Impact Investing and Community Foundations Part 1
Impact Investing and the Governance Imperative: Why Community Foundations Need a New Decision-Making Framework
Introduction
Impact investing has become a defining topic for endowments and foundations, and for community foundations in particular, it represents something deeper than a new investment category. It is a governance evolution—one that requires clarity, alignment, and a shared understanding of how mission and fiduciary duty intersect. At Highland Consulting Associates, Inc., we have seen this shift in our work with community foundations. The organizations that navigate impact investing most effectively are not the ones with the largest staffs or the most resources—they are the ones with the stronger governance.
This first article in our two-part series explores why impact investing is fundamentally a governance opportunity and how committees can strengthen their structures to support mission-aligned investing.
Impact Investing as a Governance Opportunity
Impact investing is often framed as a strategy, but for community foundations, it is better understood as a governance exercise. It requires boards and committees to articulate mission alignment in practical terms, define expectations for financial and impact outcomes, and establish decision-making structures that are transparent and durable.
These conversations strengthen governance overall. They prompt committees to revisit long-standing assumptions, clarify roles, and create policies that support both mission and financial sustainability. When approached thoughtfully, impact investing becomes a catalyst for better governance rather than a complication.
“The community foundations that succeed in impact investing aren’t chasing innovation for its own sake, they’re focused on deeply local outcomes and a clear return on impact.” – Scott Hackenberg, IFF, Managing Director of Lending – Eastern Region
This perspective underscores a central truth that effective impact investing is grounded in disciplined governance, not experimentation for its own sake.
The Governance Gap – A Constructive Path Forward
Many community foundations, especially those with small committees or limited staff, worry that they lack the capacity to take on impact investing. In our experience, the challenge is not capability but structure. The following areas often benefit from additional clarity.
1. Translating Mission Into Investment Themes
Broad mission statements can make it difficult to define what “impact” means in investable terms. Foundations that succeed begin by translating mission language into a small set of investable themes. This process requires thoughtful discussion and prioritization—not large committees or extensive staff.
2. Building Scalable Decision-Making Infrastructure
Impact investing introduces new considerations, such as return expectations, liquidity needs, impact measurement, but these can be addressed with scalable governance tools. Clear delegation policies, streamlined evaluation criteria, and structured review processes help even small committees make consistent decisions.
3. Strengthening Reporting in Manageable Steps
Impact reporting does not need to be perfect to be valuable. A simple framework that tracks a few meaningful metrics and evolves over time builds trust and credibility with donors and community partners.
Committee Creep – What It Is and How to Prevent It
“Committee creep” occurs when decision-making authority drifts informally between committees, staff, and the board. It often happens unintentionally but can lead to confusion, duplicated work, or decisions made without the right expertise.
Foundations can prevent committee creep by:
- Defining the purpose and authority of each committee in writing
- Establishing a simple workflow for decisions requiring cross-committee input
- Ensuring committees receive the information they need without assuming responsibilities that belong elsewhere
- Reviewing committee charters periodically
Clarity—not complexity—is the antidote.
Why Governance Leadership Matters Now
Community foundations are navigating rapid change, donor expectations, community needs, regulatory scrutiny, and market innovation. Strong governance helps foundations articulate mission in investable terms, build donor confidence, and demonstrate accountability.
Impact investing amplifies these benefits. It encourages committees to refine their structures and strengthens the foundation’s role as a civic leader.
Up Next
In the second article of this series, we move from governance to action—exploring practical, scalable strategies that community foundations can use to implement impact investing, including flexible capital structures, partnerships with intermediaries, and simple impact-measurement frameworks used by organizations like IFF[i].
Highland Consulting Associates, Inc. was founded in 1993 with the conviction that companies and individuals could be better served with integrity, impartiality, and stewardship. Today, Highland is 100% owned by a team of owner-associates galvanized around this promise: As your Investor Advocates®, we are Client First. Every Opportunity. Every Interaction.
Highland Consulting Associates, Inc. is a registered investment adviser. Information presented is for educational purposes only and is not intended to make an offer of solicitation for the sale or purchase of specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
