"Not Just a Gift of Money." How a Major Foundation Embraced Endowment Funding to Advance Equity

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When it comes to funding social change, philanthropy typically reaches for a range of tools: general operating support, program-specific grants, technical assistance, capacity-building and more. However, endowment funding doesn’t show up nearly as often, even though it’s a common way for philanthropy to support big institutions like hospitals, universities and museums.

According to recent research from the Center for Effective Philanthropy, less than a third of the foundations CEP surveyed award endowment grants. In its report, CEP also found that among those that do engage in this type of grantmaking, 80% of them dedicate less than a quarter of their total grantmaking dollars to endowment funding. 

But some foundations looking to advance social change are taking concrete steps to embrace endowment funding as part of their overall grantmaking approach. The Bridgespan Group profiled one of them in a new case study titled "Endowment Funding as a Grantmaking Tool: The Robert Wood Johnson Foundation Approach," digging into Robert Wood Johnson’s use of endowment funding as a way to address racial inequities and advance social change.

For RWJF, dismantling structural racism and other systems of oppression are a part of its mission to improve health and wellbeing for all. As such, it regularly funds organizations that work to advance racial justice. But RWJF is going beyond its usual grantmaking by providing endowment funding grants to three organizations led by people of color, each of which is receiving $5 million: the NAACP, UnidosUS, a Latino nonprofit research and advocacy organization, and Faith in Action, a network of faith-based community organizations that works to advance justice. The aim of these endowment grants is to support the long-term sustainability of organizations committed to racial equity. 

"Few tools really allow organizations to grow resources and really sustain longevity and really sustain their work in the way that endowments do because it actually allows you… to think about short-term goals, but also to think about long-term goals," said Bridgespan partner Darren Isom, who co-authored the case study. 

"A natural next step"

The story of these endowment grants from RWJF goes back to 2020. After George Floyd's murder, the NAACP decided it wanted to establish an endowment to be better poised to address ever-changing equity needs and challenges, in the present and going forward. It reached out to RWJF, whose prior backing for the NAACP included both programmatic and general operating support. 

In the past, RWJF had mostly funded university endowments, and although it was beginning to rethink its approach to endowment funding, it did not have a clear policy. Given its ongoing work to advance equity — including by backing community and grassroots power-building, as we’ve reported — endowment funding “evolved as a natural next step,” according to the Bridgespan case study. 

RWJF went to work conducting research on endowment grants, speaking with grantees, equity champions and finance and investment professionals with experience in endowment funding, and conferring with its board. Once the decision was made to move forward, the foundation had to choose who to fund. 

Potential grantees — close allies in RWJF’s work to achieve health equity — were required to demonstrate a longstanding commitment to dismantling structural barriers to public health, including systemic racism. They also needed to have a strong, long-term relationship with the foundation.

One thing RWJF wanted to ensure was that it did not "prescribe" endowments onto organizations. Instead, it sought out existing grantees that had already determined that endowments were right for them. While the NAACP was in the process of setting up its endowment, both Faith in Action and UnidosUS already had endowments established in 1997 and 2000, respectively. (UnidosUs' endowment was established thanks to an $8 million grant from the Ford Foundation.) 

In the fall of 2022, after about a year of work, RWJF launched its new endowment grantmaking strategy and announced the three endowment grants. RWJF will also be providing the organizations with technical assistance to further develop their endowment infrastructure and conduct an evaluation of the grants.

Additionally, as part of its Truth, Repair, and Transformation process to examine and repair any past harms it may have caused, RWJF will be looking at its endowment investments and analyzing how current and past investments and decision-making have impacted marginalized communities.

The benefits of endowment funding 

Endowing grantees — particularly those working directly for social change and racial justice — is far from standard practice for institutional philanthropy. But as more and more funders embrace trust-based philanthropic practices, endowment funding can be a logical next step for many. It’s one that can help address the longstanding funding inequities affecting organizations led by people of color, whose endowments tend to be nearly four times smaller than those led by white people.

"An endowment is not just a gift of money — it's also a transfer of power," the case study notes. "By helping to secure nonprofit organizations' financial futures, endowments are one tool that can put them on a path of liberation, can demonstrate trust, and can give these organizations the freedom to dream their biggest dreams." 

Having an endowment allows nonprofits to think beyond simply surviving and lets them think more ambitiously. The case study noted that while funders can provide many kinds of support — general operating support; project grants; emergency, capital and reserve funding — none of these can grow resources and sustain longevity the way endowments can.

"Having an endowment really allows you to sustain the work and gives you the space to breathe, the space to think and the space to unlock your genius from a nonprofit perspective," Isom said. Having an endowment allows leaders of color to do more. "They're not sitting there trying to figure out what one foundation wants… They can actually sit down and work with the community about what success looks like from a long-term perspective, and they have the funding, the mental space, the intellectual space, the financial space to make that happen."

According to the case study, endowments can also help nonprofits be prepared to address new challenges and community needs as they arise. "Oppression is clever in this country. The second you figure something out, something else pops up that you have to solve," Isom said. "I think that we need to be able to have organizations that are as clever as oppression, that can shift and transform as things look different. The world that we're in is not the world we thought we'd be in five years ago, and so we need organizations that are able to shift with the moment itself." 

Isom also pointed to this mode of endowment funding as a path forward for the sector as a whole. "I think it's important for us to be thinking about, yes, funding Black and brown organizations as a way of addressing racial equity, as a way of addressing social issues, but ultimately, at the end of the day, this is what good philanthropy looks like," Isom said. "Good philanthropy looks like targeting these organizations that are most thoughtfully connected to the communities that are most impacted by the issues. It's about funding those leaders that understand the issues from both a professional, personal and community perspective."

Having an endowment, however, does not mean that organizations no longer need to fundraise, and the case study cautioned that endowment funding should not replace other types of philanthropic support. Interestingly, the study also noted that having an endowment actually helps nonprofits raise additional funds. 

That tracks with CEP’s report, which noted that organizations with endowments "grow more quickly in assets, revenues, contributions and expenses, and tend to be significantly larger, older, employ more people and have more volunteers."

The way forward

RWJF's specific approach to endowment funding is just one example of the steps funders can take. Bridgespan's case study offers other alternatives, including supporting grantees that may have a limited understanding of endowments by providing resources like cohort-based financial trainings, and endowing a fund that supports an entire ecosystem of organizations (similar to how the United Negro College Fund supports historically Black colleges and universities).

But in the end, those making the case for endowment funding have their work cut out for them. CEP's report found that of the 69% of foundations that do not fund nonprofit endowments, a majority have not considered or attempted endowment grantmaking. Of those that have never considered doing so, only 4% reported that they would consider doing so in the future. 

RWJF hopes that by providing information on its journey to endowment funding, through the study as well as additional information it plans to release as time goes on, it will inspire other funders to see nonprofit endowments as a tool for social change.

As RWJF’s president and CEO Richard Besser put it in the case study, "If we truly believe in racial justice, why would we not want to ensure the long-term financial stability of organizations that are so directly committed to racial equity and racial justice? We see contributing to endowments as one of the ways to help do that."