BOSTON—March 26, 2024—Endowment funding, when used strategically, is a powerful grantmaking tool that not only can address longstanding racial inequities but also represents a direct transfer of power, according to a new case study authored by The Bridgespan Group.
Bridgespan Partner and co-author of the work Darren Isom says, “By helping to secure a nonprofit’s financial future, endowments can help put organizations on the path to liberation by demonstrating trust and commitment and offering them the strategic freedom to live into their biggest and boldest impact aspirations.” Despite their promise, according to Bridgespan’s own research and new research from the Center for Effective Philanthropy, endowment giving remains relatively rare among foundations and represents only a small fraction of foundation giving. The numbers are even smaller for organizations led by people of color.
When the Robert Wood Johnson Foundation (RWJF) started evaluating how it could be a bigger champion of advancing equity alongside its grantees, it began re-thinking its approach to endowment giving and created an internal working group to dig deeper. The process revealed that philanthropy lacked a blueprint for funding endowments and that there was a demand for more knowledge. In 2022 RWJF launched its renewed endowment grantmaking strategy by giving endowment grants of $5 million each to three racial justice organizations led by people of color: UnidosUS, NAACP, and Faith in Action.
Bridgespan’s case study provides an overview of the foundation’s approach and examines the implications and lessons for how philanthropy writ large can use endowment funding to effect equitable social change. It also describes RWJF’s criteria for considering an organization for an endowment grant.
“While endowment funding does not replace other types of funding, it can be transformational for some grantees and should be seen as an additional tool in a grantmaking toolkit to complement other grant types,” says Isom’s co-author and Bridgespan Partner Lyell Sakaue. Bridgespan identified several ways philanthropy can act to unleash the potential impact of endowment funding, including understanding that:
- Endowments can prepare nonprofits to address new societal challenges and meet the ever-changing needs of the communities they serve.
- Endowments allow organizations to think beyond survival and have the space to set ambitious goals.
- Nonprofit organizations are at various levels of endowment readiness, depending on their current financial situation and familiarity with endowments. This is especially critical to organizations led by leaders of color, which typically have smaller revenues and unrestricted net assets than their white-led counterparts. Such chronic under-resourcing can also limit access to asset managers, financial advice, and knowledge.
- Endowments offer funders creative ways to advance equity and justice; for example, nonprofits could use the endowments for local community and economic impact investments or socially responsible investments that consider environmental, social, and governance (ESG) factors. RWJF grantee UnidosUS, for instance, invests a portion of their endowment in Latino-owned businesses.
“RWJF plans to continue to share its own journey with the field through future updates to this case study. Together we hope to inspire philanthropy to view nonprofit endowments as the social change tools that they can be,” says Bridgespan Managing Partner William Foster, an advisor on this research and co-author with Isom on Endow Black-Led Nonprofits.
About The Bridgespan Group
The Bridgespan Group (www.bridgespan.org) is a global nonprofit that collaborates with social change organizations, philanthropists, and impact investors to make the world more equitable and just. Bridgespan’s services include strategy consulting and advising, sourcing and diligence, and leadership team support. We take what we learn from this work and build on it with original research, identifying best practices and innovative ideas to share with the social sector. We work from locations in Boston, Johannesburg, Mumbai, New York, San Francisco, Singapore, and Washington, DC.
