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Foundations

Grantmakers Can Do More than Make Grants

In the midst of a crippling recession, grantmakers and foundations should look to investments that both promise returns and advance their mission.

Charitable grants get much of the focus of the more than 75,000 grantmaking foundations in the U.S.

But with the recession vaporizing over one-fifth of the value of foundations’ assets, foundations should be looking harder for additional strategies they can use to advance their charitable mission.

Program-related investments, or below-market-rate investments in activities tied to their missions that foundations can count as part of their annual charitable distributions, are growing in use, according to a new study by the Foundation Center.

The study, which tracked 173 private and community foundations that made at least one program-related investment of at least $10,000 in 2006 or 2007, found PRI’s for the period totaled $734 million.

That is only a tiny fraction of the nearly $92 billion those foundations’ overall charitable distributions for the two-year period.

But the Foundation Center also says a recent survey it conducted found over half of foundations planned to use non-grantmaking activities because of the recession, and over one in 10 of those voiced an interest in increasing their use of program-related investments.

The erosion of foundation assets, and in turn grantmaking, because of the recession, the Foundation Center says, provide “the best incentive yet for foundations to consider whether PRIs – as well as other forms of mission-related investing – are an appropriate tool to advance their missions.”

With social and global problems increasing because of the recession, foundations need to be more strategic about investing their resources.

That means taking a hard look at program-related investments and taking a more active role as shareholders, investing in companies and capital markets that not only will promise healthy investment returns that also will advance their mission.

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