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Can Endowment Funding Advance Racial Justice and Equity?

Date: April 23, 2024

Kelly Simone

Senior Associate General Counsel, Robert Wood Johnson Foundation

Daniela Phayme

Senior Director, Program Financial Management, Robert Wood Johnson Foundation

Marjorie Paloma

Assistant Vice President, Robert Wood Johnson Foundation

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Advancing racial equity and wellbeing is hard work, especially for on-the-ground organizations that are leading the work.

Endowment grantmaking is a tool that foundations can use to ensure that these organizations not only survive but thrive.

For us at the Robert Wood Johnson Foundation (RWJF), endowment grants are another tool in the philanthropic toolbox for creating social change. They are not meant to replace project grants or general operating support, but to help ensure the long-term financial stability of organizations that share our vision of health and racial equity.

A new report from the Center for Effective Philanthropy (CEP) shows that few foundations — just under a third — make endowment grants. Endowment philanthropy is not on the radar of most foundations, because they don’t see it as connected to what they do.

It is, however, something for philanthropies to consider, especially those that are willing to allow grantees the flexibility to invest and spend grant funds over the long term to achieve sustainability and meet their missions.

RWJF is dedicated to taking leaps to transform health in our lifetime. To get there, we must work to dismantle structural racism and other barriers to health. Through funding, convening, advocacy, and evidence-building, we work side by side with communities, practitioners, and institutions to reach health equity faster and pave the way together to a future where health is no longer a privilege, but a right. Endowment grantmaking is one way we support this mission.

Taking a Long-Term View

Achieving health and racial equity requires long-term work. Philanthropy has the unique opportunity and privilege of taking a long view of how they support the organizations leading this work. At RWJF, we became interested in exploring endowment grantmaking as one lens for that long view, specifically with organizations working to advance health equity.

According to the CEP report, few foundations see endowment grantmaking as a way to advance equity or social justice. For us, though, it made sense, especially given our growing interest in community leadership, voice, and power. We see these as critical elements for advancing health and racial equity that require sustained support.

Preparing to use endowment giving as a new tool took forethought, planning, and preparation. We did a lot of listening and learning to bring our organizational knowledge up to speed and create a new strategy for endowment grantmaking. Then, in 2022, RWJF launched this strategy by giving endowment grants of $5 million each to three racial justice organizations led by people of color: UnidosUSNAACP, and Faith in Action (FIA).

A case study by Bridgespan provides a detailed look at RWJF’s approach to nonprofit endowment grantmaking and explores how philanthropy can use endowment funding to support equitable change over the long term. It is important to emphasize that this is just our approach — there are many ways to go about endowment funding, and it may not be for everyone. That’s something that each foundation and each grantee organization must determine for themselves.

Embracing a Cross-Foundation Approach

One aspect of our process that we think is especially worth emphasizing is the cross-foundation approach that RWJF took. For us, this was critical, because so many elements must be considered when designing a strategy for endowment funding, and different departments have different areas of expertise. Our workgroup for this effort included staff from the programming, law, and finance departments. (We were all part of the workgroup, representing our respective departments.)

Over the course of a year, workgroup members exchanged thoughts about the benefits and challenges of using endowment funding as a tool to advance racial equity and justice. In the end, we wove our perspectives together to create a process that can serve as another tool for our grantmaking strategy.

At first, we tried to come up with a standardized approach to endowment grantmaking. Particularly from a financial viewpoint, we thought that it was important to have a uniform process for doing due diligence and financial review of organizations that RWJF considers for endowment grants. However, this turned out to be not entirely possible, or practicable.

There Is No One-Size-Fits-All Approach

Our efforts to create a uniform process for endowment grant due diligence ran up against the truth that nonprofit organizations vary widely. Not all nonprofits are structured to accept endowments. Others would benefit more from a larger grant up front, as opposed to having access only to the interest earned from an endowment grant.

We were able to standardize certain aspects of the process, such as ensuring that each organization had an investment policy. But we didn’t dictate what that policy looked like. We also evaluated the financial health of each organization. In addition, we wanted to understand who would be managing the endowment at each organization and how.

But in the end, we recognized and appreciated that each organization was unique and had to be considered individually.

More broadly, because these were going to be long-term investments, we wanted to ensure that we had mission alignment with each organization. In addition, we felt that it was important to contribute a sizeable amount of money to the organizations’ existing endowments, so that grantees could earn sufficient interest on their investments to sustain them. And, by contributing to existing endowments, we were not asking grantees to create a new endowment fund specific to their RWJF grant or develop new policies to receive our endowment grants. This made the process easier for everyone and will allow grantees to leverage our commitment to cultivate other funders to invest in their sustainability.

RWJF awarded the three endowment grants in November 2022, and we will assess the impacts of those grants on their organizations over the next few years. Meanwhile, we will continue to explore whether and when to use endowment funding as a tool for advancing social justice and health equity. We encourage other foundations to consider this tool as well.

Marjorie Paloma is assistant vice president at RWJF; Daniela Phayme is senior director, Program Financial Management, at RWJF; and Kelly Simone is senior associate general counsel at RWJF.

Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.

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