Socially responsive investing (SRI) 

Foundations & Endowments

CASE STUDY: Designing an approach that endures


Established in 1913, this healthcare-oriented foundation (based in Atlanta, GA) was created to eradicate tuberculosis. In 1988 its mission was broadened to include ‘all lung related diseases.’ Since its inception, the foundation pioneered social hygiene programs, led the movement for nursing services in county health departments, and became the forerunner of the modern Lung Association. With an initial investment of $50,000, the foundation’s portfolio has grown to roughly $4.7 million and has distributed $3.1 million in grants since 1971.


During the fall of 2014, the organization’s Board began to evaluate the investment portfolio to determine whether invested securities were properly aligned with the foundation’s mission. The Board did not want to invest in any company whose principal business had a negative impact on air quality. During that same time, Stanford University was making headlines as the first large university to publicly commit to divest its endowment holdings in publicly traded companies whose principal business was coal mining for energy generation. Stanford’s decision was in response to student protests regarding climate issues such as global warming. The foundation’s Board felt that if Stanford University could divest from securities that harm the environment, then they should also consider making the same adjustment—especially in light of the organization’s mission.

At the time, the discretionary investment portfolio was managed with no restrictions and had a long-term strategic target of 60% equities, 30% fixed income, and 10% alternatives. As fiduciaries, the Board decided they had an obligation to align the investment portfolio with the mission of the organization.


As their long-standing investment advisor, Truist’s Foundations and Endowments Specialty Practice team met with the Board to facilitate an exhaustive discussion. This included developing a clear understanding of what the Board wanted to ultimately accomplish. We facilitated a thorough discussion around the potential trade-off of meeting a social obligation versus maximizing portfolio investment returns, as well as the types of social investing screens we could potentially deploy to meet the organization’s objective. Those social investing screens included:

  • Negative/exclusionary screening—the oldest type of screening, this approach removes investments which could be engaged in undesirable products, services, or even actions.
  • Positive/affirmative/best-in-class screening—a much more proactive approach, this seeks to support companies that uphold socially responsive philosophies and practices, rather than seeking to exclude companies based on their business practices.
  • Environmental, social and governance (ESG) integration—is based on a practical belief that a company’s approach to ESG factors will be a strong determinant as to its overall longevity. Analysis can focus on one or all three factors, and there are many smaller issues in each category that can be designated as an area of particular focus.

Ultimately, the Board decided on negative/exclusionary screening for domestic equities, and ESG integration for international equity and fixed income. Additionally, due to the lack of socially responsive liquid alternative vehicles, the Board allowed the usage of non-screened liquid alternative strategies. For domestic equities, the Board designated that the portfolio would not actively invest in the following:

  • Tobacco Restriction—excluding manufacturers of tobacco products such as cigarettes, electronic cigarettes, cigars, pipe tobacco, snuff, or chewing tobacco. Investments would also be excluded in companies deriving any identifiable revenues from the manufacture of such products.
  • Fossil Fuel Restriction—eliminating investments in companies that derive revenue from the exploration, extraction, refining, or distribution of fossil fuels such as coal, petroleum, and natural gas.

Once we memorialized the Board’s socially responsive objectives in their Investment Policy Statement (IPS), we implemented the strategy for the portfolio. The domestic mutual funds were eliminated, and we hired two active managers to invest in Large Cap and Small/Mid Cap using individual securities filtered through the negative screens. In the International and Fixed Income asset class, the Board agreed to utilize mutual funds that focused on ESG (Environmental, Social, and Governance) screening. Given the magnitude of the portfolio transition, however, the Board wanted to track the restricted sectors going forward to affirm their decision.

Initial assessment

The Board was extremely happy with their decision when evaluating their 2015 performance. The restricted sectors performed poorly that year, so the portfolio benefited greatly by not having that exposure. When evaluating 2016 performance, however, the Board began to question their restrictions. All the poor performing restricted sectors from 2015 turned in strong 2016 returns. Yet despite their concerns about giving up some performance, the Board reaffirmed their stance regarding the restrictions and decided to stay the course based on the strong belief that the portfolio should be aligned with the organizational mission.

