Laura Kind McKenna, an Investors’ Circle member, is a Trustee and the former Managing Trustee of the Patricia Kind Family Foundation. Laura has been a true pioneer in the space and has demonstrated that small family foundations can substantially increase their impact beyond grants. Most recently, Laura was credited by the Barra Foundation for helping them to make their first impact investment. We are privileged to have members like Laura in our network who are leading the way and bringing others on board. We sat down with Laura learn how the Patricia Kind Family Foundation makes their impact investments and how philanthropists can take her lead in bringing philanthropic capital into the impact investing space. Below is the edited and condensed interview.

Rebecca: Tell us about the Patricia Kind Family Foundation.
Laura: The foundation was started in 1998 by my mother, Patricia Kind, with money from my grandparents. About ten years ago, after hearing from Luther Ragin of the F.B. Heron Foundation that we could make more of a difference if we didn’t just use grants, we made a decision to change. So we began to look at ways that we could align our endowment investments with our mission.

Rebecca: What is the mission of the Patricia Kind Family Foundation?
Laura: We are geographically focused on the Philadelphia area and focused on alleviating poverty and helping people obtain basic human needs of housing, clothes, shelter, food, education, and health care. We focus our granting making on funding efforts focused on the poorest of the poor. We look for grassroots organizations that have budgets under $1 million.

Rebecca: So how did you start the process of aligning your endowment and other deployed capital with your mission?
Laura: We first invested into the Reinvestment Fund, a local CDFI. We invest across asset classes including direct investments. Some of our investments are more generally negatively screened and some are more directly mission aligned. I’m proud to share that we are now close to having 100% of our endowment invested in ways that align with our mission.

Rebecca: What was your first direct impact investment, and what it its status now?
Laura: It was a loan to a local non-profit that provides housing for men struggling with alcoholism. They wanted to start a cleaning business to generate revenue to offset their costs and not be completely reliant on grant funding. Instead of making a grant for them to open the franchise, we made a 0% interest loan and the advantage to that was multifold. By paying us back over time we were able to hold them accountable to their business plan goals. They had to pay us back once a year for seven years. We just got the last payment! If we had made a grant, the business may have gone belly up in the first year when they hit their first hurdle. But they were committed to paying us back and maintaining good terms with us. The company is still inexitence and continues to provide several thousand dollars in revenue to the non-profit, as well as employment opportunities. The overall impact has been very significant—even more than if it was a grant.

Rebecca: How does the focus of your mission-aligned investments differ from your grants?
Laura: Start with a broader purpose that says, ‘I want to use these dollars to do more good in the world.’ You make a mistake if you think the only investment to make is one that is exactly aligned with your mission. A lot of people miss an opporuntity by trying to keep their mission-aligned investments as narrowly defined as their grants. As such, at the Foundation, we define our investments more broadly. We seek companies in the Philadelphia area that are addressing poverty that have a strong social and environment impact along with a strong financial return. Even if your traditional investments had nothing to do with your focus area, making your first investment has an impact. Look at your investments now and say, ‘Let’s get started with investing that results in a more positive social, environmental or governance impact.’

Rebecca: How did you decide to put more of the foundation’s assets to use?
Laura: Philanthropic organizations are governed by tax laws that mandate the 5% of the foundation’s assets must be granted every year. The other 95% can be invested traditionally with no requirements to be mission aligned. We realized that we had all of this untapped impact! If we only used 5% of our dollars to make an impact, we were missing the potential to use 95% of our assets for impact. We decided that we needed to use more than 5% of our assets to make the world a better place.

Many people have read how the Ford Foundation is committing $1 billion to impact investing which is about 10% of their assets, and they have a full-time staff working on this. But I want people to realize that you don’t have to be a large foundation to make mission-aligned investments. We have $35 million and a part-time grants manager, and we are able to do it. There are simple and accessible opportunities to use your money to have more of an impact. Investors’ Circle has been a great way to find great deals and have a community to work with.

“The most important thing is to start believing the ‘why’ and then get to the ‘what’ and ‘how.’ Investors’ Circle can help with the what and how, but the most important component is the why.”

Rebecca: How did you get the rest of foundation and board interested in mission-aligned investments?
Laura: We needed an internal champion. I was fortunate to be in a position to bring the foundation along, and I stressed the importance of the mission-aligned investments. The most important thing is to start believing the “why” and then get to the “what” and “how.” The why is really that there is so much money left on the table that could be put to use to make the world a better place. Investors’ Circle can help with the what and how, but the most important component is the “why.”

Rebecca: How did you bring your wealth advisor on board with mission-aligned investments?
Laura: Initially, our wealth advisor was hesitant and thought that these investments were too risky. However, along the way, we started to discuss how investing in things that went against the mission of the foundation was not okay. We taught them that there were opportunities in the various asset classes that would provide a similar level of risk that did align with our mission, such as a CDFI which paid the same as a traditional bond. We now have a great relationship with our wealth advisor. They find investment opportunities in every asset class and bring them to our attention. We also find opportunities, and our wealth advisor will do the financial due diligence.

Rebecca: So what is the first step a foundation should take?
Laura: First, believe that your money could be making a much stronger impact on the world. Use more than the mandatory 5%. I like to challenge foundations to think about how they can ask a small non-profit that receives a $10,000 grant to demonstrate that each of those dollars has impact and yet only use 5% of their total dollars for impact. The best way to get started is to start small and realize that you are doing it with the idea that the mission is first. Then, if the company fails or you lose your investment, this can qualify as a program-related investment that counts towards your granting requirement. Every time you make a grant, you have 100% certainty that you will not have those grant dollars returned. It is important to realize that you could make a mission-aligned investment and possibly have a greater than 0% return. Take a small amount of money and make that first investment. Start by making some loans that might have a good risk of not getting your capital back or returning a less than market rate return but that have a significant social impact. A lot of people are talking about impact investing, but the most important thing to do is just to try it!

Rebecca: How has IC’s Patient Capital Collaborative (PCC) fund helped to achieve your investment goals?
Laura: The PCC is a great way to get started. For a low minimum, you can invest in many different types of companies. The team does the due diligence for you and makes the investment decisions. You then get updates on the portfolio and can see how your investments are doing and what impact they’re creating.

Learn more about Laura and the impact she has had on other foundations, such as the Barra Foundation and the Valentine Foundation here. Learn more about impact investing and join Laura and other mission-focused investors in our community by joining IC here.

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