The Arch Community Fund uses a non-extractive investment strategy that starts with a commitment to invest all of the Foundation’s assets outside of the stock market. The stock market operates on longstanding assumptions about the primacy of growth of capital and values profits over people and the planet. Instead of investing in the stock market, we put our money in a mix of assets that ensure liquidity and maximize impact. Our complete Investment Policy Statement can be found here.
The process of developing a mission-aligned investment philosophy has not been without challenges. For starters, we had to grapple with the gravitational pull of the foundation world to a rationale that the returns afforded by the market allows funders to have more money available for grant-making. While undeniable that investing in the stock market would likely increase long term capital for grantmaking, doing so props up a system that breeds concentration of wealth and extreme inequality. Ultimately, we do not believe that an ends-justifies-the-means approach can ever lead to transformative change. To use Audre Lorde’s well known adage, “the master’s tools will never dismantle the master’s house.”
Then there is the reality of needing liquidity and stability to meet foundation expenses and grant-making obligations, and how that can present a challenge for making higher social impact investments, which are usually longer term and “riskier.” Arch makes a combination of one-year and three-year grants and must ensure that it has the capital and liquidity to fulfill its commitments to grantees.
Last, there are the issues related to longevity and perpetuity. In forgoing stock market-based returns, while giving away well over 5% per year, we are effectively cementing our status as a “limited life” foundation. We launched Arch in a state of urgency shortly after the election of Donald Trump. That urgency is no less acute today, given the political landscape and threat to our democracy. For us, the urgency of the present moment is a greater priority to us than our own life as a Foundation. Foundations committed to a longer term time horizon may not be able to completely divest from the market; however, they can certainly divest a portion of those assets to make investments in projects that have a greater social impact.
Arch’s Asset Allocation
Our asset allocation is a balancing act between stable investments that ensure liquidity for grantmaking and foundation expenses and higher social investments that offer the promise of more transformational change. Since many of the highest impact investments are higher risk and longer term, we have invested close to half of our assets in low-risk and highly liquid assets, like money markets and treasuries and federal agency securities.
The majority of our assets are invested in alignment with our mission. Some of these assets are invested in fixed income funds that fund low-income communities, such as Calvert Notes and Capital Impact Notes. We refer to this category of assets as “Public Purpose” investments. These investments, along with our cash equivalents and federal agencies, are managed by Harrington Investments, a socially responsible wealth advisory firm that actively challenges corporate management through stakeholder engagement.
Our most exciting investments are directly into community-controlled projects that build local power. We refer to this category of assets as “High Social Impact”. We execute High Social Impact investments through our partnership with Chordata Capital, an anti-capitalist wealth management firm.