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For the better part of two decades, the world of philanthropy has been engaged in an important, sometimes contested, conversation about “impact”—both how we measure it and how we deliver it. More recently, this discussion has focused on how to create impact through the capital market, specifically through impact investing. Darren Walker, president of the Ford Foundation, writes about the next great challenge for philanthropy.
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Since 1969, US tax law has mandated that foundations pay out a minimum of 5 percent of their total assets each year. For the Ford Foundation, in recent years, meeting (and often exceeding) this requirement has translated to an annual grant-making budget of around $500 million to $550 million.
I believe the time is right for us to look at this paradigm with fresh eyes—to consider how we might start to bridge the gap between philanthropic impact and investments.
The Ford Foundation’s Board of Trustees has authorized the allocation of up to $1 billion of our endowment, to be phased in over 10 years, for mission-related investments (MRIs). While this field is still emerging, we are making this commitment because we believe MRIs are the next great tool for social transformation, in philanthropy and beyond.
If philanthropy’s past half century was about optimizing the 5 percent, its next half century will be about beginning to harness the 95 percent as well, carefully and creatively.
See the top 5 impact investing articles on Giving Compass.
This decision was a long time coming, and would not be possible if not for the hard work of so many pioneers and visionaries in the impact investing community. Indeed, it represents the next step in a long march that stretches back to the very beginnings of impact investing. Our predecessors believed that philanthropy “should be viewed as a continuum of contractual options with the outright grant placed at one extreme, something close to a market investment at the other, and in between a series of alternatives representing ascending degrees of gifting.”
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