INVESTMENT POLICY STATEMENT

STATEMENT OF PHILOSOPHY

A core tenet of Quaker philosophy is that spiritual principles apply not only to individuals, but also to social and international relations, trade, and businesses. Therefore, we believe it is our responsibility to view our assets, as well as our income, as vehicles to achieve our mission, and have chosen to align our asset management with that mission.

Corporations and businesses are more than institutions for making money. They do not operate in a vacuum. They can provide quality and service, and promote innovation in their products. They can make efforts to improve the lives of their workers and the communities in which they are located. They can change their practices to diminish pollution and other negative environmental impacts. Because the purpose of this Foundation is to promote improved quality of life for both people and the environment, we believe the portfolio should be invested in companies which make consistent, committed efforts to be socially responsible, as defined in our guidelines. We will seek out companies, particularly locally owned businesses in accord with BALLE principles, whose products, services, and methods of conducting business enhance the human condition and sustain our natural environment.

We recognize that no company is perfect, and that companies may excel in one social criteria and lag behind in another. We will look for quality of corporate disclosure, consistent efforts to be responsive to social concerns and changes, and environmental impacts as we evaluate investments on an individual basis for their ethical suitability.

OBJECTIVES

The primary investment objective is to provide a return on investments that provides for the adequate support of Foundation operations, meets its distribution requirements, and adheres to its focus on slow money capital and the triple bottom line. (Environmental, social and financial return) Every investment will be assessed according to the criteria of our mission, particularly regarding energy security, food and food systems security, and community sustainability. We call this BSRI (Beyond Socially Responsible Investing)

SPENDING AND INVESTMENT GOALS

The spending and investment goals of the Foundation are:

  • to generate income and capital gains necessary to support the foundation's operations and fund its grant making over the long term
  • to provide capital directly to, or own the equity or debt of enterprises which further the foundation's mission
  • to avoid investing in companies whose environmental or social impacts contribute to the issues that the foundation's grant making seeks to address
  • to set spending levels based primarily on an assessment of current need and of current and projected investment returns
  • to preserve, to the extent possible consistent with the foundation's spending levels, the real (inflation adjusted) value of its assets over the long term.

    1. The specific objective for the account is to achieve an average annual real total rate of return (net of investment fees) of at least 4- 6% over a rolling three-year period.
    2. Appreciation and income may be used to finance cash requirements for grants and operating expenses. Assets may be spent down during periods in which neither appreciation nor income are sufficient to fund grant making budgets.
    3. We will utilize Mission Related Investing, (MRI), and its subset, Program Related Investing, (PRI) as part of our investment policy and strategy.
    4. In a down market the preference is to take a more "defensive" posture with respect to principal preservation. This is the reason for our wide asset allocation targets. Using MRI/PRI will be a vital part of dealing with down markets while continuing to support our mission, goals, and fiduciary requirements.
    5. Investments shall be diversified among various asset classes (equities, fixed income and cash equivalents) and within asset class (e.g. within equities by economic sector, industry and size).
    6. We will evaluate our strategy, processes and criteria at least once a year and adjust as necessary. Since this is an evolving field, we anticipate significant changes and innovations in this developing investment market over the next 3-4 years.

Our portfolio will contain two accounts:

  1. A BSRI account that is a balanced account containing a broad diversity of investments. This account shall be composed of investments in SRI and Mission Related Investments (MRI), with a subset of Program Related Investments, (PRI)
  2. An International Account which may be either an equity or a balanced portfolio, managed with social screens and SRI guidelines.

DEFINITIONS:

Socially Responsible Investing (SRI) is the general practice of considering social, corporate governance, and environmental factors in investment decisions. SRI utilizes positive and negative screening, community investing and shareholder activism and public advocacy criteria in addition to financial criteria when selecting an investment.

Mission-Related Investing (MRI), encompasses any SRI investment activity which is focused specifically on furthering the Foundation's mission. These investments are used to complement our grant making strategies while also recycling capital and/or earning a financial return

Among the MRI choices, the most common are:

  • Community Development Banks and Credit Unions
  • Loan funds
  • Venture Capital
  • Private Equity and Debt
  • Real Estate and timber or agricultural lands
  • SRI mutual funds
  • Screened, publicly traded securities

Program Related Investing (PRI), is a sub-set of MRI.
PRI investments are made in strict accordance with IRS Section 4944 guidelines, which state:
Under, Section 4944 private foundations are allowed to make "program-related investments" that meet three criteria:

  1. The investment's primary purpose must be to advance the foundation's charitable objectives;
  2. Neither the production of income nor appreciation of property can be a significant purpose; and
  3. The funds cannot be used directly or indirectly to lobby or for political purposes

These PRI investments also include the intention of:

  1. Furthering the Foundation's mission
  2. Recycling the principal invested and/or earning a below market return.
  3. Addressing a critical funding gap, leveraging additional capital, and delivering social impact for the areas defined in our mission.

