April 14

James Militzer

Ford Foundation Sends Message to Those Still on Impact Investing Fence: A Q&A with Darren Walker

The Ford Foundation is an independent, nonprofit grant-making organization founded in 1936 by Edsel Ford, son of Henry, the founder of the Ford Motor Co. Earlier this month, foundation President Darren Walker announced the organization is putting “our money where our mouth is” and committing $1 billion of its $12 billion endowment over the next 10 years to mission-related investments in affordable housing and financial services for people in developing countries. In this email Q&A, he talks about why the foundation made the shift and the signals he hopes it sends.


James Militzer: How important is it for impact investing to tap into major foundation/institutional investor money, and to what extent is this move motivated by your desire to see that happen? 

Darren Walker (above): We think it’s important to the success of the impact investing market for these investors to engage. And we also know that those on the fence will need to see clear and demonstrable results.


JM: Do you feel like this move represents any significant risks for the foundation? If so, what are they, and why do the opportunities outweigh them?

DW: There are risks to any investment strategy and we feel we have put appropriate guardrails in place to mitigate these over the ramp up. If successful, this is a way for the foundation to not only advance its mission but also demonstrate a case for other investors.


JM: As you look over the landscape of impact-related investment deals into businesses serving low-income people over the years, is there one example that particularly sticks out as a model for what you’re trying to do here?

DW: There are many compelling investment opportunities. We hope that in the process of identifying funds and being transparent about what we learn that more investors will have a blueprint and some verifiable examples.


JM: What has the foundation learned from its success in managing millions of dollars in program-related investments over the years, and how do you think the work of making mission-related investments will be similar/different?

DW: Given the way that we are structured and our global scope, we have learned that investing through intermediaries and managers is an effective way for us to achieve our mission while diversifying risk. We have learned the importance of investing in managers that hold the dual skill set of being firmly grounded in both finance and impact.


JM: I understand you’ve decided to start by focusing on affordable housing (in the U.S.) and financial inclusion in emerging markets, because those are sectors that the foundation has experience in – and also because they have the potential for attractive returns. To what extent does “financial inclusion” refer to microfinance? And if microfinance investments will make up a considerable portion of the $1 billion, do you have any concerns that the sector, while profitable, 1) may not represent your best opportunity for major social impact, and 2) may not need an influx of investment as much as other sectors do?

DW: Financial inclusion is not a synonym for “microfinance” but refers instead to the full range of technologies and business models for expanding access to secure and affordable financial services. Credit, which microfinance has focused on in particular ways, is one such service. But savings and payment services are important too. New types of firms and approaches, as well as innovations by established players, are showing just how powerfully we can expand access – on a very large scale – in the years ahead.


JM: The foundation has said this move “sends a signal to other foundation and institutional investors that perhaps the time has come to consider the potential of impact investing,” and $1 billion is a lot of money. But how much stronger would that signal be if the other $11 billion of your endowment were involved, or if the 10-year timeline were shortened? Has there been any discussion, for example, of following the Heron Foundation’s lead and aligning 100 percent of the endowment with your mission, or of divesting the endowment from industries like fossil fuels that are seen as having a uniquely negative social impact?

DW: Given the stage of the market and the foundation’s commitment to ensuring this strategy advances its programmatic goals, we think a staged approach at this juncture is prudent.  We are also excited to be making the largest commitment of its kind by a private foundation and think $1 billion is a strong step to advancing the market.


JM: You’ve said that most American foundations have not invested any portion of their endowments into MRIs because of (previously existing) legal barriers and “legitimate questions about whether there is enough evidence to prove that mission-related investments yield desirable financial or social returns.” You added that “if we hope to answer this question, it is our responsibility to put more of our money where our mouths are.” Many in the impact investing space would argue that the question has already been answered (affirmatively) – but it sounds like you’re not entirely convinced. Is that a fair reading of your position, and if so, what would it take to make you more fully believe in the sector’s social and financial impact potential?

DW: We believe very strongly in the incredible potential of this nascent field which is why the foundation’s trustees have committed $1 billion. We are confident this market will continue to grow as more financial and social return data supports this type of investing.


JM: In 10 years, how do you think this move will have changed the Ford Foundation, other institutional investors and the impact investing space?

DW: We hope to see it mainstreamed – we hope the term impact investing might even go away and investors will see the value of considering social and environmental factors as prudent in making investment decisions across the full spectrum of their practice and the widest possible range of asset types.


James Militzer is NextBillion’s senior editor.

Photo of Darren Walker courtesy of Joi Ito via Flickr




financial inclusion, impact investing, microfinance, poverty alleviation