Impact Investing for Social Justice-Looking Back and Moving Forward-Surdna Foundation

Impact Investing for Social Justice: Looking Back and Moving Forward

By Adam Connaker, Surdna Foundation

Adam Connaker Surdna Found - GreenMoneyLike so many impact investors, we’ve hit an inflection point. For several years, our Foundation has taken steps to explore the terrain of impact investing, steadily learning how to complement and enhance our work to move toward positive value in this world. Now, we must take stock of where we are and chart a course for the future.

Let’s Start at the Beginning

In 1917, John Emory Andrus — a businessman, investor, and public servant — established the Surdna Foundation with 45 percent of his fortune. At first, the Foundation focused on direct services for orphaned children and the elderly. (pictured above) Over a century later, Surdna is governed mainly by Andrus’ descendants and has a long tradition of supporting innovative solutions to meet the core issues of the day. Since 2008, in response to the dramatic social and racial inequities across the United States, Surdna has worked to foster sustainable communities guided by principles of social justice and distinguished by healthy environments, inclusive economies, and thriving cultures. These pillars — environment, economic opportunity, and culture — form the backbone of a more fair and just society for all. They also pose new and distinct challenges in their scale.

Our Learning Journey to Mission-Aligned Investing

We believe all our capital — intellectual, social, and financial — has a shared purpose. As such, in 2014, at nearly 100 years old, Surdna set out to learn how our endowment, and the broader global financial system, could complement and augment our service to communities in need. For Surdna, impact investing answers the question of ‘how do we scale our impact and instill replicability to bring about lasting improvements in people’s lives.’ Against the enormous challenges of today, scale and replicability are a must. While having a greater than $1 billion endowment seems like a lot of capital, it’s small compared with the broader financial system’s hundreds of trillions of dollars. But it does represent a gateway to beginning to invest in solutions to today’s biggest pressing issues.

Surdna President Don Chen & former Impact Investing Director Shuaib Siddiqui discuss Surdna’s investment and risk-taking strategies to create wealth for BIPOC communities.

Six years ago, we made an initial allocation of $100 million to impact investing from our endowment—roughly 10 percent. The strategy was simple: widen the aperture of acceptable risk through two new dedicated pools of higher risk-seeking capital with the goal to “graduate” new impact funds through these pools into the endowment over time. This was a major step in our learning journey. We sought to design a financially accretive and highly impactful portfolio that would guide us toward our endowment of the future. We used $20 million to invest in more nascent strategies and managers while committing the remaining $80 million to test larger sourcing, execution, and performance of the impact space.

Investments That Go Above and Beyond

Today, the portfolio is fully committed—over-committed, actually. Performance is among the best of our entire endowment, albeit still early. We are excited about the impact our investments are having on areas like climate change (mainly through climate tech) and economic opportunity for gender and racially diverse communities (through investment in diverse-owned small businesses). And we are thrilled to see these impactful managers gaining traction with other institutional investors.

Take, for example, our early investments in Impact America Fund managed by Kesha Kash. In her first funding round, she brought in $10 million. In round two, Kesha raised $55 million, which may be the largest fund ever raised by a sole Black female general partner. Kesha and her team have a knack for investing in exciting companies, including Mayvenn, a platform that increases the bookings and incomes of hair stylists, and Care Academy, which provides home-care agencies with the training and tools they need to support home health aides. Often overlooked and undervalued, investments like these help businesses grow and scale, while increasing ownership and opportunity for entrepreneurs and communities of color.

Beyond growing assets under management, many managers we support are also challenging the field of finance to reckon with issues like racial bias. Illumen Capital, through a fund of funds, works with its portfolio of managers to institute racial bias training backed by empirical evidence. We also invested in Founders First Capital Partners, a small- and medium-sized business lending platform that leverages revenue-based finance to deploy value-add capital into underinvested communities in the U.S., especially Black communities. More importantly, they are redesigning a small business investment platform around the needs of Black entrepreneurs to upend the historic — and staggering — disparities in access to capital. A 2010 study from the US Department of Commerce highlighted that minority-owned firms are less likely to receive loans, on average receive lower loan amounts, are more likely to not apply for fear of rejection, and pay higher interest rates than non-minority-owned businesses. A just and supportive financial system must address issues like racial bias and disparities in access to capital at scale.

Surdna’s $100 million commitment was the first step on a journey toward an endowment of the future, built on the principle of innovative solutions to core issues faced by society. It is quickly proving capable of generating impact directly to communities in need and supporting managers with a new vision for the future of finance. It is also highlighting challenges and lessons learned that are critical to overcome to strive toward a long-term vision of authentic 100 percent mission alignment.

Reflecting on What the Future Holds

While the risk pools and graduation strategy have given us the flexibility to form relationships with high-impact managers and test larger endowment strategies, success still hinges on graduation, which has proven difficult. It takes years to fully prove performance and scale new managers and investment strategies. We also need to ensure there is room in our allocations for larger graduated commitments. The risk we face is to end up with a carve-out portfolio that traps managers long term. We are working on this, rethinking what graduation means and how to do it. For example, our climate tech portfolio has hit a critical mass and has met several key performance indicators, leading us to consider where it belongs long term and how to move it there.

On the back of a 10 percent carve-out, we’ve also created challenges in our asset allocation strategy. The impact portfolio has sought the best high-impact opportunities it can find, most of which have been illiquid ventures or early-stage investments. Its outperformance has led to the portfolio overshooting the full endowment’s asset allocation targets. As our impact commitments grow, we will have to layer in more of the disciplines of the full endowment, including sourcing investments across an array of asset classes and geographies. This presents its own challenge of finding equally high-impact opportunities across the other asset classes.

Lastly, to be authentic in our vision of addressing social and racial inequities, we have to keep going deeper. Similar to the movement around gender lens investing, racial justice investing will not be contained to ring-fenced strategies, but rather, needs to permeate all investments.

While there are great strategies that address specific racial disparities, and we will continue to invest in those, we need to carry the practices of analyzing and addressing racial impact to all our investments.

Working with Founders First and Illumen is a great step in this direction, but we need to continue investing in managers that can help build new norms for the field.

Six years into our strategy, our primary goal remains intact: continue to learn and strive toward greater mission alignment in our endowment. The reason still holds that we need to leverage our entire set of resources and that of the broader financial markets to meaningfully address today’s seismic challenges. Jumping in feet first with the initial pilot portfolio has laid the groundwork. As we move from testing to scaling, we are now grappling with new questions. How do we move beyond carve-out and avoid the pitfalls it can bring? How do we deepen our authenticity to racial justice? How can we leverage this opportunity so others can learn from our experience?


Article by Adam Connaker, who serves as the Director of Impact Investing at the Surdna Foundation. He oversees the Foundation’s $100 million impact investing portfolio and leads an ongoing effort to align the Foundation’s investment policies and practices with its social justice mission. 

For over 15 years, Adam has harnessed innovative finance to mobilize private capital for social and environmental outcomes. Before joining Surdna in 2022, Adam was Director of Innovative Finance at the Rockefeller Foundation, where he and his team supported research, strategic direction, and implementation of the Foundation’s program-related investments. In this role, he also spearheaded Rockefeller’s climate finance and racial justice investments and managed relationships with grantees throughout the investment process. 

Prior to Rockefeller, Adam worked as a private equity analyst for Wayzata Investment Partners, covering a range of industries, especially energy investments. Adam received his bachelor’s degree in finance from the University of Minnesota and his master’s degree in global affairs, with a focus on international development and humanitarian assistance, from New York University.

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

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