At the end of 2024, US private foundations held a record $1.64 trillion in assets. According to federal law, annually they must spend 5 percent of that amount, or $82 billion, on grants or other qualifying expenses. In 2024, actual grants reportedly were $105 billion.

So, where does the remaining $1.5 trillion-plus go? As that caustic Heron Foundation question from two decades ago makes clear, mission-aligned investing is not a new idea. Nonetheless, most foundations today still invest for maximum returns, often without regard to mission.

As Geraldine Watson, executive vice president of finance, operations, and the Pocantico Center at Rockefeller Brothers Fund (RBF), indicated, “For many years, most foundations really didn’t know exactly where their 95 percent [of non-grant assets] was.…Their investment people did, but they didn’t know how it correlated with how they were spending their grant dollars.”

Watson is part of a growing group of foundation leaders who wish to end that disconnect. But how can foundations shift billions of dollars toward mission alignment? What does it mean for foundations to align with mission while maintaining equivalent financial returns as standard investments? And if you align your investments but don’t give up any financial return, how much of a difference are you making?

To answer these questions and to get a better understanding of the dynamics and tradeoffs, NPQ spoke with Watson of RBF; Rey Ramsey, CEO of the Nathan Cummings Foundation; and Elizabeth McGeveran, vice president of investments at the McKnight Foundation. All three of their foundations have sizeable endowments—Cummings, with nearly $500 million in assets, is the smallest; McKnight, with $2.6 billion in assets, is the largest. And all have been practicing mission-aligned investing for a while, some for over a decade.

Getting Started on Aligning Foundation Assets with Mission

It is never the case that a foundation converts overnight from having none of its endowment aligned with its grantmaking to all of it. There are many steps.

RBF began its efforts in 2005 by adopting a policy to make detailed proxy voting guidelines apply in stockholder votes. Watson said it took two years to develop what she estimated was a 30-page document detailing foundation positions on corporate behavior. Five years later, in 2010, RBF set aside 10 percent of the assets of the whole endowment to “see if we can have our outside investor manager help us find ways to invest in impact investments.”

Read the full article about aligning foundations' assets with missions by Steve Dubb at Nonprofit Quarterly.