As the world of financial services continues to expand, ever-new subcategories arise within it, each one generating its own new crop of philanthropists.
We looked at the changing face of Wall Street giving back in 2019, for example, specifically covering philanthropic leaders emerging from the booming world of private credit. Private credit, which encompasses all kinds of non-bank lending, sits within the alternative credit world, and as we previously reported, ballooned from $42.4 billion in 2000 to $776.9 billion by 2018. At the top of our list of big givers from the field sat Antony Ressler, the cofounder of Ares Management Corporation (and longtime husband of actress Jami Gertz).
Today, as Bloomberg recently reported, the private credit market has grown to $1.5 trillion. Ressler, meanwhile, has incorporated his personal commitment to philanthropy into the company that he founded with Michael Arougheti. Ares Charitable Foundation launched in 2021, tapping Michelle Armstrong, a veteran of the foundation and nonprofit world, to lead. (To learn more about Armstrong’s journey, check out my interview with her here.)
Funding financial empowerment
As is true with other philanthropies established by financial services firms, Ares Foundation focuses on economic opportunity. It has three main issue areas: career preparation and reskilling, entrepreneurship and financial literacy. Though a relatively new organization, Ares Foundation has moved quickly and decisively. In 2021, led by Armstong, it gave $56 million in total to three signature initiatives within its broader interest areas and invested another $3.4 million in 10 smaller, employee-directed initiatives.
I first heard about the Ares Foundation through an event sponsored by CoGenerate, a grantee of its employee-directed philanthropic arm. Ares committed $700,000 to the CoGen Challenge to Advance Economic Opportunity, a contest designed to support and highlight eight innovators working on cogenerational ways to increase economic opportunity. The Ares money is funding, among other things, eight $20,000 fellowships, which will begin January 2024. (Applications are still open through October 16.) As I wrote here in September, Michelle Armstrong spoke about the timeliness of cogenerational approaches to financial empowerment, given our aging society, during a webinar to kick off the contest.
Tying giving to fund performance
Ares ties its philanthropic giving to the company’s performance in a specific way. It has no endowment, and about two dozen specific funds within the company have each pledged up to 5% of their profits to the foundation each year. This is reminiscent of the Pledge 1% approach to giving championed by Salesforce, or even Jack Dorsey’s #startsmall, a philanthropic fund rooted in shares of Square Inc. (now Block Inc.).
Ares took this route partly to help the business by motivating employees to do well: tying giving to earning means that when funds make more money, people in those groups have more resources to contribute. “It lets investment professionals know they have some skin in the game. The better they do, the more the firm can do philanthropically, and they can play a part in that,” said Armstrong.
Many of the firm’s senior employees have made five-year commitments of their own, as well, donating cash, equity and/or a portion of the carried interest they earn from investment deals they’ve been part of, said Armstrong. Some of these funds come from employees’ own family foundations and trusts, which Armstrong sees as a nice way to get their own families involved and extend the foundation’s reach.
“We’ve seen our more junior employees also pledging and giving to the foundation; maybe they allocate $100 every pay period. So there are multiple streams of income for the foundation. It’s giving everybody a stake so they can be part of the success.”
Supporting equity in alternative finance
Ares’ three signature initiatives have pretty hefty backing. For the largest of these, “AltFinance: Investing in Black Futures,” the foundation has committed $30 million over 10 years and garnered equal commitments from Apollo and Oak Tree, financial services institutions also working in the alternative investment space. Alternative investments are more opaque, less tied to the market, and far-less regulated than the traditional, publicly traded investment vehicles of stocks, bonds and cash. Alternative investments are made by private institutions or individuals to investors who can meet high minimum investment thresholds, can be active in the company or asset they’ve invested in, and don’t need the ability to access their cash right away.
Working with Apollo and Oak Tree, Ares created AltFinance, a standalone entity dedicated to promoting racial equity in the alternative investment industry, largely by educating and recruiting students from historically Black colleges and universities.“Apollo and Oak Tree locked hands with us to think about where we can find that critical mass of talented Black students we can help cultivate. That’s how AltFinance was born,” said Armstrong. “It started with four HBCUs and has since evolved to include more schools from which we tap fellows who get a very curated experience, including mentorship, exposure to learning and development about this industry, and opportunities for internships at the participating firms and others.” Ares team members also volunteer on the AltFinance board of directors and mentor program participants.
Bolstering green jobs, employee ownership — and hard work at Ares itself
For its second-largest initiative, Climate-Resilient Employees for a Sustainable Tomorrow (CREST), Ares Foundation committed $25 million over five years to support communities’ efforts to prepare and reskill workers for green jobs. This funding priority came about at Armstrong’s suggestion.
“I was reading and watching the news and seeing that there was all this money coming down from the administration for bridges and infrastructure, and legislation to fund all this. But I wasn’t seeing money to train people to do this work,” said Armstrong. “I was talking to Mike [Arougheti] in the fall 2021 and I said, ‘I have this idea about helping people get ready, get skilled up for these green jobs that will be emerging. The demand will outweigh the supply. Where can we be helpful?’ That’s how CREST came about.”
Ares Management Corporation has long been involved in sustainable infrastructure investments through its group Ares Infrastructure Opportunities. Armstrong said she also liked the fact that CREST could complement this business and motivate employees in the group to get involved.
CREST has two main parts: In the U.S., plans include spending nearly $5 million to help create regional networks of groups working to train people in new climate technologies and transitioning away from things like coal. The aim is for 25,000 people to enter green jobs over the next five years.
“There is an intention to get those jobs to women, people of color, and those of low socioeconomic status,” said Armstrong. “How do we disrupt occupational segregation? It’s serendipitous that the Biden administration just announced its commitment to training people for green jobs. We like to think they were inspired by us.”
CREST also will work in India through World Resources Institute, supporting micro, small and medium enterprises, and “reskilling workers within those industries to better withstand the shocks of climate change.” WRI has a second part focused on supply chain equity and trying to get large corporations to work with small and medium enterprises to help them meet changing sustainability goals, rather than merely cutting them loose when they don’t, leaving workers without jobs.
Ares Foundation’s third signature initiative, Ownership Works, is a $1 million investment over five years to bolster employee ownership within its portfolio companies. As with performance-based funding overall, giving employees an ownership stake can benefit the bottom line because it leads to people feeling more deeply committed to the companies they’re helping build. “Ownership actually works, in the sense that it’s effective, because now you’ve got workers who have a real stake in the company because they own part of it,” said Armstrong.
All grants, across all initiatives, include a volunteer component, designed to encourage employees to get personally involved. “Whether it’s a one and done or they’ll be involved over a long period, we want to leverage their own unique background and expertise,” said Armstrong. “We’re constantly trying to marry volunteering and grantmaking.”
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