Why We Invest

To maximize the benefits of our investments, we aim to generate financial returns, environmental and social impact, and deep learning. Founded by one of the early leaders of the 3M Company, the McKnight Foundation has innovation embedded in its approach to philanthropy. Carrying that spirit, in 2013 the board asked: What more can our endowment do to further our mission of advancing a more just, creative, and abundant future where people and planet thrive? In 2014, the McKnight Foundation committed to investing $200 million (10 percent of its $2 billion endowment at the time) in strategies that align with McKnight’s mission. Over a decade later, impact investments are now uncapped and 50% of our endowment is aligned with our mission. These investments generate financial return, meet our fiduciary duty, and drive program learning, all while advancing our mission. Financial Returns Each impact investment has a targeted financial return that meets our fiduciary standards. The vast majority of our impact investments target market-rate returns. We apply the same rigorous investment diligence to impact investments as to the rest of the endowment. Environmental & Social Returns Each impact investment contributes to solving social and/or environmental challenges. We seek investments that create affordable housing, help build the sustainability of Minnesota and the Midwest, increase energy efficiency, promote the distributed generation of electricity, reduce chemical inputs in commercial agriculture, or preserve grasslands and wetlands. For select investments where the expected impact is exceptional, we may make Program Related Investments with concessionary returns. Annual impact reporting provides a more comprehensive picture. We collect data to better understand the social and environmental value created by the funds and businesses where we invest. We aim to keep measurement requirements simple and useful. Learning Returns Each impact investment provides deep learning to the Foundation about market gaps and opportunities, as well as private-sector solutions. Investment and grantmaking staff work closely to capture and institutionalize these insights. We hope that market experience contributes to better, smarter grantmaking. “Old school thinking asks whether a fund manager can succeed in spite of sustainability consideration. The reality is, it’s possible to find success because of it.” – ELIZABETH MCGEVERAN, FORMER VICE PRESIDENT OF INVESTMENTS Source: Sustainability Focus, Extraordinary Performance