Autumn greetings,
Yes, if you own it, use it for shareholder advocacy! We’ve been working with The Sisters of St. Francis of Philadelphia on our first shareholder resolution, which actually got the corporation moving on our request, so much so that we withdrew our resolution. Who knew these resolutions could be so powerful?! (We’ll tell you more soon.)
I had mistakenly thought shareholder engagement would be time consuming and laborious. But it’s like learning how to use your smartphone: you thought it would be difficult, but once someone showed you the ropes, it became pretty easy!
And easier still is working with the non-profit As You Sow on your shareholder advocacy. You can, for example, sign up with them to vote all your proxies. They have lots of easy tools, including this one for looking up specific stocks, bonds, mutual funds, ETFs, and more. Your retirement plan may be on this page as well. (If this sounds like a commercial, I suppose it is – a true Public Service Announcement!)
Thanks for starting to move all the funds that you have control over! Yes, we need to vote with our dollars.
Elizabeth
Featured Paradigm Shifter
Rochelle Witharana
Chief Financial Officer The California Wellness Foundation
a mission aligned eco-trailblazer
At Work…
What inspired you to align your endowment with your mission? The overarching strategy of The California Wellness Foundation is to activate all our resources to further our mission. Along with grantmaking, using our voice and our advocacy work, we wanted to make sure that our $1 billion endowment aligned with our mission to protect and improve the health and wellness of the people of California. We are committed to managing our assets in a way that demonstrates that you can do good and make money. We also had a vision of fully integrating diversity, equity, and inclusion practices into our investment practices.
What have you seen as the biggest obstacles at Cal Wellness for mission alignment? When we started on this journey, many folks didn’t know what mission-related investing was and what it meant. The board and staff needed education on types of investments that were available and what this could look like. Also, a big obstacle was that our endowment was very conservatively invested in 2017. We didn’t even have alternative private investments in our portfolio. We only had public market investments. Just getting through that hurdle of skepticism, especially on the point that we could do good and make money – meaning that the mission-related ESG investments would generate the same performance as the traditional investments.
How far along is your foundation in this journey? In 2018, the board allocated a $50 million carveout for a mission-related investing pilot, and $10 million for program-related investments. We activated that quite quickly. We created a mini-endowment that mirrored the same asset allocation as the rest of the portfolio. As we implemented this portfolio, we intentionally selected mission-aligned investments and increased investments in diverse managers to bridge the gender and racial equity gap in the investment field. We tracked the pilot portfolio against our larger endowment, and we proved the point that we achieved the same performance in our mission-related investments portfolio as the endowment. That was the catalyst for the board to approve that we eliminate the carveout and move our entire portfolio into mission-related investing in 2021. We also developed a new framework to score our investments and track the diversity of our investment managers. We have increased the number of diverse managers in our portfolio from none in 2017 to over 60% in 2022.
What’s next in Cal Wellness’ mission alignment? We are working towards refining our frameworks and reporting on the impact of our investments as we move toward aligning the entire portfolio with our mission. We want to continue to be a strong voice in supporting and building the field, and we will work towards developing a shareholder engagement strategy.
What about perpetuity or spending down? For most of the foundation’s history, we have managed our portfolio and payout based on the strategy of remaining in perpetuity. In 2019, the board asked us to review this policy. We did some research and discovered that our bylaws are silent on perpetuity, which is a little bit different than some of the other foundations, as most foundations have a specific mandate to remain in perpetuity. We had a very deep board discussion at the time; the board considered keeping the current policy, spend down, or somewhere in between.
The board settled on somewhere in between and approved a new payout policy, which authorized staff to budget for payout up to 6%, and gave the board the authority to approve anything over 6% as a special distribution. The board designated our PRI budget as special distribution above the authorized 6% payout. Some foundations reduce their payout of grants based on the dollar amount for the PRIs. That’s not how we do it. Since 2020, due to Covid, we have increased our payout by $10 million above 6%. Our payout has ranged anywhere from 6% to a little over 7% for the last four years. We have also increased our asset allocation to private investments to help support that increased payout. Our board is focused on supporting the community as best as possible. And so we don’t manage to an exact 5%.
What’s a favorite mission-aligned investment of yours? As a strategy, my favorite investments are investments in a diverse manager who has a specific strategy to invest in entrepreneurs of color or creating products and services that support underrepresented communities. These investments result in creating jobs and creating wealth in communities that we care about. It’s an organic progression of diverse investment managers investing in entrepreneurs of color who then hire folks of color and create jobs. And if they’re investing in education and healthcare solutions, then we’re even more targeted.
Has Cal Wellness ventured into shareholder advocacy? How so? We don’t have a formal strategy for shareholder engagement, but we have engaged with managers directly, when issues have come up. We also have a large public equity holding with managers that specifically execute shareholder engagement activity on our behalf. The next step in our mission-related investment strategy will be developing and implementing a formal shareholder engagement policy.
What’s the most convincing thing to get others on board with mission alignment? Our initial $50 million mission-related investment pilot mirrored the asset allocation of the broader portfolio, which made it easier to track performance and also helped the board decide where they wanted to make an impact.
We tracked it for about five years and proved that the $50 million pilot achieved the same performance as our broader portfolio. We proved that we could do good, do no harm and make money. I think that’s a key investing point. Also, the universe of the investment opportunities that are available have expanded, and there is even much more than when we started even five years ago.
After Work…
Guilty pleasure: Hot fudge sundae
Last series you binge-watched: Succession, Never Have I Ever
Favorite caffeine source: Coffee
Sweet or salty: Sweet! Anything chocolate!
Happy place: The beach, especially Hollywood Beach in Oxnard, CA
A favorite novel: Snow Flower and the Secret Fan, Lisa See
Animal friend: Ella, my sweet 12-year-old Shit-Tzu
Childhood ambition: I wanted to be a professional dancer
Adult ambition: Dance every day
Music that lifts your spirits: Rock ‘n’ roll, but I enjoy all types of music
Last splurge: Shoes
Mission Aligned Investees
Peaceful Fruits
Peaceful Fruits, a B Corp, makes delicious – healthy – candy! I know, it sounds counterintuitive, but true! We have personally tested all of their offerings, and we have lots of sweet teeth. They use no added sugar, no GMO’s, no Stevia, no fake flavors, and the list goes on – and they source their fruits locally and from Amazon farmers, who are working against deforestation. They also have the Peaceful Fruits Foundation that addresses mental health issues for a new generation.
