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Written by: Glenmede | GLENMEDE
- Private foundations are under pressure to increase support for nonprofits providing vital services during the pandemic.
- Benefits of increased grantmaking should be weighed against the potential to reduce future spending.
- Sustainable and impact investing is an option for supporting environmental, social and governance changes beyond grantmaking.
- The COVID-19 pandemic represents an opportunity for private foundation boards to reconsider grantmaking and financial goals in light of increased community needs.
As the COVID-19 pandemic takes its toll on our economic infrastructure, healthcare and education systems, private foundations are called upon to increase support for nonprofits providing vital services. However, in the midst of significant market volatility, funders are also grappling with diminished investment returns that may jeopardize their ability to make an impact. Glenmede recently conducted a webinar with Exponent Philanthropy offering insight on grantmaking during the COVID-19 pandemic. Here are three key takeaways:
Despite a robust recovery, we haven’t seen the last of volatility.
Equity markets saw a 34 percent drop in the S&P 500 over the month of March, representing the swiftest transition to a bear market in history. Since bottoming out in late March, investors have observed an equally swift recovery, as the S&P 500 regained more than 30 percent due to accommodative monetary policy and significant fiscal stimulus. However, funders should note that volatility is likely to continue in the near-term as the path to recovery remains uncertain.
Expanding your grantmaking in response to increased need? You’re not alone.
In order to provide more direct support in the midst of the pandemic, many foundations are considering adjusting their spending policy. While long-term returns remain supportive of the opportunity for foundations to achieve their payout percentage plus inflation, it is important to note that increasing grantmaking in the near-term may reduce a foundation’s ability to achieve this desired payout in the long-run. Since greater support in the near-term may also reduce assets in the long-term, foundation boards should consider working with an advisor to quantify potential outcomes based on any contemplated spending adjustments. Worth discussing: How does the foundation think about the long term, and is existing in perpetuity an important goal? How would a reduction in future purchasing power impact achieving the long-term mission?
Mission-aligned investing remains an option to make an impact beyond grantmaking.
Many foundations look to sustainable and impact investing as an avenue to create change beyond their grantmaking. Investor interest in sustainable ETFs has seemingly increased in response to the COVID-19 pandemic, and our Sustainable & Impact Investing team’s analysis shows that ESG strategies tended to outperform in the recent bear market. Additionally, foundations may see impact investing as a way to influence corporate behavior in response to COVID-19, including the management of employee health, safety and wellness.
While uncertain market conditions are challenging for funders, the current environment also offers unique opportunities to make a transformational impact on communities vulnerable to the pandemic’s social fallout. As traditional preferences and policies evolve to support new needs, we encourage you to work closely with your foundation board to identify short- and long-term objectives.
If you are interested in learning more about Glenmede’s Endowment & Foundation team or have questions about foundation investing in COVID-19 markets, please contact efsolutions@glenmede.com.