In recent years, private foundations increasingly have sought to incorporate socially responsible investing (“SRI”) mandates. Some SRI mandates take the form of negative screens—e.g., screening out tobacco stocks. Other SRI approaches are more proactive—e.g., a foundation focusing on disease eradication might invest in companies that develop vaccines. However, there has been a view—accurate or not—that some socially responsible investments yield lower risk-adjusted financial returns than traditional investments (such investments are sometimes referred to as “concessionary”).
Accordingly, when a foundation engages in an SRI program, several legal issues arise.