• Unpacking the Relationship Between Mission & Investments:

    How Fiduciary Duty, Good Governance, & Impact Investing Coexist

Ever caught a boardroom debate where someone argues that fiduciary duty is all about maximizing every bit of possible return, leaving no room for social impact or mission considerations?

It’s a common misconception: the belief that being a responsible trustee means walling-off mission from investment considerations. Many board members question, “Can we really pursue impact without compromising our financial obligations?” The truth is, by unpacking and rethinking what fiduciary duty really means—alongside reworking governance systems—we can discover that the pursuit of both financial returns and mission alignment isn’t just possible; it’s a win-win. Let’s dive in and explore how these fresh perspectives can open up new, sustainable ways of achieving long-term success.

On March 27, 2025, GSIC partnered with Rosalie Sheehy Cates, Senior Advisor at The Giving Practice, to facilitate a virtual workshop, “Fiduciary Duty, Good Governance, & Impact Investing,” for Georgia’s foundations and philanthropic leaders. The workshop drew a diverse group of participants – including foundation staff, board members & trustees, investment committee representatives, philanthropic advisors, and donor advised fundholders. The conversation explored how an evolved understanding of fiduciary duty—not just as a set of legal rules but as a trust-based relationship influenced by culture—can unlock more mission‐aligned and impact investing capital.

Fiduciary Duty: Code + Culture

Fiduciary duty is more than just a legal standard and mandate. Yes, there is legal written code that sets uniform standards that instruct certain behaviors, policies, and activities, but fiduciary duty is also shared culture.

  • The Written Code: Foundations rely on legal standards, detailed investment policy statements, and case law to define the duty of care, loyalty, and obedience.
  • The Cultural Context: While written code does establish a clear set of guidelines and expectations for fiduciary duty, foundations interpret and apply code individually, and each foundation establishes the culture that reinforces governance through its individual systems.

Often, discussions about fiduciary duty and impact investing overemphasize “code” and underemphasize “culture.” What do we mean by that? Well, the written code does not dictate that foundations must wall off mission and purpose from investment decision-making. Nor does it prevent trustees and governing leaders from investing assets in such a manner that considers both the mission & impact as well as the financial merits of an investment. In fact, U.S. regulations and guidelines have evolved to support this approach. The Uniform Prudent Management of Institutional Funds Act (UPMIFA) was approved in 2006 by the National Conference of Commissioners on Uniform State Laws. The regulation gives governing boards more flexibility in making spending decisions with endowment funds. In particular, it enables them to consider non-financial outcomes, like a foundation’s mission and the anticipated benefits of impact investments, as part of the prudent investor rule. Today, UPMIFA has been adopted in 49 states, including the District of Columbia and the US Virgin Islands. Only Pennsylvania has not yet adopted the standard (Uniform Law Commission, April 2025).

Given this, it is fair to express that the traditional philanthropic business model described above is not code-created, and it is, therefore, reasonable to conclude that culture is driving this predominant model within the field.

In so many cases, foundations – especially private family foundations – create a firewall that exists between investment decisions & investment processes and grant-making. What is really critical with impact investing is that you merge those two so that there’s true values-alignment and understanding of what the goal of the organization is and how you try to use the assets to accomplish those goals. 

Core Components of Fiduciary Duty

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Missed the conversation? Listen to the session recording, and read the report below to hear/read what was discussed!

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Fiduciary relationships often concern money, but the word fiduciary does not, in and of itself, suggest financial matters. Rather, fiduciary applies to any situation in which one person justifiably places confidence and trust in someone else and seeks that person’s help or advice in some matter (Merriam Webster). There are varying descriptions and definitions fiduciary duty. Depending on the specific context, fiduciary duties may include the duty of disclosure, the duty of confidentiality, the duty of good faith, and the duty of accounting. During this workshop, we focused the discussion into three central duties – the duty of care, the duty of loyalty, and the duty of obedience. Let’s unpack these further.