But in the 4th quarter of 2017, the Board once again questioned performance. While performance within the restricted sectors was mixed, they were concerned that the active Large Cap manager was not allocating the portfolio correctly given the run-up in technology stocks.

In addition, the ESG international active mutual fund performance was lagging the benchmark. Based on this, they asked us to evaluate the active managers (as well as the tobacco and fossil fuel restrictions) and provide recommendations.

In late December 2017, Truist provided recommendation to the Board. These included:

  • Eliminating the domestic and international active managers
  • Replacing them with passive managers who would replicate the domestic and international benchmarks (this way, any performance deviations from the benchmark would be clearly attributable to the restricted sectors)
  • Moving to passive ESG managers as well
  • Maintain the existing tobacco restrictions
  • Eliminating the fossil fuel restrictions, but applying ESG integration.

Recognizing that the initial discussion regarding these sector restrictions began with Stanford’s decision in 2014 to divest from coal, the Board was keen to understand Stanford’s 2016 reversal of their position to divest from fossil fuels. Stanford’s rationale was that they couldn’t adequately evaluate whether the social injury caused by the fossil fuel industry outweighed the social benefit it provides. In January 2018, the Board accepted our recommendations and we implemented the new strategy.


Balancing the mission of the organization with their fiduciary responsibilities through the lens of socially responsive investments has proven a multi-year process for the Board. Inevitably, doubts and uncertainty crop up from time to time. But their portfolio today is much more aligned with the foundation’s long-term objectives than ever before.

The entire exercise has been a valuable learning experience for the client—providing them with a far greater appreciation for the pros-and-cons of SRI implementation. The Board now understands how each socially responsive restriction applied to the portfolio has a direct impact on performance. Furthermore, the client expressed deep gratitude to Truist for serving as a consultative partner to guide and inform their investment decisions regarding SRI screens.

We recognize that the decision to transition a portfolio to incorporate SRI screens is complex and unique to each organization. As we guide boards and investment committees through this process, we ensure that they have a good understanding of what they’re trying to accomplish and have answered the following questions:

  • How does the organization’s mission intersect with economics?
  • Is the investment portfolio the appropriate vehicle to express the moral or social values of the organization?
  • Should the investment portfolio be solely focused on achieving the highest economic value through traditional non-screened investing, thus maximizing the financial resources available to the organization that can be devoted to meeting its mission?
  • How much do socially responsive screens matter when assessing portfolio performance?

In this complex and evolving dialogue between mission and fiduciary duty, between economic realities and the pressing social concerns that demand our attention, investment committees and Boards should seek information, analysis, and perspective on the array of choices available to them. As a consultative partner, we stand ready to assist in those conversations that contribute to evolving financial ethos for your organization.

Our Practice delivers comprehensive investment advisory, administration, planned giving, custody, trust and fiduciary services to trade associations, educational institutions, foundations, endowments and other not-for profit clients across the country.

About Truist Foundations and Endowments Specialty Practice

Truist has more than a century of experience working with not-for-profit organizations. Fiduciary stewardship is the heart of our culture. We’re not just a provider, but an invested partner—sharing responsibility for prudent management of not-for-profit assets. Our client commitment, not-for-profit experience, and fiduciary culture are significant advantages for our clients and set us apart. The Foundations and Endowments Specialty Practice works exclusively with not-for- profit organizations. Our institutional teams include professionals with extensive not-for-profit expertise. These professionals are actively engaged in the not-for profit community and are able to share best practices that are meaningful to their clients. Team members offer guidance and advice tailored to the various subsets of the not-for-profit community, including trade associations and membership organizations. Our Practice delivers comprehensive investment advisory, administration, planned giving, custody, trust and fiduciary services to trade associations, educational institutions, foundations, endowments and other not-for profit clients across the country.

Need additional assistance or insights on best practices for integrating SRI screens into your investment decisions? Contact your Truist relationship manager or investment advisor or call us at 866-223-1499.