“Our focus has been on how do we think outside the box outside of traditional philanthropy because we need all tools on deck right now, especially post-pandemic, we have got to think about how do we create social change and open the toolkit to consider multiple vehicles and not just those checks we write expecting a 0% return, but how could a low interest loan serve a nonprofit or social enterprise? How can some private-equity-style investment help a social enterprise or an entrepreneur doing a lot of great work in the world? So that’s kind of the approach we take.” – Elizabeth Carlock Phillips, Executive Director of Phillips Foundation
Leading the Phillips Foundation, Elizabeth Carlock Phillips is passionate about impact investing and using all the tools in her philanthropic toolbox to create change. She joined Senior Philanthropic Advisor Gwen Wurst in conversation to discuss how the Dallas-based foundation prioritizes once-in-a-generation grants through non-traditional philanthropic vehicles.
Listen to the Conversation
About Elizabeth Carlock Phillips
Elizabeth Carlock Phillips is a social entrepreneur and impact investor at the helm of Phillips Philanthropies, which includes the Phillips Foundation. Since 2013 she has served as the Foundation’s executive director, leading the organization’s implementation of Generational Grants, Original Programs, and Impact Investing, including a “Total Portfolio Activation” approach. Among the Foundation’s Original Programs are Give As We Grow, a digital platform that aims to educate the next generation about giving; RealityCheckIt, a social media initiative that connects caring people with community needs in real time; and Impact Investing Think Tank, focused on Unleashing More Capital for Good through speaker series, seminars, workshops and an online hub of curated information and resources. Elizabeth serves as a Governor-appointed Trustee of UNC Greensboro and is on the boards of Texas Women’s Foundation and The Dallas Foundation, along with other affiliations. She has appeared in featured stories on broadcast news and other media including Barron’s, Bloomberg Briefs, Dallas Morning News, Forbes.com, The Financial Times, and Triad Business Journal. Elizabeth and her husband Kevin are cofounders of The ImPact and principals of Phillips Enterprises, a family office and portfolio of companies. They enjoy life with their young family in Dallas, Texas, and Greensboro, North Carolina.
Episode Transcription
Gwen Wurst:
Welcome to the Grow Your Giving podcast, powered by the Greater Kansas City Community Foundation. We’re excited to bring you conversations featuring experts in philanthropy, share impactful stories happening in the Kansas City community, elevating the voices of those making a difference around the metro.
I’m Gwen Wurst, a senior philanthropic advisor at the Community Foundation and your host of today’s episode. I’m excited for you to hear a conversation I had with Elizabeth Phillips, executive director of the Phillips Foundation, a private family foundation and catalytic capital platform that leverages its assets to maximize social, environmental, and financial value. Well, let’s get started.
So welcome, Elizabeth. It’s great to have you here on the podcast today. Excited to talk with you. How’s your day going?
Elizabeth Carlock Phillips:
Hi, Gwen. Great calling in from Dallas, Texas and it’s good to see your face and hear your voice. Looking forward to this conversation today.
Gwen Wurst:
Yours as well. Well, will you start today by telling us a little bit about the history of the Phillips Foundation and a little bit about your specific role with the foundation?
Elizabeth Carlock Phillips:
Oh, sure. So, I am the executive director of Phillips Foundation. We are based in Greensboro, North Carolina and Dallas, Texas. So we kind of bookend the southeast. And my husband’s grandfather started the Phillips Foundation and it was endowed by the settlement of his estate around 2012, 2013. The family asked if I would be open to leading the foundation work. My husband was running the real estate companies and after his grandfather had died, there was just a gap in the leadership across the family businesses and entities. So, we stepped into the companies and foundation respectively, and it’s been almost 10 years now, hard to believe.
Gwen Wurst:
Wow, that time has flown. One of the things you’ve done in that 10 years that I’ve heard about is your very generous generational grants. Can you tell us a little bit about that strategy and why you and the foundation chose that strategy and approach?