PRIs fund capital projects, provide bridge loans, or offer liquidity to loan funds, among other things. PRIs employ financing methods such as loans (senior and subordinated), loan guarantees, lines of credit, linked deposits, or equity investments.

PRIs may help a program acquire property; reach scale; create jobs, products or services; or approach self-sufficiency. Often, PRIs are made to share risk and leverage co-investment, and often attract traditional financial players to the table.

Some program areas funded by PRIs include: Affordable Housing, Arts, Community Development, Cultural Organizations, Economic Development including Entrepreneurship and Micro-Businesses, Health Clinics, Child Care Centers, Social Services, and Open Space and Wildlife Habitat Protection. As PRIs are paid back, the funds are recycled into the next charitable purpose.

MANAGERS

The Foundation's assets will be managed by professional money managers who are selected by the Investment Committee and approved by the Board. Assets are allocated in accordance with guidelines set forth by the Investment Committee and approved by the Board. Investment managers have discretion to manage the assets in each particular portfolio to best achieve investment objectives and requirements consistent with the social and financial guidelines set forth in the Foundation's Investment Policy. Managers will be monitored on a regular basis.

MONITORING

The Finance Committee will monitor the performance of the Foundation's managers on a quarterly basis, with a face-to-face meeting scheduled at least annually. Investment results will be evaluated on a longer-term basis, since our perspective is focused on a larger, more long-term set of strategies and goals. The quarterly monitoring is intended to help us and our managers stay on track, and respond to the rapidly changing circumstances of this period of global transition, currently regarded as 2008-2012. These dates will move forward on a rolling basis.

Issues to be addressed include:

  1. Year-to-date and cumulative performance in terms of our screened portfolio as against other screened and non-screened portfolios under management, in comparison to relevant indexes and in relation to the performance of other SRI portfolios
  2. Social research and interactions with portfolio companies including shareholder activities;
  3. Adherence to the Foundation's screens and values
  4. Transactions and transaction costs
  5. Market capitalization, portfolio balancing and holdings overlap among managers and systematic risk (beta) for each portfolio.

LIQUIDITY REQUIREMENTS

Liquidity will be provided as necessary for charitable payouts and operating expenses.

CONSTRAINTS

Taxes - The foundation is tax exempt. It must distribute 5% of its market value annually to maintain its tax-exempt status.

TIME HORIZON - The overall time horizon is long term, which for planning purposes, means 3-5 years. However, we believe the world is entering a time of transition, moving from an industrial, neo-classical economic, growth and debt based age to one based on a knowledge/technology, and replicating systems based on an economic perspective that is focused on sustainability. We expect this transition period to manifest in 2007-2012, and so will implement a transition strategy specifically for this period and beyond. This requires us to be alert and nimble in analyzing developing trends in this transition. It may require us to adapt our usual long term philosophy and strategy to this difficult period. We will continue a long term philosophy, which is expressed in our mission, and, at the same time, be prepared to move into new investment forms as they emerge. We will be nimble in selling investments that represent the declining era, and parking the proceeds in cash if necessary. As opportunities arise, and after we assess them and perform due diligence, we will make investments in the companies and vehicles that will form the core base of the systems based economy.

We will implement our transition investment plan as follows:
Stage I: 6-12 months begin 1/ 2009
Stage 2: 12 - 24 months begin 1/ 2010
Stage 3: 24-- 48 months begin 11/ 2011

During and at the end of each stage, we will re-evaluate and reset if necessary, the criteria and allocations for the next stage. If, during the course of each stage, rapidly changing world conditions require an interim reassessment and adjustment, we will meet with our managers to determine the adjusted criteria. Every investment will be assessed according to criteria of energy security, food and food systems security and community sustainability in addition to the criteria listed below:

Use of Social and Environmental Investment Criteria The portfolio manager will judge potential portfolio additions or changes on their quality, financial soundness, effect on asset mix, and congruency with the Foundation's social and environmental criteria guidelines. Since companies are often involved in controversies around areas of qualitative concern, the portfolio manager is requested to discuss with the investment committee, any confusion or question about the intent of that criterion.

SOCIAL JUSTICE CONCERNS

The account shall avoid domestic investments in companies with the following characteristics:

  • derivation of more than 5% of revenues from alcohol production and distribution
  • any involvement in tobacco production or processing
  • derivation of more than 3% of revenues from the sale of tobacco products
  • gambling services, and production and manufacture of gambling equipment
  • genetic engineering and genetically modified products
  • animal testing unless accredited by the AAALAC or the National Institutes of Health
  • manufacture and distribution of weapons of war and/or weapons whose sole purpose is to kill people (not including hunting guns)
  • derivation of more than 3% of revenue from the Department of Defense. This criterion does not apply to goods and services that have no direct military purpose. The Foundation wishes to avoid companies providing weapons and other goods or services created solely for the purpose of harming people or the earth.
  • Companies that have paid significant penalties for violating occupational health and safety laws and regulations and/or have been continuously cited as having major workplace health and safety issues.
  • Companies that repeatedly have violated affirmative action standards, practiced discriminatory labor practices based on disability, gender, age, race, religion or sexual orientation and/or engaged in anti-union activities.

