January 29, 2015

More foundations hold ‘mission’ investments


Mission-related investments

Mission-related investments

A growing number of foundations are using their investment portfolios to help achieve a social benefit, a new report says.

Among nearly 1,200 foundations that responded to a survey in January 2011 by the Foundation Center, 168 foundations with a total of $119.2 billion in assets said they engage in some form of "mission investing."

Among those foundations, half hold "program-related investments," or PRIs, which often take the form of loans, loan guarantees, or equity investments, and are derived from a foundation's assets, but count toward its charitable-distribution requirement.

Another 22 percent hold market-rate "mission-related investments," or MRIs, that broadly support the foundations' programmatic goals but do not count toward their charitable-distribution requirements.

And 28 percent invest in both PRIs and MRIs.

In 2010, U.S. foundations overall made grants totaling an estimated $46 billion but held assets totaling over $600 billion.

"To realize the full philanthropic potential of their resources, some grantmakers have suggested that foundations should invest their assets in ways that are consistent with and support their charitable missions," the report says. "The impact of the recent economic downturn on foundation giving and the budgets of nonprofit organizations has only served to strengthen these calls."

Community and independent foundations are more likely to hold mission investments than are corporate foundations, the report says, and larger foundations are far more likely to engage in mission investing.

Nearly a third of survey respondents that reported total giving of $10 million or more hold mission investments, for example, compared to 16 percent for foundations that gave $1 million to $10 million, and 7 percent for foundations that awarded less than $1 million.

Just over one-fourth of the 82 foundations that engage in mission investing have opted to commit over half their assets to mission-related investments, although most of those had less than $25 million in total assets.

And roughly half of foundations reporting mission-related investments hold 5 percent or less of their assets in MRIs, with one in five holding less than 1 percent.

Most foundations that make mission-related investments have been doing so for five years or less, and just over half of those started in the last two years.

In comparison, roughly one in four foundations that make MRIs have been doing so for over 10 years, and 9 percent of those have been doing so for over 20 years.

Only two of the 23 survey respondents that started making mission-related investments within the last two years did so in response to the impact of the economic crisis, the report says.

"Nonetheless, persistent economic malaise may encourage at least a few additional funders to consider MRIs," it says.

Steven Lawrence, director of research at the Foundation Center, says in a statement that foundations are "striving for greater impact."

Mission investing, he says, "puts foundation assets dollars to work in ways that have the potential to go far beyond the social impact of their grantmaking dollars."

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