In 2020, Carmen Rojas became the president and CEO of the Marguerite Casey Foundation, a Seattle-based progressive funder committed to seeing that government prioritizes the needs of excluded and underrepresented people, families and communities.
At the time, less than 20% of the foundation’s endowment was in values-aligned investments. Now, the figure is 97%. Meanwhile, its endowment has outperformed its own performance benchmarks and those of similarly sized foundations, dispelling concerns that funders must sacrifice solid returns in exchange for investing in values-aligned entities.
“There’s a sense that your endowment is an engine to grow money by any means to grant money, and it cannot — or should not — have the considerations that inform your grantmaking,” Rojas told me in a mid-August conversation. “I had a different view. I came into this role with the belief that all philanthropic capital should be working in service of the public good.”
Rojas’ perspective was shaped during her tenure as the associate director of program strategies at Living Cities, where, from 2011 to 2014, she worked with financial institutions to advance the funding collaborative’s goal of closing racial wealth gaps in U.S. cities. In this role, she found that “we treat investors like nuclear scientists as opposed to people making informed bets with financial resources.” The realization “helped me to feel more empowered to ask questions and not surrender the power to invest in a flawed market in ways that can make people’s lives better.”
Rojas went on to found the Worker’s Lab, which aims to increase power for working people in the 21st century, before joining the Marguerite Casey Foundation. In 2021, Rojas, the MCF board and Daniel Gould, the foundation’s vice president of investments and operations, began to develop a values-aligned investing plan. In a May piece on the National Center for Family Philanthropy’s site, Gould laid out the strategy’s four pillars: working with diverse asset managers, sharpening the foundation’s investment screening processes, leveraging shareholder advocacy to lobby misaligned entities, and using impact investing to support the needs of underrepresented and excluded communities.
I caught up with Rojas, whom IP named one of the 50 most powerful women in U.S. philanthropy, to discuss how the strategy came together, the urge to chase exorbitant returns and more. Here are some excerpts from the conversation, which have been edited for length and clarity.
How did your proposal to revamp MCF’s investment strategy initially land with the board?
I was lucky to have a board chair when I started, Melody Barnes, and a board chair now, Ian Fuller, who understood that our objectives around our endowment could be in relationship with our mission as an institution. They agreed that we didn’t have to hold a contradiction.
Were there any obstacles along the way?
When we started the process, people said it would be impossible for us to find diverse investment managers since our policy stipulated that we had to work with individuals managing a minimum of $100 million in assets. So Dan [Gould] said, “Well, let’s just change the size of funds we invest in.” We lowered the threshold to $10 million and lo and behold, we found a ton of managers we could work with.
Any other striking takeaways from this process?
We had conversations with other foundations who said, “80% of our managers are diverse.” It turned out they were invested in managers in India or China, and that was their diversity marker. Our board members — and especially Marisa Franco, who’s a longtime community organizer — said, “Hold on a second. This doesn’t make sense.” Our language needed to talk about underrepresented managers in the U.S. and name why that was important.
The board clearly had a prominent role in the strategy-setting process.
I’ve found that there are usually one or two people on foundation boards who are finance and investment experts that dominate that conversation. We tried to ensure that everybody on our board could talk about our endowment. Dan is also fully integrated. He reports to me and I report to the board. It’s not like, “That guy over there does the investments and we do the grantmaking.”
I think that’s a subtle but important point. I imagine there’s a tendency to defer to the investment guy, especially if the goal is to outperform the market.
We have an external advisor, and what struck me when I started was the sense that the advisor’s word was their bond, as opposed to the board creating criteria for that person to go out and seek the vehicles we wanted to invest in. It’s important to understand the role of an investment advisor as just that — an advisor. You can set the parameters. You can ask the hard questions.
Daniel Gould’s post says that if an entity in MCF’s portfolio acts against the foundation’s values, you’ll leverage shareholder advocacy to encourage the entity to change course. But another option would be to divest. How do you weigh the trade-off between advocacy versus divestment?
When we were putting together our plan, we had Robin D. G. Kelley and Davarian L. Baldwin at our disposal, talking about the clarion call of the moment, which is to disclose and divest, and how we could make that conversation more open and accessible to folks.
There are clear bright lines of things we won’t invest in, and then there are things we address on a one-off basis. It’s a messy world.
For example, we have been invested in a set of healthcare conglomerates that, since the Dobbs decision, operate in places where abortion access is illegal. We don’t want to divest from these healthcare providers because we think healthcare is important; it’s not in direct opposition to our mission. So in this case, we see advocacy as a way to let shareholders know what the risks are of these healthcare companies not providing abortion. It’s also an opportunity for us to voice our concerns and that of our grant recipients.
I’d like to pivot to the elephant in the room, which is a foundation’s endowment size. I’m reminded of something that AmbitioUS Director Cate Fox once told me, which is that endowment size has become a sign of prestige. If a board ascribes to this thinking, then it follows, at least to some extent, that the foundation has to grow the endowment at an exponential rate.
Absolutely. For us, if our endowment is only growing because we are invested in companies that exploit people, poison our planet, make it easier to kill people en masse, then that doesn’t align with our values. I am always asking myself the question, “How did it grow? How much money does the foundation actually need to support the kind of work that is in alignment with the mission?”
When we were putting together our plan, we made a significant institutional shift to focus on supporting the kind of community organizing and advocacy that allows people to understand that government should work for them. At a functional level, we could be making a bunch of money by investing in private and charter schools, but we don’t because it’s not in alignment with our mission.
So is it too simplistic to say that the main reason why some foundations only invest a fraction of their endowment in values-aligned or socially responsible funds is because they’re worried the investments will underperform and threaten its grantmaking capacity and perpetuity?
I think for a lot of people in the finance and investment universe, there is the belief that you would have to sacrifice returns. We’ve demonstrated that it’s not a real issue for us, but it requires a willingness to be in complete alignment. I always ask myself, if you have a rate of return of 25% but you’re poisoning the planet, then who cares? That seems like a wild trade-off for our board. I want our grant recipients, staff and board to know that we are committed to making sure that we’re using the full weight of our resources to advance our mission.
To your comment about a 25% return, Congress set the foundation payout rate to 5%, accounting for an expected 8% return on the endowment and 3% inflation. If your investments make around 8%, the foundation should stick around forever. But there’s still that temptation to chase that 25% return.
You’re probably the only person I’ve spoken to about this issue who’s brought up this question. And the second question is, “So you got a 25% return — how did it change your grantmaking?” Or, “You got 25% return — what risks were you willing to take that you weren’t going to take before?”
I’ve been to a lot of grantmaking conferences where they rarely talk about investments and being in alignment with the mission. As a field, I don’t think that we have a good practice for talking about a full capital approach, and your question is indicative of that.
It all goes back to what we were talking about earlier. What does it mean for a foundation to tout the size of its endowment and what is the cost of growth of an endowment by any means necessary? I think having modest rates of return that allow us to continue to do the grantmaking we do is enough, and I’m proud that we’ve been able to grow our endowment in a way that allows us to fulfill our mission without hurting or exploiting people.
