Integrating Sustainable Investing into Foundations

The ABC Cultural Heritage Foundation (the Foundation), dedicated to preserving and promoting global cultural heritage, has an endowment valued at $500 million. Recent trends have indicated an increasing demand for social responsibility in investing, alongside the need for sustained financial performance. The Foundation's board is concerned about balancing these demands while ensuring long-term growth to fund its initiatives.

The Foundation has set a target return of 6% annually and currently allocates its portfolio across various asset classes, including equities (60%), fixed income (25%), alternative investments (10%), and cash (5%). The board has expressed interest in increasing its allocation to sustainable investments to better align with its mission and appeal to socially conscious donors.

Consider the unique challenges associated with managing the Foundation's portfolio. In your response, evaluate the implications of integrating sustainable investing into the Foundation's investment strategy. Discuss how this integration could impact the expected return, the risk profile, and the alignment with the Foundation’s mission. Furthermore, suggest strategies for effectively implementing sustainable investments while maintaining the Foundation's long-term financial objectives.