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Basis Approaches to Endowments and Fairness

As an idea, endowments — outlined as funds to be saved completely and invested to supply sustained help — have existed for greater than a thousand years. Supporters of endowments be aware that they’ll current a chance to shift energy and promote nonprofit organizations’ sustainability. Critics of endowments argue these funds sometimes go to bigger, extra established establishments, and that the assets used to fund endowments may as a substitute be directed to extra near-term alternatives.

With help from the Robert Wooden Johnson Basis (RWJF), the Heart for Efficient Philanthropy (CEP) and The Bridgespan Group each launched reviews right this moment that look at completely different approaches foundations take to funding nonprofit endowments. CEP’s analysis findings, that are based mostly on surveys of 283 foundations within the fall of 2023, assist make clear basis views, practices, and challenges related to endowment giving, whereas Bridgespan’s report supplies an summary of RWJF’s strategy to nonprofit endowment grantmaking.

Endowments: A Small Slice of Basis Giving

CEP’s analysis reveals that endowment giving doesn’t signify a big proportion of basis grantmaking assets. Slightly below a 3rd of foundations fund nonprofit endowments, and people foundations dedicate solely a small proportion of their grantmaking assets to endowments.

Amongst foundations that do fund endowments, the bulk fund museums and performing arts organizations or direct providers organizations, adopted by academic organizations after which faculties or universities. Nearly all of foundations that fund nonprofit endowments point out that current relationships between foundations and nonprofits is a criterion within the decision-making course of for nonprofit endowment funding.

CEP’s findings additionally point out that for foundations not at the moment funding nonprofit endowments, few plan to take action sooner or later. The explanations behind this fluctuate, starting from misalignment with mission and funding technique to a desire for different strategies or approaches to funding nonprofits.

Advancing Fairness: Not a Major Consideration

Whereas endowment giving has the potential to foster fairness and sustainability within the nonprofit sector, CEP’s analysis discovered that advancing fairness shouldn’t be the first consideration for almost all of foundations engaged in endowment funding. Of their case research on RWJF’s endowment giving, Bridgespan explores how philanthropy can use endowment funding for equitable social change.

In 2022, RWJF launched its renewed endowment grantmaking technique by giving endowment grants of $5 million every to a few racial justice organizations: UnidosUS, NAACP, and Religion in Motion. The case research contains potential impacts of the endowment grantmaking technique. As an example, one group reinvests their endowment in Latino-led companies. Others could make socially accountable investments that think about environmental, social, and governance (ESG) components. The case research notes that endowments might be particularly crucial to organizations led by leaders of colour as a result of these organizations typically expertise continual underinvestment from philanthropy.

Bridgespan’s case research additionally highlights that whereas endowment funding might be transformational for grantees, it might not be applicable for each scenario. As a substitute, endowment funding ought to be seen as a further software within the grantmaking toolkit to enhance different grant varieties, every of which is used for a unique strategic want.

This analysis by CEP and Bridgespan presents new insights into endowment giving and explores how endowments can be utilized to advance fairness. Via this work, we hope to additional construct understanding of endowment grantmaking within the subject of philanthropy and spark conversations about utilizing this longstanding funding mechanism in new methods.

Emily Yang is an analyst on the Analysis workforce at CEP. Elisha Smith Arrillaga, Ph.D. is vp, Analysis at CEP. Darren Isom is a accomplice at The Bridgespan Group.

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