As a concept, endowments — defined as funds to be kept permanently and invested to provide sustained support — have existed for more than a thousand years. Supporters of endowments note that they can present an opportunity to shift power and promote nonprofit organizations’ sustainability. Critics of endowments argue these funds typically go to larger, more established institutions, and that the resources used to fund endowments could instead be directed to more near-term opportunities.

With support from the Robert Wood Johnson Foundation (RWJF), the Center for Effective Philanthropy (CEP) and The Bridgespan Group both released reports today that examine different approaches foundations take to funding nonprofit endowments. CEP’s research findings, which are based on surveys of 283 foundations in the fall of 2023, help shed light on foundation perspectives, practices, and challenges associated with endowment giving, while Bridgespan’s report provides an overview of RWJF’s approach to nonprofit endowment grantmaking.

Endowments: A Small Slice of Foundation Giving

CEP’s research reveals that endowment giving does not represent a significant proportion of foundation grantmaking resources. Just under a third of foundations fund nonprofit endowments, and those foundations dedicate only a small proportion of their grantmaking resources to endowments.

Among foundations that do fund endowments, the majority fund museums and performing arts organizations or direct services organizations, followed by educational organizations and then colleges or universities.

Advancing Equity: Not a Primary Consideration

While endowment giving has the potential to foster equity and sustainability in the nonprofit sector, CEP’s research found that advancing equity is not the primary consideration for the majority of foundations engaged in endowment funding. In their case study on RWJF’s endowment giving, Bridgespan explores how philanthropy can use endowment funding for equitable social change.

Read the full article about endowments and equity by Emily Yang, Elisha Smith Arrillaga, Ph.D., and Darren Isom at The Center for Effective Philanthropy.