Upholding the duty of care requires that trustees must act as a “reasonably prudent person” would, ensuring that every decision is informed by comprehensive review and assessment. By definition, prudent means wise and sagacious. Over time, the “prudent” has come to connote “cautious,” but that strays from the word’s root origins, which actually mean “to look ahead.” Case law here emphasizes good faith, business judgment, and an eye on the evolving needs of your beneficiaries. The most current interpretations of a “prudent person” focus on the transparency and accountability of trustees – i.e., establishing and utilizing good processes to demonstrate your deliberations and prove that care is taken. Good governance and fulfillment of the duty of care can look like intentional procedures such as consistent attendance, thorough review of meeting materials, and documented processes for evaluating impact investments.

The duty of loyalty requires trustees to put the foundation’s mission first. In the most straightforward sense, this duty prohibits self-dealing and conflicts of interest, and it gives rise to obligations of confidentiality. However, the duty of care also encompasses the idea that being a trustee means being in a “trusting relationship with the other people on the investment committee” to make weighty decisions on behalf of the community and the intended philanthropic beneficiaries.

The field’s current definition of “obedience” relies on the Middle English word “obeien,” which was borrowed from Anglo-French “obeir,” which actually stretches back to the Latin word “oboedīre.” Each of these linguistic roots relates to the definition of moving “toward, in the direction of” and “to hear.” So, as trustees, the duty of obedience implies that you are listening to and being guided by something that is trusted.

Older interpretations of this duty say that trustees must listen to the wishes of the people who generated the charitable assets, the governing documents, and the applicable law. This traditional viewpoint narrows the “obedience lens” on a few stakeholders and does not allow for adaptive, context-specific ways of deploying the foundation’s assets over time. However, emerging perspectives of this duty now stress that acting obediently (and prudently) also means being accountable for the “public benefit” of your foundation. Trustees can, and perhaps should, examine the social context and systemic nature of charitable purposes. For example, if a foundation’s mission is to ensure child welfare and educational achievement, a prudent, obedient trustee would recognize the interconnectedness of housing, healthy food access, healthcare, and other environmental factors to that mission statement.

Your foundation’s social objective is to maximize the present value of the social impact of your activities. The perpetual nature of your foundation suggests that you should be maximizing the long-term financial capacity of your organization. These two things are in tension with one another. We [William Josef Foundation] thought that impact investing was one way to dissolve some of tension, if you will. We use some of our investment assets to augment our grant making, increasing the present value of the social benefit while also following our prudent investing standards.

Leading Foundations Connect Mission & Investing

While it’s important to examine the concepts that underly fiduciary duty, it’s equally important to see how leading foundations across Georgia and the country employ this evolved understanding within their systems of governance to pursue impact investing. See some examples below for the language peer foundations are using to strengthen the relationship between mission & investment systems.

In 2019, The Sapelo Foundation, a private family foundation based in Savannah, Georgia, celebrated its 70th anniversary as a foundation by approving a strategic plan, which included a new mission statement, a new approach to grantmaking, and a new mission investing journey to align 100% of capital – grants (at least 5% of financial capital), endowment (95% of financial capital), human, partnership, advocacy, convening, strategy, and more – with its mission. Let’s look at the language The Sapelo Foundation uses to describe what effectuating this different approach looks like for its investment practices.

We committed to a mission investing journey, to align 100% our capital with our mission. This included an intentional breakdown of the traditional and unnecessary firewall between our grants (at least 5% of financial capital) and endowment (95% of financial capital). Our single decision unleashed 19 times more resources for us to advance our mission. After approving a new Investment Policy Statement and completing a search for a new investment advisor, we completely reorganized the investments in our endowment. Our goal was simple, but complex: ensure that the companies we own align with our mission and the missions of our grantee partners. We also initiated a process for Program Related Investments (PRIs) – low/no-percent interest loans – to small businesses, to complement our grantmaking and further our mission. 

Tips & Resources to Get Started with Impact Investing

Check out the Field Insights: Fiduciary Duty, Good Governance, & Impact Investing report linked above for GSIC’s suggestions on the practical steps leaders can take today to advance the impact investing conversation or begin to make mission-fulfilling investments! Need more convincing? Add these resource to you individual or board reading list to guide your exploration.

 

Michael & Susan Dell Foundation - Mission Investing: A Framework for Family Foundations

Mission Investors Exchange & Jessie Ball duPont Fund - Impact Investing and Intentionality

Untours Foundation - Mission Aligned Investing Toolkit

The Giving Practice - Mindful Fiduciaries at the Wheel