Events Detail

Transcript Now Available - Click Here! (PDF format, 33 pages, 389 KB)

A complete, edited transcript is now available of our February 12 discussion entitled

Monday, February 12, 2007 • Noon to 2:00 p.m.
Hudson Institute • Betsy and Walter Stern Conference Center • 1015 15th Street, NW • Suite 600

Program and Panel

11:45 a.m.

Registration, lunch buffet

Event Summary

In January 2007, the Los Angeles Times published a two-part series on the Bill and Melinda Gates Foundation, suggesting that the foundation is substantially invested in corporations overseas which operate - the Times claimed - in such a way as to cancel out some of the beneficent effects of the foundation's own grantmaking.  This raised a question that has long roiled the philanthropy world:  should foundations practice "social investing," by screening their investments to insure they’re aligned with their missions?  

A debate among experts unfolded in the print media:  No, argued American Enterprise Institute Adjunct Fellow Jon Entine in a Wall Street Journal editorial:  "The dark secret of 'social investing' is that it is neither art nor science: It's image and impulse. It reflects perceptions, not performance." ("What Should Bill Gates Do?" Jan. 26)

Blogger and foundation adviser Lucy Bernholz, founder and president of Blueprint Research & Design, Inc., insisted: "What Entine calls image, impulse and perceptions, I call values. If you are going to invest in public companies - which it's safe to say Foundations are going to do - thinking through how they align with your values, where they compromise, where you compromise for portfolio balance, etc., is appropriate." 

And Allison Fine, Demos Senior Fellow and author of Momentum: Igniting Social Change in the Connected Age, agreed with Bernholz: "Given the Foundation's resources and ability to hire anyone from anywhere with the necessary expertise to review their investments, it is mind boggling to believe that finding socially conscious companies to invest in - to at least avoid companies that are specifically and actively counteracting their grantmaking efforts, would be too difficult or distracting for them." (For more, visit Allison Fine's blog, A. Fine Blog, and read her Feb. 7 AlterNet piece, "How Generous Is the Bill Gates Foundation?" online at http://www.alternet.org/story/47713/.)

On February 12, 2007, the Bradley Center brought together these three authors and scholars as well as Paul Driessen, a senior policy advisor for the Congress of Racial Equality and scholar with the Atlas Economic Research Foundation, to discuss four questions:

1.  Should foundations, especially foundations the size of the Bill & Melinda Gates Foundation, seek to align their investments with their grantmaking?

 

2.  Are there adequate sources of information or sufficiently practical mechanisms to which foundations interested in aligned investing can resort?

 

3.  Does the Gates Foundation's refusal to invest in tobacco enterprises compromise in any significant way their stated reluctance to get into the business of making complicated moral judgments about investments?

 

4.  And what about social investing in general? Is it morally necessary? Is it an illegitimate interference with the free market? Is it hopeless to put into practice? Is it too vulnerable to unintended consequences? What about this broader practice of social investing?

Allison Fine began the presentations by describing the "intentional firewall" the Gates Foundation has built between its investments and its grants. "Don't hear my comments today as criticism of the Gates Foundation's grantmaking," she told the audience. "However, some of their investments directly contradict the good work of their grants. This is a terrible practice that needs to change." Fine expressed wonder at the thought that such an innovator as Bill Gates or his foundation would choose not to pursue socially responsible investing or other innovative grantmaking models, which she considers to be pure common sense.

Jon Entine took the exact opposite position: "Social investment does not promote social change," he observed. Moreover, it is difficult to determine whether investments are good or bad, from a social standpoint. And finally, "If I am Bill & Melinda Gates, I want to help people. I want to increase my endowment. The foundation is money. The foundation is helping people. The idea that there is somehow an adversarial relationship between those things is absolutely absurd."

Lucy Bernholz made the case that foundations must screen their investment choices somehow – so why not use values to screen them? Good social management practices make good companies – with lower employee turnover, greater innovation, and more profitable research and development arms. Berholz also discussed shareholder activism and what foundations may be able to do to shape companies in which they invest. She concluded, "Endowment directors have a fiduciary responsibility to steward the resources under their management for the public good. Not 5 percent of the resources, all of the resources. The tools of aligned investing… allow philanthropists to develop strategies that use everything the foundation has to achieve its goals."

Finally, Paul Driessen argued, "When it comes to social responsibility as a movement or cause, what we are dealing with is largely an activist alliance that is… promot[ing] narrow political agendas…. By promoting concepts like sustainable development and the precautionary principle, they protect healthy, affluent First World citizens from the distant, minor, conjectural or exaggerated risks – to further their own political agendas. Worse, they often do so by imposing real, immediate, life-threatening risks on the world's most powerless and destitute people."

Needless to say, the question-and-answer period was very lively!  (Please see the transcript to get the full flavor of it.) Questions were asked by John Edie of PricewaterhouseCoopers; Henry Olsen of the American Enterprise Institute; Bill Dennis, and Martin Morse Wooster.

Blog Mention

Participant Lucy Bernholz let her readers know about the event on January 31 via her blog, Philanthropy 2173.

Online Mention

Philanthropy Australia, Inc., includes a link to this transcript in its list of resources on responsible investment, online at http://www.philanthropy.org.au/.

Further Information 

 
This event transcript was prepared from an audio recording and edited by Krista Shaffer. To request further information on this event, the transcript, or the BradleyCenter, please contact Hudson Institute at (202) 974-2424 or e-mail Krista at krista@hudson.org.