouble-in-paradigm-foundations-bargain-with-the-devil/

[8] Association of Charitable Foundations (2021) Investment: The Pillars of Stronger Foundations: https://www.acf.org.uk/common/Uploaded%20files/Research%20and%20resources/Stronger%20foundations/ACF_investment_pillars_FINALv3.pdf

Laura Boyle, Head of Stakeholder Engagement, Snowball
Laura Boyle, Head of Stakeholder Engagement, Snowball