What are purpose-driven investments?

Purpose-driven investments are becoming increasingly popular, particularly within the foundation sector, and serve as an umbrella term for foundations’ efforts to align the use of their assets with their capital investments. Purpose-related investments are investments that are directly or very closely linked to the foundation’s purpose and directly support it through the nature of the investment. Generally speaking, these investments also accept returns below the market average and usually take the form of loans, guarantees, direct investments in companies and even holdings in venture capital and private equity funds. Mission-related investments make it possible to overcome certain regulatory hurdles by achieving market-rate returns, whilst also promoting the foundation’s environmental and/or social purpose through the nature of the investment. This helps, for example, to ensure alignment between the institution’s self-image and its investment policy, to avoid hidden reputational risks, to enhance risk management by incorporating ESG criteria (environmental, social and governance), and even to achieve diversification benefits.