The Ford Foundation Just Made A Billion Dollar Bet On Impact Investing

19-4-2017

By Ben Paynter

Like many major philanthropic funders, the Ford Foundation for social justice spends roughly 5% of its annual endowment on charitable causes, reinvesting the rest to ensure it will be able to recoup those costs and operate in perpetuity.

With a total endowment of about $12 billion, that means there’s about $600 million granted toward charitable programs each year. (That 5% figure is the minimum requirement to maintain nonprofit status under federal tax code.) But it also means that 95% of the foundation’s money is sitting in stocks, private equity, real estate, and venture capital, not leveraged in the same socially responsible manner that the foundation insists on when making its grants.

In recent years, president Darren Walker has grown uncomfortable with that imbalance, which he sees as another “classic disconnect” affecting well-funded but sometimes apathetic institutions, including Ford. “We won’t solve big problems without deploying some part of that 95%,” Walker says. “So what I’m hoping is that we are reaching an inflection point, a tipping point in which the momentum has shifted to normalize a conversation about how foundations use our endowments from the margins to the mainstream. For too long this question has been sidelined. And I think the time has come where we’ve got to take it on and we’ve got to demonstrate the capacity to use our endowment to advance our mission.”

To that end, Walker announced plans to use up to $1 billion of the foundation’s endowment over the next decade on more mission-related investments, investments in projects that generate the return Ford needs, but also support things like affordable housing or better financial services for the poor. The logic is explained in detail in a post entitled “Unleashing the power of endowments: The next great challenge for philanthropy” on Ford’s Equals Change blog. The commitment makes Ford the largest private foundation playing in this space.According the Global Impact Investing Network (GIIN), an industry group that’s tracking market trend, impact investment has grown rapidly. In its network alone, there are over 2,500 different investors contributing to more than 400 funds, which have grown in size from $15 billion in contributions two years ago to more than $77 billion in 2016.

----------------------

To read the full article, click here.