Thursday, May 31, 2007
Mission Related Investments
Following Lucy Bernholz's post about the American tax system and the preferential treatment given to private foundations, here, arguing that "we should align the tax benefits for charitable giving with the amount of money that actually goes to charity" and that the tax benefit should only be extended to the foundation's investiments "if endowment managers can demonstrate alignment between their investment policies and their charitable missions", Sean Stannard-Stockton replied that Lucy's proposal is "at least a decade too soon", here, because "the field of Mission Related Investing (MRI) is still in its infancy" and there isn’t "MRI opportunities available to absorb the half a trillion dollars in foundation assets". According to Sean:
MRI is an exciting area. But we are years away from having the shared infrastructure and vocabulary we need to have widespread adoption of the concept. I don't think I would agree with Lucy’s suggestion even if we did have all the needed elements in place. But I am sure that we are far too early in the evolution of MRI to contemplate making it mandatory. Doing so would hurt the MRI movement, not accelerate it.
If the field of MRI is still in its "infancy" in the US, in Portugal is simply non-existant.
According to the Portuguese law, foundations' investment policies are legally irrelevant, only the use of the income, whatever the source is, is tax challenged:
In order to maintain their tax status, tax-exempted (0%) foundations should be able to demonstrate that they spend in charitable activities at least 50% of the net income that otherwise would be taxed, until the end of 4th year following the year of the income. The consequence for non-complying foundations is the regular taxation (20%) of the part of the income that was not spent in the mission activities that justified the tax preferential treatment.
If the MRI debate is maybe precocious in Portugal, Portuguese foundations should start thinking, at least, in voluntary ethical standards for their investments.
MRI is an exciting area. But we are years away from having the shared infrastructure and vocabulary we need to have widespread adoption of the concept. I don't think I would agree with Lucy’s suggestion even if we did have all the needed elements in place. But I am sure that we are far too early in the evolution of MRI to contemplate making it mandatory. Doing so would hurt the MRI movement, not accelerate it.
If the field of MRI is still in its "infancy" in the US, in Portugal is simply non-existant.
According to the Portuguese law, foundations' investment policies are legally irrelevant, only the use of the income, whatever the source is, is tax challenged:
In order to maintain their tax status, tax-exempted (0%) foundations should be able to demonstrate that they spend in charitable activities at least 50% of the net income that otherwise would be taxed, until the end of 4th year following the year of the income. The consequence for non-complying foundations is the regular taxation (20%) of the part of the income that was not spent in the mission activities that justified the tax preferential treatment.
If the MRI debate is maybe precocious in Portugal, Portuguese foundations should start thinking, at least, in voluntary ethical standards for their investments.
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