In the first two pieces in this series, we introduced the tidal foundation and explored when mission may require higher payout. But how much a foundation spends is only one part of stewardship — the other is how the endowment itself is invested.

But payout and investment questions are often treated separately. Grantmaking is where foundations most visibly express mission, while the endowment is managed primarily as a financial resource. Yet both are part of what a foundation stewards in service of its charitable purpose. A tidal foundation therefore asks two connected questions: How much should flow out as grants, and how should the capital that remains be invested to advance mission?

As we explored in the previous piece, the traditional 5% payout should not be treated as the automatic answer to the first question. Mission, opportunity, and financial capacity may point toward deploying more. The second question deserves the same scrutiny. What is the remaining capital being used for and how could it best advance an organization’s mission?

Mission-aligned investing is not new, and many foundations have worked to bring endowment strategy into closer alignment with mission. A tidal foundation builds on that thinking by connecting investment strategy more explicitly to the foundation’s overall stewardship. Just as 5% can become the default for spending, maximizing financial return can become the default objective for the endowment. Tidal stewardship asks both how spending and investment choices can best serve mission.

Where the Current Meets the Shore

Private foundations receive significant tax advantages and exist to serve charitable purposes. In that sense, “private” describes who governs them more than whom their assets are meant to serve. For us, tidal stewardship is also a question of public purpose. How can foundations use grants, investments, and influence to advance the public good? That does not mean replacing government, but complementing public resources and supporting the power of communities to shape how those resources are used.

Read the full article about mission-driven investing by Carmen Rojas, Rickke Mananzala, Daniel Gould, and Lenore Champagne Beirne at The Center for Effective Philanthropy.