2019 Annual Review: A Broader Vision of Our Assets
Posted on: October 19, 2020
It became clear as 2019 reached its close that the Rockefeller Brothers Fund had a new story to tell. Five years after committing to divest from fossil fuels, we had a track record that showed our decision to get out of coal, oil, and natural gas had not hurt our portfolio; it had, if anything, helped it to outperform.
The RBF’s endowment posted a 7.76 percent average annual net return over the five-year period through the end of 2019. As with most large investment funds, we assess this performance against a customized benchmark, in our case a blend of 70 percent global equity index and 30 percent global fixed income index. Our actual five-year performance beat that yardstick by a full percentage point and showed less volatility, meaning our portfolio had smaller swings in value compared to the benchmark and may be considered less risky.
Of course, there is no guarantee that the success of any portfolio strategy will continue in the future. Our divestment effort got a boost from good timing, as we began selling our fossil fuel investments in 2014 when the price of oil was around $100 a barrel and going into a slide. Plus, five years is a relatively short period to establish an investment track record.
But in the past half-decade, our conviction in the decision to divest has only grown stronger. We simply cannot provide financial backing to the companies our grantees oppose in the fight against climate change. More than just removing a bit of capital from a rogue fossil fuel industry, this decision also served as a model for other foundations and endowments weighing divestment.
Using All Our Assets
It took time, work, and some learning curves, but the journey we have taken to deploy our endowment investments for greater sustainability has led us to a broader realization that the impact of our institutional decisions and practices can bolster and extend the social change efforts of our grantees. Beyond grants, we can embrace every opportunity and “tool” the organization has to effect change. We can use the RBF’s full array of assets—its endowment, its reputation, its name, its offices and The Pocantico Center, its expertise, and its history—to further our mission. It has also led us to embrace more deeply our role as a convener of ideas and people. The results of our five-year path of divestment through 2019 firmly evidenced the value and potential of this “assets-all-in” approach.
Sharing Our Learning
Using all our assets goes beyond the standard conception of a grantmaking organization, but it is very much grounded in the expertise we develop through our grant programs. We learn as we engage with and fund the people who work and innovate every day to support democracy, foster sustainability, and build peace. Using the resources and reputation of the RBF to share that learning has the potential to multiply the impact.
Sharing what we have learned about mission-aligned investing has certainly multiplied whatever modest monetary impact may have come from pulling our investment dollars from fossil fuel companies. From the start, we have been committed to a high level of transparency around our divestment decision and our implementation process. To recognize that we now have five full years of performance data, we published a detailed case study of our mission-aligned investment efforts in May 2020. The publication discusses not only fossil fuel divestment, but also our expansion of impact investing, which is on track to become 20 percent of our portfolio, and embrace of environmental, social, and governance (ESG) criteria for the portfolio.
The legacy and symbolism of Rockefeller family philanthropy, fueled by one of the most famous men and largest fortunes in history, positions the RBF to captivate a broad audience that can inspire change in sometimes new and untapped places. As we prepared to announce our decision to purge the fund of fossil fuel investments in 2014, for example, we never anticipated the media attention it would receive; it was big news that the Rockefellers were getting out of oil.
As we reached our divestment milestone, we sought other ways to increase the impact of our investments. In 2019, we began to expand our mission-aligned investing principles to include fund manager diversity. Throughout the year, we assessed the level of racial and gender diversity among the financial professionals who oversee our investments and established objectives for boosting the diversity of this group. This intensive exploration of how we could leverage our endowment and investment practices to contribute to greater equity in the financial sector concluded with the creation of a proposed commitment to invest 25 percent of the endowment’s holdings with firms majority-owned by women or people of color. (The board of trustees approved this proposal in March 2020.) This has likewise been a learning process, one we are eager to share with other investors in the hope of fostering similar diversity commitments.
The Pocantico Center, too, is a unique asset that extends our opportunity for impact. A place of natural beauty and tranquility, it has long hosted meetings and conferences that build on the RBF’s philanthropic efforts to share our and our grantees’ experiences. Gatherings convened at Pocantico have tackled issues ranging from cultivating philanthropy in China to addressing political polarization in the United States. In the lead-up to our divestment decision, researchers, advocates, and advisers from Carbon Tracker, the London-based initiative that popularized the stranded asset theory our divestment efforts would rest on, convened at Pocantico to formulate a strategy to counter the big oil companies trying to shoot it down.
We are, of course, not the only foundation to embrace the idea that, while grants are our most effective tool, there is more we can do. The RBF’s effort to elevate the broadest possible approach to making a difference is something we share with the Ford Foundation, the MacArthur Foundation, the Wallace Global Fund, and others. We have also joined with a number of organizations, including Confluence Philanthropy, Mission Investors Exchange, the U.S. Impact Investing Alliance, and Intentional Endowments Network, to share the expertise we have developed through our mission-aligned investing commitment, for example. No foundation ever has the money to accomplish everything it hopes, but with this use-all-assets approach, the RBF hopes to maximize the impact of our modest resources.
Energizing the Organization
It should never be taken for granted that an 80-year-old organization can change. The RBF is always changing. One thing I am thankful for in my career here is that we have always been willing to embrace new ways of doing things, take on new challenges, push new ideas, and pursue new goals. Our commitment to use every asset to its fullest is a reflection of that. In recent years, I have found that taking a broad view of the RBF’s mission and assets allows us to stretch and grow the sound, strategic, and creative use of our resources. The institution and everyone working here—whether on grantmaking, finance, operations, or administration—benefits by staying involved with the ideas and in touch with the people that matter most for our mission. This approach has not distracted management energy from our grantmaking, but rather the opposite: Thoughtful focus on every option and asset for pursuing our mission has energized us. It has made us smarter and more engaged with everything we do.
–Gerry Watson, Executive Vice President, Finance and Operations
2019 RBF Annual Review
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