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Financial Planning > UHNW Client Services > Family Office News

How US Family Foundation Philanthropy Is Evolving

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Family foundations in the U.S. are giving more money but through fewer grants, shifting their emphasis from local giving to addressing public policy issues, doubling their use of impact investing and expanding the diversity and inclusiveness of their boards and staff, according a new study from the National Center for Family Philanthropy.

The study, published in collaboration with and support from Bank of America, found that giving amounts grew over the last five years when the last study was conducted, while the number of grants awarded each year declined, indicating that foundations are becoming more intentional with their giving.

Family foundations today are also making fewer but larger grants. Those awarding 50 or more per year fell from 43% before 1970 to 11% in this decade, according to the study. More are awarding 25 to 49 grants annually.

In addition, an increasing number of family foundations are now giving $500,000 or more annually, with giving levels and number of grants of the oldest family foundations notably higher than those of formed since 2010.

Some two-thirds of family foundations make general operating support grants and provide multiyear grants, and about half provide capacity-building ones, the survey results showed. Newer forms of grants are much more prevalent among family foundations established after 2010:

    • Program-related investments – 63%
    • Other mission-related approaches – 59%
    • Impact investing – 47%
    • Loans/grants to guarantee loan funds – 39%

Sixty-four percent of family foundations in the study said they focused their giving on a particular geographical area, such as their home town, state or region. However, those established over the past three decades — about 70% of the total — were more focused on specific issues than on geography.

In fact, only 46% of those created since 2010 concentrated their giving based on geography, compared with 81% of ones established before 1970. In contrast, 40% of the oldest foundations said they were focused on issues, whereas 82% of the youngest foundations said this.

Consistent with findings from the 2015 study, the main areas of emphasis for family foundations overall were education, cited by 38% of respondents, and poverty, hunger and homelessness, cited by 27%.

However, family foundations created in 2010 or after reported significantly different giving priorities, with 64% of these far more focused on economic inequality and/or basic needs funding, compared with 28% of the oldest foundations, which leaned more toward education funding.

The survey showed that foundations were also increasingly adding impact investing approaches to their giving; these doubled since 2015. Twenty percent of respondents reported plans to institute mission/impact investing over the next four years, and 29% said they would expand investing in this area.

Again, foundations created since 2010 were much likelier to use program-related investments and pursue other mission-related or impact investing approaches.

“The Trends 2020 findings provide insights into how family foundations are adapting to changing times, values and priorities as they strive for increased impact,” Virginia Esposito, NCFP’s founder and president, said in a statement.

“The study shows the growing influence of family foundations on philanthropy and offers families important guidance to improve their governance and operating practices and increase their effectiveness.”

The survey encompassed 517 responses from family foundations with assets of at least $2 million or annual giving of at least $100,000. An oversample of 500 foundations had $25 million or more in assets and annual giving of at least $100,000.

Governance Trends

“With seven out of ten family foundations established over the last 30 years, younger foundations are finding their own path to the future,” Claire Costello, managing director of the philanthropic solutions group at Bank of America Private Bank, said in the statement. “Trends 2020 gives board members and staff benchmarks to responsibly leverage capital and prepare themselves to be ever more effective with their giving during the coming decade and beyond.”

More than half of family foundations in the study had multiple generations serving on their board, and one in 10 had three or more generations on the board. One-third reported that at least one member of the third generation served on the board, while only a few of the fourth generation or younger were so involved.

Among the family foundations in the sample, men comprised 55% of board members and women 45%. Thirty-five percent of foundation boards included at least one person of color, and 11% had at least one LGBTQ member.

Thirty-seven percent of family foundations said they planned to increase the number of younger family members serving on the board, and 28% said they would give younger family members a greater say in foundation operations and giving.

Seventy-one percent of board positions in the sample were held by family members and 29% by non-family members. Fifty-two percent of those formed since 2010 said they planned to increase non-family board membership, 46% to increase racial diversity on the board, 44% to increase staff and 27% to discuss the role of racial equity in their work.

As they look to the future, family foundation boards and staff plan to become more diverse, add younger family members and nonfamily members, and adopt diversity, equity and inclusion initiatives, according to the report.

One in four family foundations said they used DEI goals and strategies to guide giving, while one in three had DEI initiatives built into their plans for the future.

Sixteen percent of respondents said they used outside DEI experts, and 15% said DEI considerations significantly influenced their giving approach.

The study found that DEI considerations were much more common in family foundations formed in this decade, with 53% of them reporting using DEI guidelines, compared with 20% of older ones. More than a third of newer foundations said DEI considerations had a lot of influence on their giving approaches, versus one in 10 for all other foundations.

— Check out 15 Questions to Ask Clients About Their Charitable Giving on ThinkAdvisor.


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