America is a nation founded with enormous promise anchored in the right to “life, liberty, and the pursuit of happiness.” Yet, in 1776 that promise made by all-white-male founding fathers did not truly include everyone. Today there are still barriers that stand in the way of this promise becoming a practical reality for all – particularly for people of color and those with little to no wealth. Perhaps chief among these barriers is the brand of capitalism that under-invested communities encounter on a day-in day-out basis and which results in choosing between paying for rent and paying for healthcare; choosing between paying for transportation and food; not having the “right” collateral to qualify for a small business loan. And so on.

Our work at The California Endowment has been focused on building a California – what we have long called a “Beloved Community” – that delivers on our nation’s promise through health, wellness, inclusion, and shared prosperity. Our impact investing work to date has taught us important lessons about how we put our own capital to work.

When used inclusively democracy and capitalism are two important pathways we have to transform the nation into a Beloved Community. As America approaches its 250th birthday in 2026, how can this enormous promise articulated at our founding but not realized for all be reaffirmed, and this time, be fulfilled for everyone? What can we at The California Endowment do to help shift to a more inclusive brand of capitalism for all? How can we respond to the urgency felt by the families and communities we serve and do more?

To that end, The Endowment has made the deliberate decision to be more than a grant maker and more than a community agitator. Today, The Endowment embraces its identity as an institutional investor and is committing to go “all in” to begin aligning all of our investment assets with our mission and values.

With $4 billion in assets under management, we believe this makes us the largest foundation to make an “all in” impact investing commitment to date.

The Transition Is Already Underway

Few people outside of philanthropy understand how foundations manage their funds. Most foundations take a small portion of their assets to make grants that fund efforts such as improving education, combatting food and housing insecurity, and protecting people’s health and the environment.

A foundation colleague once jokingly described foundations as investment companies who do a little grantmaking on the side. He asked, “If your foundation is using five percent of its $3 billion under management to make grants, what is the other 95% doing?” The remark was an eye-opening moment, a potential game changer for the field and the work.

The Endowment is now embarking upon a journey where we will consider our mission and values as we make all our investment decisions with the ultimate goal of bringing our 95% in alignment. Shifting all our capital toward our mission will not happen overnight and we have a lot of work ahead of us. As a first step, we are developing a new impact framework which we hope to unveil later this year that will guide us in examining every investment decision for financial returns and social impact.

Our path forward is supported by the work we have done over the last decade to invest for positive social impact. Since its inception, The Endowment has implemented “negative screens” that we apply to our investment portfolio (that 95 percent) in order to prohibit certain investments that don’t align with our mission and commitment to racial equity, healing, and wellness. We started by saying no to investing in tobacco companies, and expanded that to for-profit prisons, and then to companies that manufacture firearms.

As time passed, we pushed further by asking how we could intentionally invest our capital in the things we believe in? Access to capital is unevenly available to many communities in California and across the country, so why shouldn’t we make ours available to support our communities’ power and resilience?

That led the Board of Directors to carve-out $350 million for making mission- and program-related investments that tested and proved the model. (Read about our journey with program-related investments in our report: Building Trust & Equity.) We have also committed parts of our endowment to diverse fund managers.

Forging Ahead

In November 2023 The Endowment’s board resolved to begin the process of transitioning TCE’s investment assets to support and more fully align with The Endowment’s vision of a California and nation that supports wellness, inclusion, and shared prosperity.

By committing to invest the $4 billion entrusted to TCE’s oversight towards our mission and values, we are using our mandate and power as an institutional investor to stand with the communities we serve, and to contribute to a more inclusive brand of capitalism. The Board recognizes this process will take time but is eager to expand the quest to maintain the financial strength of The Endowment over the long term while advancing our mission.

We are sharing news of our expanded impact commitment in investing because we want to be a beacon for others who are rethinking how their capital can be used to support mission and values. We also want to lock arms even more closely with peer institutions that have also commenced this journey. Imagine the demand we could create for more inclusive capital!

In pursuit of this vision, we are committed to being transparent to the communities we serve and to the field of peer institutional investors. We believe that by holding ourselves accountable and by sharing our “lessons learned” from the journey, we will have greater impact in reanimating and fulfilling the promise of America, to reshape new markets for society and to give agency and belonging to all.

 
Robert K. Ross, M.D.
President & CEO

Kurt Chilcott
Board Chair

Leslie B. Kautz, CFA
Investment & Finance Committee Chair