Unlocking Foundation Endowments
Earlier this month, the Treasury Department issued new guidelines that open the door a little wider for foundations around mission-driven investing.
The announcement sends a strong, positive signal to foundations, providing them with more latitude to align their endowments with their mission. Historically, charitable organizations operated with a wall between program and investment teams: for-profit investments focused on financial factors such as risk, return, and liquidity, while social impact considerations were reserved for grant making. The new guidance makes clear that it is permissible for endowment managers to consider mission and values as legitimate factors in their investment decisions. Many would argue that this has always been the case; this guidance removes any doubt, perceived or real.
This is extremely good news for foundations that are eager to more fully leverage their endowments to advance social change. The implications are significant: foundations can carve out a piece – or even all – of their endowments for mission-driven investments. Here at Omidyar Network, we have long operated with a two-pronged strategy that allows us to invest in for-profit enterprises alongside non-profit grants. We have learned that leveraging markets can be an extremely effective way to accelerate the scale of change.
This important milestone was the result of efforts from many parties: the White House Office of Social Innovation and Civic Participation, the Beeck Center for Social Impact and Innovation at Georgetown University, Mission Investors Exchange, and all of the members of the National Advisory Board on Impact Investing, including our colleagues at the Ford Foundation, the Case Foundation, and Social Finance. Congratulations to these organizations – and many, many more – that worked together to reach this significant milestone. It represents the power of our unified voice and is an exciting and significant step forward for the impact investing sector.