The connection between impact investing and our foundation’s commitment to advancing diversity, equity, and inclusion comes up for us every day at The California Endowment (The Endowment). As a health funder, we know race and structural racism drive health inequality and lifespan differences between communities, and we have emphasized the importance of diversity and racial equity in our work since our founding.

As we continue to deepen our commitment to these issues, we’re excited about the progress we have made through our investments. We are also reflective. Our history of working at the intersection of health and racial equity has taught us important lessons that influence how we put our capital to work, and continues to remind us of what more we need to do as we pursue our mission. Below are five core practices that have helped us make racial equity central to our impact investing work:

1. Set Concrete Goals for Accountability and Evaluate Progress

In 2008, The Endowment created a Diversity Equity and Inclusion Audit (DEI Audit) that laid out 15 goals related to diversity, equity, and inclusion. Since then, we’ve conducted additional, organization-wide audits of our DEI practices every few years, in partnership with the evaluation firm Social Policy Research Associates.  The audits draw from a combination of interviews, document reviews, staff surveys, and grantee data.

Evaluating our practices has helped foster a culture of continuous reflection and improvement across all departments. For example, we set a goal to focus on socially responsible investments after the first audit, but after our 2013 audit, we realized we needed to do more to adequately cover the range of activities across our investment portfolio and program-related investments (PRIs). We recognized we needed to set even more goals if we were to capture our full intent and the nuances of DEI work in our investments. As of 2016, we created specific goals for our PRIs and investments in our DEI Audit.

2.  Make Intent Explicit in Investment Policy Statements

We have also made our commitment to DEI explicit within our Investment Policy Statement (IPS), which governs how we invest our endowment.

In 2017, we updated our IPS to include five DEI goals, including the inclusion of women and minority-owned firms in our investment portfolio; partnering with investment managers who incorporate environmental, social and governance (ESG) into their practices; and assessing and implementing investment screening to ensure that potential investments align with our mission and values. Today, 30 percent of our $3.5 billion endowment is with investment managers who incorporate ESG principals into their processes, and nearly $295 million of that portfolio is with women and minority managers.

Read the rest of Robert K. Ross & Amy Chung’s article at Stanford Social Innovation Review