Foundations Increasingly Use Investment Assets to Achieve Their Missions, Report Finds

The number of community and private foundations using their investment portfolios to help achieve a social benefit is growing, a new report from the Foundation Center finds.

According to Key Facts on Mission Investing (4 pages, PDF), which benchmarks for the first time foundations' engagement with mission-related investment, one in seven of the foundations surveyed for the report are directing their assets to market-rate mission-related investments or below-market-rate program-related investments (PRIs). The report also finds that more than half the foundations making mission-related investments started doing so within the past five years, while 28 percent started to do so within the past two years.

By investing endowment funds with an eye to advancing their missions, these grantmakers — which together hold some 20 percent of all U.S. foundation assets — are extending the public benefit of their financial resources, the report argues. While all foundations are allowed by law to make PRIs, which generally yield below-market-rate returns and count toward a foundation's charitable distribution requirement, market-rate investments that support a foundation's programmatic goals do not count toward the distribution requirement.

In 2010, private foundations in the U.S. awarded approximately $46 billion in grants, while their assets totaled more than $600 billion. "Foundations are striving for greater impact," said Steven Lawrence, the Foundation Center's director of research and principal author of the report. "Mission investing puts foundation asset dollars to work in ways that have the potential to go far beyond the social impact of their grantmaking dollars."

"More Foundations Use Investment Assets to Achieve Their Missions." Foundation Center Press Release 10/26/2011.