Just desserts - Sara Lee foundation to invest all assets into social change

LONDON (Thomson Reuters Foundation) - The charity founded by the previous owner of frozen dessert-maker Sara Lee in the United States said it would invest its entire $440-million asset pool in ways that drive social change.

The New York-based Nathan Cummings Foundation (NCF), which in 2016 agreed grants of $23 million, said its decision would make it “one of the largest foundations to commit 100 percent” to so-called impact investing.

Impact investing takes into account financial returns as well as the effect such investments have on people’s lives.

“The problems we are working on – the climate crisis and growing inequality – will not be solved by grantmaking alone,” NCF president Sharon Alpert said in a statement.

“How we invest our assets and leverage our influence as an investor are powerful tools to make that change to happen.”

Nathan Cummings rose from an impoverished childhood to become the founder and guiding force of the Sara Lee Corporation that became part of his company until his death in 1985. The company has since been divided and sold off.

Part of NCF’s revised remit will see it invest in companies that do not pay inflated executive salaries, are mindful of gender pay differences, and have a narrower gap between the highest-paid and lowest-paid employees.

“We know that companies doing better in the marketplace are companies where CEO compensation is not completely out of whack with overall compensation of wages,” Alpert told the Thomson Reuters Foundation by phone.

Charities commonly invest their assets to generate returns they spend on their objectives. Under U.S. law, they must each year allocate at last 5 percent of their asset value as grants.

The NCF, which over the last 27 years has awarded almost $500 million, said it would still issue grants. However, it said, foundations have trillions of dollars in collective assets yet employ only a fraction in grants to further their aims.

“This move asks the question of what is possible if foundations begin using the other 95 percent,” it said.

NCF’s move follows last year’s decision by the Ford Foundation - the country’s second-largest grantmaking foundation with $12.4 billion in assets - to commit up to $1 billion to impact investing over a decade.

The Ford Foundation said at the time that its decision was the largest by a private foundation, and that it would focus on “affordable housing in the United States and access to financial services in emerging markets”.

The amount of money going into impact investing is growing, the Global Impact Investing Network (GIIN), a trade group, said. In 2016, it said impact investing accounted for at least $113.7 billion of assets under management.

“We will continue to see more announcements like this one ... as more foundations realize that they are leaving their resources on the sidelines instead of putting all of their assets to work,” said Amit Bouri, GIIN chief executive.