Beyond Socially Responsible Investing: Effects of Mission-Driven Portfolio Selection

Tizian M. Fritz and Georg von Schnurbein
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Tizian M. Fritz: Center for Philanthropy Studies (CEPS), University of Basel; CH-4051 Basel, Switzerland
Georg von Schnurbein: Center for Philanthropy Studies (CEPS), University of Basel; CH-4051 Basel, Switzerland

Sustainability, 2019, vol. 11, issue 23, 1-15

Abstract: In their pursuit of value creation, charitable foundations are mission- rather than profit-driven. Therefore, foundations are also mission-driven investors. We explore the effects of mission-driven portfolio selection based on three model foundations, representing common fields of activity in Switzerland. Employing a moving block bootstrap approach, we simulate time series. Based on these model foundations and under the integration of qualitative company rating data, such as environmental, social, and governance-related characteristics (ESG), we find both negative and no significant financial effects of portfolio screening. However, screening portfolios substantially increases mission-driven portfolio quality. Additionally, screening reduces reputational risks and even leptokurtic return characteristics under special consideration of governance issues. After a joint analysis of financial and qualitative factors for portfolios with equity shares of 25% and 50%, we did find strong enough evidence to encourage foundations to implement negative and positive screening criteria. Additionally, we argue that without the integration of mission-based qualitative criteria, for instance, the involvement in business activities contradicting the foundation’s mission, an adequate evaluation of investment opportunities’ desirability is not feasible.

Keywords: ESG; mission investing; nonprofit organizations; portfolio selection; charitable foundations; screening (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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