Elizabeth Carlock Phillips:
Yes. So we coined the phrase generational grants because we decided when we took a leadership role at the foundation that we did not want to do philanthropy as usual. We wanted to identify what were those once in a generation opportunities to really move the dial or solve of something in Greensboro, North Carolina, which sits in Guilford County, and it’s the headquarters still of the family business to this day. So how could we invest in the long-standing roots we had in Greensboro and Guilford County, North Carolina, but also not become the foundation that grants to the same annual funds year after year after year.
Don’t get me wrong, there’s a place for that. We just realized it wasn’t where we could add unique value. So we took an issue-agnostic approach and met with a lot of community leaders, nonprofit executives. The community foundation in Greensboro was hugely helpful, the United Way, and we identified about 12 of these once-in-a-generation opportunities to grant between $500,000 and $5 million. So we decided to do large amount high-impact grants, and then we closed that cycle of grant making and our place-based strategy in Greensboro will reopen when it’s our children deciding what are the issues or the projects or efforts and initiatives of their time that catalytic capital can really power some positive social change.
So that’s kind of where that term came from, generational grants, and that’s our place-based strategy, but the foundation isn’t solely focused on Greensboro alone.
Gwen Wurst:
Okay. Well, that’s a nice segue to my next question, which is how do you choose the areas that you want to focus on? You mentioned the generational grants, but moving forward, how have you chosen those areas?
Elizabeth Carlock Phillips:
Great question, because I ask myself the same thing. I don’t have a straight answer to that. We went through this process and we identified these program areas, and that’s what we do. Rather, we take the approach of looking at the capital on our platform that we steward across asset classes, the endowment as well as the 5% the IRS mandates we distribute in grants annually, and we decided that we would be more opportunistic than thematic in our approach. So we’re not the Phillips family that says we care about hypothetically the arts, education and X, Y, and Z issues. Rather, we look for opportunities where are creative financing and philanthropic capital as well as impact investment capital can really launch something or help scale something. And so we call ourselves a catalytic capital platform rather than a family foundation that makes traditional grants, if that makes sense.
So we use a variety of tools in our toolkit, not just the grant tool, but also PRIs, which are program-related investments, and MRIs, mission-related investments. And PRIs have been approved by the IRS for use in our field since the late 1960s, but only a couple hundred foundations actually use this tool. So we’ve been actually doing a lot more PRS than even traditional grants lately. Our focus has been on how do we think outside the box outside of traditional philanthropy because we need all tools on deck right now, especially post-pandemic, we have got to think about how do we create social change and open the toolkit to consider multiple vehicles and not just those checks we write expecting a 0% return, but how could a low interest loan serve a nonprofit or social enterprise? How can some private-equity-style investment help a social enterprise or an entrepreneur doing a lot of great work in the world? So that’s kind of the approach we take.
Gwen Wurst:
Wow, that’s really exciting. Can you give us an example of a couple of your PRIs or MRIs that you’ve initiated at the foundation?
Elizabeth Carlock Phillips:
Sure. I always love telling the story of our first PRI, because I think it helps people understand that this is not rocket science. It happened pretty naturally for us, actually. So I was involved in a social enterprise in East Africa that was empowering women in rural villages, connecting them in their crafts to the western marketplace. This organization was called Akola, and it was originally a nonprofit. It’s since restructured. And I was the founding designer of that organization and on the board for six years. And at one point in a board meeting, we realized we needed some bridge loan capital because Dillard’s Department Stores had placed a big purchase order with Akola. And as a nonprofit, we couldn’t just go out and fundraise that amount overnight, a small startup.
And so I said, “Wait a second. I’ve been reading a lot about impact investing, and there is this tool called a PRI, program-related investment where you can essentially give a low interest loan to a nonprofit and expect them to pay it back at a rate that’s lower than market rate. So anything that is lower than market rate qualifies as a PRI. You can’t get rich off of these loans, that would not be good form in philanthropy, but you can certainly get your money back with some interest.” And so that’s what we did. We loaned Akola $500,000 and it was paid back within two years with 5% interest, which actually outperformed our fixed income portfolio for that year. So once we had that proof of concept, the trustee said, “We want more of that. What a win-win.”
