At the Excelsior Impact Fund, we invest to create the world we want for future generations—an equitable one that lives in harmony with nature, respects biodiversity, and provides the opportunity for everyone to have a rich and fulfilled life. The Excelsior Impact Fund represents the pooled assets of multiple families that invests across the returns continuum to maximize long-term impact toward a sustainable and just world. These include commercial rate investments, financially subcommercial investments with outsized impact, and grants to non-profits that provide impact well beyond the direct donation.

There is a focus on climate solutions (and overall environmental sustainability), safe water and sanitation, and opportunity equity. The fund also invests in a healthy US democracy and in the effective giving or strategic funding infrastructure, which helps further these and other impact goals. The fund recognizes, though, that the world is interconnected so will invest in other areas if the combination of impact, return, and risk is compelling.

Most of the investing is done through a donor-advised fund at Impact Assets. We treat this like a foundation targeting a 5% payout in grants, although, we accelerate the payout in more urgent times. We are a member of Toniic’s T100 and have pledged 100% of the assets of the donor-advised fund to be invested for impact.

The Beginning: The fund grew out of discussions among a group of friends from across the political spectrum who met regularly to discuss the issues of the day. The group boldly called itself “the Junto” fashioning itself after Ben Franklin’s group of the same name, whose discussions led to the first lending library, the first fire department and the postal system.

Commercial Rate Impact Investing. The fund formally started in 2014 seeking out commercial rate return impact investments across asset classes. If you can get commercial rate returns and have a positive impact on the world, then why not? This seems especially appropriate for money in the donor-advised fund that has already been earmarked for the public good. Our experience has been positive. The public debt and equity funds have mostly tracked or outperformed their indices; and the private investments overall have performed according to expectation.  In addition, many of the private impact investments are not correlated with the major indices so provide attractive portfolio diversification.

Evolution to Holistic Approach.  We questioned the sole focus on commercial rate investments, though, when offered an opportunity to invest in WaterEquity’s first investment fund of $11M offering a return of 1-2% over the seven-year fund life while delivering safe water and sanitation to a million people.  It was not a commercial rate investment, yet if the reduced return from the commercial rate were a grant, we would gladly make it to get that kind of impact.  More importantly, this was a key step in Water.org’s (WaterEquity’s sister non-profit) strategy to show the attractiveness of the lending sector to drive the vast amounts of capital necessary to meaningfully address the problem.

With this subcommercial rate investment, we began our holistic approach of investing across the returns continuum to reach the impact goals of the fund. This donor story discusses Water.org/WaterEquity as an example of how philanthropy, subcommercial investments, and commercial investments can work together to catalyze systemic change to help solve at scale a major global problem---here changing the financial system to make affordable loans available to bring safe water and sanitation to tens of millions of people with a line of sight on many more.

Imputed Grants.  When making a subcommercial investment, we consider the reduced financial return to be an imputed grant and include this in our grant budget. As with WaterEquity, we would only accept the lower return if we would be willing to make a grant to get that kind of impact.

The Future. We recognize that subcommercial impact investments are undercapitalized and view this as an impact opportunity. Going forward, we also expect to reduce our public investments where capital is plenty, replacing them with higher impact private investments which are relatively undercapitalized.  We will do this over time to diversify the vintage year of the illiquid private impact investments to provide liquidity over time and to reduce risk.

Hope to Inspire. We share our approach with the hope that others will learn that you don’t have to be a large foundation to have outsized impact.  We are able to access most of the investments at much lower minimums by investing through Impact Assets and through our impact financial advisor, Align Impact. We hope to inspire others to action and to find collaborators to amplify our combined impact.

Excelsior is a Latin word meaning “ever upward’ or “still higher” and reflects the view that no matter what humanity has achieved we can continue to improve and take our quality of life ever higher. Excelsior was popularized by Stan Lee, the famed creative director of Marvel Comics, who used it as a sign-off for his columns. Our reading tastes have evolved somewhat over time.