Recession Slams Gates Foundation - Time for Mission Related Investing?

Bill Gates via LATimes

The New York Times and Silicon Alley Insider yesterday reported that the Gates Foundation's assets had plummeted by almost 20%. This is obviously a huge bummer considering the scope and magnitude of their work. In Bill's first annual letter, he said that the Foundation was still planning on increasing the size of its giving this year, in spite of the recession.

One of the interesting things in the NYTimes story is the breakdown of where they are shifting money, including buying 1.5 million additional shares of McDonald's. It seems like a decent financial bet, if only that in bad economic times people by cheaper food, but it also might be seen as validating the critique that some have levied at the Foundation that they divorce their giving from the social impact of the money they invest.

The Gates Foundation is one of the better known firms to disavow "mission-related investing," instead preferring to put its foundation's assets in whatever has the best financial returns. The most inflammatory criticism of this practice was a piece in the LA Times a couple years ago "Dark cloud over good works of Gates foundation.":

Ebocha, Nigeria — Justice Eta, 14 months old, held out his tiny thumb.

An ink spot certified that he had been immunized against polio and measles, thanks to a vaccination drive supported by the Bill & Melinda Gates Foundation.

But polio is not the only threat Justice faces. Almost since birth, he has had respiratory trouble. His neighbors call it "the cough." People blame fumes and soot spewing from flames that tower 300 feet into the air over a nearby oil plant. It is owned by the Italian petroleum giant Eni, whose investors include the Bill & Melinda Gates Foundation. Read the rest.

I'm not at all a Gates Foundation hater. I think they're doing incredible work and their willingness to experiment and make bets is essential in the social sector. I hope that the Gates Foundation makes smart moves financially and gets its endowment back up. But honestly, its a bit baffling to me why they don't more robustly embrace mission related investing? Isn't this exactly what Gates was talking about with "Creative Capitalism?"

The supporters of Gates policy tend to disbelieve that mission related investing can have any impact at all - that the resources are simply too disbursed and that corporations who meet the social impact cut are probably just gaming the system any way. But if the Gates Foundation takes those cynical views -particularly that the resources they have are too small to make a difference in the financial markets - then what the hell are they doing in this business anyway? They're bold enough to try to eradicate malaria but forget shareholder advocacy, that's too hard?

It seems to me that a whole new generation of advisers like HIP Investor are just waiting to be helpful on questions just like these. This is a real opportunity for leadership.

And besides, when you just lost 20% on your investments in a host of 20th century institutions that are withering both because of the market and because of their own failure to adapt, what do you have to lose?