And that did something a grant could never do for Akola, and that is that it provided credit. So after they had this track record of paying us back and paying us back on time with interest, they were able to get additional rounds of capital from other family offices and foundations who had supported them in more traditional ways in the past.
So that’s one example of how we stumbled into this, just kind of following intuition and responding to need and getting creative and not just going by the traditional rule book of philanthropy. So now our PRI portfolio is; we have about $30 million in PRI ideal flow on our books. And so as one loan gets paid back or one equity investment gets paid back, we recycle that capital and it allows us to grow our 5%. Because when you get a PRI loan paid back, for example, you capture the principle in the 5%, it stays there to get recycled out, but any interest can roll over to your corpus and be invested as part of your endowment. So we’ve actually been growing our 5% without just growing our endowment through this creative way of leveraging PRIs.
Gwen Wurst:
Wow. That’s fantastic. So I’ve heard you reference PRS and MRIs as a part of your total activation of your catalytic capital. Can you talk a little bit about how you’re leveraging a elements of your assets for change?
Elizabeth Carlock Phillips:
Yes. So I think so often impact investing has this stigma that it’s just venture philanthropy or oh, that must be ESG, but actually impact investing is a spectrum, and we do impact investments across asset classes. Everything from grant making is an impact investment that gets a 0% return. You can think about it that way. All the way to market rate returns. And what we’ve found in taking this approach, as you said, we call it a total portfolio activation approach, is that we’ve actually had better financial returns. And we’re able to make the point now in practice, not just in theory, that you can do well while you’re doing good with every dollar that you steward to the best of your ability.
And capital markets are at a point now where you can insist with your managers that they provide impact metrics and that you understand what your money’s doing in the world. Because honestly, if we look at our assets as foundations and we don’t know what 95% of those assets are doing in the world, and we’re just focused on the 5% that we’re distributing annually, the private foundation model, then we’re probably not making that positive difference in the world. How can we know that confidently? Just doing the math. So that’s how we think about it. How can we leverage the other 95% for good and not just the 5% we’re donating to nonprofits?
Gwen Wurst:
That just makes so much sense. So I’m sure lots of people come to you and say, how do I do this? So when you talk with other family member or other people who are running small family foundations or larger ones, or even folks who are using different vehicles like a donor advised fund, what do you tell them? What’s the first step, how to get moving?
Elizabeth Carlock Phillips:
Well, kind of like the example I provided earlier. I always tell people start with “what and know what you own.” So a good first step if you’re wanting to practice impact investing is to look at your existing portfolio and see where there are investments in your portfolio that may be able to have a higher impact, not just a high financial return, but there’s so many products out there now on multiple platforms. A lot of these financial advisory firms now have impact investing practices in groups. So if you just ask your advisors these questions, and in our case, we have to switch advisors, so that’s always an option too, if they’re not serving you for your, and helping you meet your goals. But I think people are surprised to find what’s out there that they just maybe not be aware of because they haven’t asked.
So start with knowing what you own, what’s on your existing platform, and then stick to your wheelhouse. So for example, with the Akola PRI that we did, our first PRI, I knew that organization intimately. I’d been involved, I’d been on the ground, I was able to respond in a time of need because I had context. So it may be worth a look at your grantee portfolio and see, okay, where could, for example, this magnet school may need a loan for roof repairs or a bridge loan to a library as they await government funding for whatever. So there are lots of ways to get creative once you look at what you own, start with what, and then just dip your toe in the water and reach out to your nonprofit partners or your investees and say, how can we be more creative in the ways we’re helping you? And usually they’ll come up with an answer.
Gwen Wurst:
Sure. Well, thanks for that. So what’s next for the Phillips Foundation?