ENVIRONMENTAL CONCERNS

The account shall avoid investments in companies with the following characteristics:

  • disregard for a clean, healthy and sustainable environment; i.e. polluting, not disclosing information, substantially or repeatedly violating air water, hazardous waste management, or other environmental regulations
  • own and/or operate nuclear power plants and/or mine, store and/or transport nuclear fuel.
  • refusing to change harmful production methods or practices when alternative technologies or practices are available.
  • high toxic emissions levels in relation to their peer group
  • production of ozone-depleting and soil depleting synthetic agricultural chemicals
  • derivation of revenues from the mining, sale or combustion of coal or oil and their derivative fuel products
  • extractive fossil fuel companies, except for natural gas

INTERNATIONAL INVESTING

The account shall avoid international investments with the following characteristics:

  • strategic support for repressive regimes
  • sweatshop labor, including unacceptable labor conditions and practices and use of forced labor or child labor
  • conflict with indigenous peoples
  • use of chemicals, pesticides, drugs, or environmental abuse which would be banned in the United States
  • operational support of the government in Burma

Corporate practices abroad should be carefully examined. If any doubts exist, the Investment Manager should consult with the Investment Committee to decide whether to invest, divest, or file shareholder resolutions/protest.

AFFIRMATIVE SCREENING

The account shall seek out socially responsible investments in companies that have the following characteristics:

  • pro-active environmental policies including adoption of strong pollution prevention and resource conservation programs, utilizing a substantial amount of recycled products as raw materials and/or initiate sustainable business practices.
  • signing the CERES Principles and/or by participating in recognized environmental programs
  • facilitate quality and accessible reproductive healthcare by providing reproductive services, products and/or insurance to their employees and/or to the general public.
  • Focus on local and regionally based (within 500 miles) food and energy systems of production, distribution and consumption.
  • a focus on alternative and locally based non fossil fuel derived energy, excepting corn based ethanol
  • servicing and equipment for energy companies that use natural gas can be considered, especially if they are making filters or other such equipment that facilitates energy efficiency and conservation
  • a focus on sustainable agricultural practices and organic agriculture
  • pro-active employment policies
  • hiring practices that foster diversity and inclusivity and/or are included on lists like Fortune magazine's 50 Best Companies for Minorities and Working Mother magazine's 100 Best Companies for Working Mothers.
  • Support for the construction of and/or provide financing and mortgages for affordable and low-income housing.
  • Companies with demonstrated leadership in innovative approaches to community development, environmental friendly building designs and excellence in the public education system.
  • Companies that purchase goods and services from minority and women owned businesses and actively promote contract opportunities for minority and women owned suppliers and service providers.
  • Companies whose labor practices and compensation standards support collective bargaining, living wage and pay equity
  • commitment to community affairs and charitable giving
  • a diverse board of directors and top two levels of management with regard to gender and race
  • reasonable compensation packages for CEOs relative to other employees

SHAREHOLDER ACTIVITIES

Shareholder activities are a component of aligning the socially responsible investment guidelines with the investment activities. Voting on the proxies, co-filing, and filing shareholder resolutions are all part of this effort. Proxies shall be voted in accord with the concerns stated in the policy guidelines.

Proxies shall be voted in opposition of the following corporate board characteristics and actions:

  • incentive payments unrelated to financial performance
  • increasing salaries and options for executives that far exceed salary increases for average company employees
  • boards composed mostly of "inside directors"
  • nominating and compensation committees that are not composed exclusively of independent directors
  • board nominees who serve on multiple (more than 3) boards, when the boards have many of the same people
  • lack of diversity by gender, race and age
  • golden parachutes for executives
  • pension plans for non-employee directors

COMMUNITY INVESTING

The Foundation considers community investing to be an additional way to align our assets with our mission, and to leverage our grant making activity. Therefore, we will designate a percentage of the average annual market value of the portfolio to community investing. This will include both the MRI and PRI components of our portfolio. Our Stage I MRI/PRI goal is 5-20% of our assets.

The Foundation is committed to support community development projects with a potential for high positive social impact. These investments will use the values and strategies of community economic development and include community empowerment and the local control of resources as critical components. The Board of the Foundation will determine the percentage of assets available for investment in this category, considering that in regard to the PRI components, they earn below market rates and may be have higher risk characteristics than other portions of the portfolio, while they also serve to advance the mission of the foundation.