Foundations focus on 'mission investing'

Buffalo Business First reported that when the economy began going south in mid 2008, foundation leaders took note. Still, many committed their organizations to sustained levels of giving, even when that meant exceeding the required minimum distribution level of 5 percent.

That may be difficult moving forward, as next year’s giving levels likely will be determined based on this year’s asset levels. Western New York’s 25 largest foundations saw a collective decline of nearly $400 million between fiscal 2007 and 2008.

The foundations, included in the Business First Top 25 Private Foundations list, are hurting.

• Total assets, on average, declined by 27.4 percent from $1.12 billion to $814.7 million among the region’s 25 largest foundations, with nearly half experiencing declines of 30 percent or more.
• The economic decline was evident by looking at total new revenues, most coming in the form of investment income. The group saw a decline of more than 67 percent on average, with 10 foundations experiencing declines greater than 100 percent year over year.

• Grant dollars actually increased by 7.6 percent from $59.8 million to $64.4 million, including a $1.1 million grant by a foundation that made just one small grant the previous year.

But rather than bury their heads in the sand and hope for fewer grant requests, foundation leaders say they’re more determined than ever to find ways to help meet growing needs.

For some, like the Patrick P. Lee Foundation, that means making grants for human service agencies – outside the areas defined in its mission statement. They’re also rewarding innovation.

“We talk about it all the time: Where is the money needed?” says Fred Cook, executive director. “There’s a tremendous number of really dedicated, smart people who are doing an awful lot of good things with less money than you’d think. When times are tough, they get innovative.”

Corporate giving is also shifting, according to new research by the LBG Research Institute of Stamford, Conn. A recent survey on corporate giving shows more than 84 percent of corporations and their foundations are encouraging more employee volunteerism to offset declines in cash giving. They’re also increasing in-kind donations, such as meeting space and office equipment; and product donations, such as pharmaceuticals or apparel.

Foundations also are expanding beyond just giving grants and gifts into mission investing. Mission investing includes program-related investments, such as loans issued at below market rates, as well as mission-related investments. In either case, mission investments allow foundations to utilize a larger portion of their assets to facilitate capital projects, launch programs or build initiatives.

Mission investing is “absolutely” growing among foundations, says Mark Kramer, managing director at FSG Social Impact Advisors, a Boston nonprofit consultanting group that works with nonprofits and foundations around the country.

“There is a considerably greater willingness, even now in the downturn,” he says, pointing to an increase from $150 million in such investments in 2005 to more than $400 million last year. Additionally, the Gates Foundation recently announced it would commit $400 million itself to mission investments.

Larger, older foundations had been doing these types of investments for years, though mostly just low-interest loans. Now foundations are looking to more creative investments, Kramer says.

“There’s been this real blossoming of new ways of using mission investments, with increased awareness and data about it,” he says. “Foundations, once they get over the hurdle of knowing these things are possible, see that it’s not a foolish or dangerous thing to do. These are real investments that can both generate real social change and investment.”

That’s been the case here in Western New York for at least two major foundations: The John R. Oishei Foundation and the Community Health Foundation of Western and Central New York (CHF). Oishei has in recent years begun making low-interest loans to organizations such as Meals on Wheels of WNY and Upstate New York Transplant Services. The CHF made loans to CommunityCare in Olean to help start a care program for seniors; and to inner-city school systems in Buffalo and Syracuse to create a health planning model. Both foundations have also begun funding initiatives aimed at strengthening nonprofit leadership. Read more here.