With more than $800 billion of foundation assets, their annual grants total more than $56 billion – doing a lot of good. Each year, however, nearly $750 billion remains in endowments – where it usually is invested for the single bottom line of financial gain.
- The investment’s primary purpose must be to advance the foundation’s charitable objectives.
- Neither the production of income nor appreciation of property can be a significant purpose of the investment.
- The funds cannot be used directly or indirectly to lobby for political purposes.
- Making a low-interest-rate loan to a nonprofit to pay off a building mortgage – saving the nonprofit significant interest over the life of the loan.
- Making an investment in a for-profit company researching and developing an “orphan drug” to help cure a disease that primarily affects people in developing countries.
- Investing in or lending money to a nonprofit or for-profit in a developing country that creates a recycling program to prevent pollution.
- Lending money to or investing in small businesses that employ people after a natural disaster or in a low-income area where commercial funds are not readily available.
“We often think about philanthropy’s ability to make grants, convene and build partnerships but don’t always consider its investment capabilities. Traditionally, a foundation has viewed its financial resources as two distinct pots of capital: funds set aside for grants that further charitable purposes but are not repaid, and funds dedicated to investments, which provide a financial return and maintain the value of the endowment as an ongoing source for future philanthropic activity. Increasingly, foundations are realizing the benefits of tools for funding charitable projects that do not neatly fall in one category or the other.”