As activists took to the streets to protest war, discrimination, and pollution, a handful of investors and entrepreneurs sought to repurpose the tools of capitalism for social good. Some bought shares to lobby corporations from inside. Others created social purpose banks or established community development loan funds to provide capital to disadvantaged neighborhoods or rural communities. A scattered handful of innovators launched mutual funds designed to deliver social, as well as financial, returns. Another group created services to assess and rate the performance of environmental, social, and governance impacts of major corporations.
In the early days of this movement in the 1970s, mainstream capitalists derided all of these efforts. One organization—the Ford Foundation—played a significant role in nurturing them. Drawing on the foundation’s archives and interviews with pioneers in the movement, this paper provides an overview of the foundation’s pivotal role in community development finance and socially responsible investment from the 1960s to the early 2000s. It shows how this work set the stage for the adoption of the United Nation’s Principles for Responsible Investing in 2006, a move that led to the takeoff of ESG investing strategies.
The impact of this work exceeded the foundation’s strategic vision and came despite an organizational culture that was suspicious of, if not hostile toward, the mainstream of global capitalism. It came despite an investment culture that resisted deploying the foundation’s own corpus for what is today known as mission-related investing. As the paper shows, the foundation’s success in this arena came in large part as a result of the influence of grantees, many of whom shared the foundation’s social values, but also believed that the invisible hand of the market could be guided toward social good.