In this brief, we explore actions that federal policymakers can take to encourage greater private foundation use of mission-related investments—defined as an investment made by a private foundation from its endowment that relates to its charitable purposes—to advance racial equity and racial justice goals. We draw from a literature review, interviews, field consultations, a focus group, and industry conference content.
WHY THIS MATTERS
Due to historical and contemporary practice and policy, racial disparities exist across almost all dimensions of life. Addressing these disparities will require government and philanthropic resources. In 2019, private US foundations held approximately $880 billion in assets, but most focus only on driving impact with their annual 5 percent payouts required by the Internal Revenue Service. By investing endowment assets toward their missions, private foundations could do more to advance racial equity and racial justice goals.
- There are no federal policies that explicitly promote or prohibit MRIs, but there are some federal or state policies that may influence the investment decisions made by private foundations.
- Most existing racial equity mission-related investments do not heavily focus on outcomes at the community level or engage communities in decisionmaking; rather, they tend to focus on investing in fund managers of color.
- Possible roles for federal policymakers include (1) working with private foundation leaders and impact investing field leaders to develop future guidance and policies that serve the field; (2) facilitating public-private partnerships to create opportunities for knowledge sharing and public-philanthropic co-investing; and (3) incentivizing a market for investments at the community level and community benefit analyses of private foundation endowments.