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More Foundations Use Investment Assets to Achieve Their Missions

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The number of charitable foundations employing their investment portfolios to achieve a social benefit is on the rise, according to a new Foundation Center report. Key Facts on Mission Investing finds that one-in-seven surveyed foundations are directing their assets to market-rate mission-related investments and/or below-market-rate program-related investments.

By investing endowment dollars to further their charitable missions, these grantmakers — which hold 20 percent of all U.S. foundation assets — are extending the public benefit of their resources.

The Foundation Center has tracked program-related investment activity for years, but its latest report benchmarks for the first time foundation engagement with mission-related investments. It finds that more than half of surveyed foundations currently making mission-related investments began doing so within the past five years, and 28 percent within just the past two years.

“Foundations are striving for greater impact,” said Steven Lawrence, director of research at the Foundation Center and the report’s principal author. “Mission investing puts foundation asset dollars to work in ways that have the potential to go far beyond the social impact of their grantmaking dollars.”

The report also offers perspective from Stephen Viederman, former president of the Jessie Smith Noyes Foundation and a proponent of mission investing, who argues that foundations’ investment strategies should be guided by their broader purpose to benefit the public and that social investing equating to financial underperformance is a myth.

About Program-related Investments and Mission-related Investments

By law foundations are allowed to make program-related investments — often loans, loan guarantees, or equity investments — which are derived from their assets but count toward their charitable distribution requirement. Generally, these investments yield below-market-rate returns. By comparison, market-rate mission-related investments may broadly support a foundation’s programmatic goals but do not count toward its charitable distribution requirements. The potential for mission-related investments is significant: America’s foundations made approximately $46 billion in grants in 2010, whereas their assets totaled more than $600 billion.

Key Facts on Mission Investing (PDF) can be downloaded at no charge from the Gain Knowledge area of the Foundation Center’s web site. For more information, please visit or call (212) 620-4230.