Elizabeth Carlock Phillips:
So we’ve taken an entrepreneurial approach throughout this process. It’s very much a part of the family ethos to think entrepreneurially. So what we’ve been doing is in addition to our generational grants and continuing to pay those out in certain cases and our impact investing practice, we also launch original programs When we scan the market and the field for gaps and identify gaps, then we create what doesn’t yet exist. So one of those things is called Give As We Grow, but it is going to be an app that we provide to families that want to raise generous children. As a mom of three myself and being in the field of philanthropy and talking to so many generous multi-generational families who want to maintain that spirit of generosity and being a good citizen down the generational path, we’ve created this tool so that instead of just playing an Nintendo game, you can play games that are teaching kids from age three and up about philanthropy, about how to give back, learning about different issue areas and causes.
We’re not a tech company, so we’ve used a lot of consultants and people who do this to understand the best approach. But what we do know after a lot of trial and error and market testing is that there’s a need for this. Parents want to be able to educate their children about how to step into a philanthropic role at whether it’s their family foundation or people who just want to add those values into their parenting toolkit. And so we look forward to Give As We Grow growing. That’s one of our original programs.
We also launched the Impact Investing Think Tank because we realized that we were learning impact investing kind of on our own with what was out there. But boy, do I wish that 10 years ago there was a one stop website where I could self-educate on the topic of impact investing and not be dependent on what my financial advisors thought they knew or didn’t know. And so we’ve really put a lot of effort into field building around the topic of impact investing to make it less intimidating for people and to provide an up-to-date list at all times at the events, conferences, podcasts, webinars, case studies, everything going on in the impact investing space so that anyone who’s interested can go to impact investingthinktank.org and learn about what I’m describing today.
And 10 years into it, I’m just even more of an evangelist for impact investing because it is honestly so rewarding when you get to see 100% of your assets being used in the world for good. And the challenge now is just measuring that impact. And so in the impact investing field right now, that’s a big topic is of how do you measure impact? Because not all impact is measurable. So sitting with that discomfort in a way as a philanthropist and running a foundation is just knowing that not everything can have a statistic and data metric attached to it, but it’s going to be an ongoing evolution as more and more foundations jump in and allocate assets toward impact investing. So we have our eye on that and how can we continue to build the field and we invest in networks like the impact which we co-founded for families that want to make impact investments more effectively.
So, those are a few things that we have going on right now and when we look to the future where we’ll set our focus.
Gwen Wurst:
Very exciting. You’re a very busy person.
Elizabeth Carlock Phillips:
I have a great team. This is not a one woman show. Trust me.
Gwen Wurst:
It’s great. Well, it’s very inspiring. Is there anything else we haven’t covered today that you want to add?
Elizabeth Carlock Phillips:
Well, I will just say that I have come to really appreciate the concept and the partnership of Community Foundations. And I love connecting like this because we have to share learnings, right? And we have to be willing to admit failures, celebrate successes, learn from one another. And I sit on the board of the Dallas Foundation, which is a DAF institution here in Dallas, outside of my role with the Phillips Foundation.
And I’m also on the board of the Texas Women’s Foundation where I hold a donor-advised fund. And I really think those community, organizations, and networks are crucial to the responsible practice of philanthropy. And none of us can do it alone. We’re so much stronger together. And so depends on your community foundation when you’re stuck, when you need to understand at a deeper level something going on in your community, it’s a great resource and they know the community deeply.
And so I’m always looking for ways to connect the dots between community foundations at a national level and how can we as philanthropic family support each other, which is why I’m also serving on the board of the National Center for Family Philanthropy. That’s how we met, Gwen.
Gwen Wurst:
Right.
Elizabeth Carlock Phillips:
And so I always want to make families aware that it exists too on your journeys and you don’t have to go it alone.
Gwen Wurst:
Well, thank you so much. Thanks for your time, your generosity, your spirit, and your enthusiasm for this work. It’s really infectious. So, thanks for your time.
Elizabeth Carlock Phillips:
Oh, thank you. It’s an honor.