Impact in the Balance: Leveraging Foundation Assets for Mission
An examination of innovative tools for impact for private foundations
Summary
In recent decades, foundations have adopted a broad range of tools for advancing impact alongside traditional grantmaking. In light of the events – including the COVID-19 pandemic and growing attention around systemic injustices – there is a growing sentiment that major institutions need to do more with more to support the public good. Given that, the U.S. Impact Investing Alliance set out to examine how private foundations are leveraging their balance sheets for impact in innovative ways. Support for this report was provided by a grant from the Robert Wood Johnson Foundation (RWJF). The views expressed here do not necessarily reflect the views of RWJF.
To facilitate broader understanding of these tools, we are proposing a new categorization of these models based on where they sit on a foundation’s balance sheet or financials.
Spending strategies are reflected on a foundation’s income statement and include charitable activity as part of the foundation’s 5% payout rule. These tools include traditional grantmaking and program related investments (PRIs), where relevant. Learn more about the role of public policy in promoting the uptake of PRI strategies.
Asset strategies seek to align some or all of the endowment with mission. The most common asset strategies are mission related investments (MRIs) and values-aligned endowments. Learn more about the Treasury guidance that has catalyzed new MRI strategies by foundation boards and investment committees in recent years.
Liability strategies are financial instruments that are booked as liabilities on a foundation’s balance sheet. As it relates to mission-aligned activity, the tools that fall under this category are guarantees and social bonds. Learn more about these liability strategies. As spending and asset strategies are widely documented, the report primarily focus on the potential for foundations to implement and expand catalytic leverage strategies.
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What Comes Next?
The purpose of the report is to encourage foundations to do more with more. This includes implementing new strategies that expand the use of the balance sheet for mission, as well as modifying existing tools to encourage risk taking, innovation, and field building. Many foundations are already implementing and scaling many of these tools, and we encourage more foundations to expand their breadth and for all foundations to utilize these tools with more regularity and at greater scale going forward.