Gates Foundation Investment "Approach"
In a statement on the Gates Foundation homepage Cheryl Scott, the foundation’s chief operating officer, “explains the foundation's approach to investing its endowment.” The explanation seems to represent some backtracking from its pledge to review its investment strategies. It also appears that Mr. Gates is not an enthusiastic proponent of socially responsible investing.
As we mentioned in a previous entry, this is a very thorny issue – made even more complex because of this particular foundation’s impact on the whole sector.
Here are a few excerpts from the statement:
"Two recent articles in the Los Angeles Times have raised questions about whether we should spend time evaluating companies and shifting our investments away from the ones that get a low score on some ranking criteria. We want to make it clear why the foundation focuses on our grant making, rather than on such evaluations, and we want to explain Bill and Melinda’s investment philosophy.""Bill and Melinda oversee the investment of the foundation’s endowment. In giving guidance to the investment managers, they have chosen not to get involved in ranking companies based upon factors such as their lending policies or environmental record. There are dozens of factors that could be considered, almost all of which are outside the foundation’s areas of expertise. The issues involved are quite complex...Which social and political issues should be on the list?"
"Many of the companies mentioned in the Los Angeles Times articles, such as Ford, Kraft, Fannie Mae, Nestle, and General Electric, do a lot of work that some people like, as well as work that some people do not like. Some activities might even be viewed positively by some people and negatively by others."
"Shareholder activism is one factor that can influence corporate behavior. The foundation is a passive investor because we want to stay focused on our core issues."
Ms Scott’s entire statement is here.
A personal note after the jump.
A personal note: Speaking (or writing) for myself and not the institute… the Gates Foundation is missing an opportunity here. Size does matter, and they are big enough to change the entire conversation about socially responsible investing (SRI).
Imagine if even a 25% of the foundation’s assets were invested in “green companies”. Then imagine their investment managers gradually learning more about SRI, and increasing their stake in such companies to half or more of their portfolio. Then imagine if Bill and Melinda Gates would initiate a conversation with their peers in the technology sector about recycling legacy products in a responsible way, eliminating unnecessary packaging, and just being more environmentally conscious in general.
The Gates Foundation – especially with the enormous addition of Warren Buffett’s investment portfolio – can change the fundamental way philanthropy “does business”, but that can only happen if they change the way they do business