The 82-year-old Ford Foundation is upending the model for grant-making institutions by wielding its endowment like an impact investor. Though foundations traditionally spend 5% of their funds on cause-related grants and initiatives, the other 95% typically goes toward unrelated investments that keep the endowment growing. Ford spends between $500 million and $550 million a year to support social justice work around the world. But last year, it also pledged to plow up to $1 billion of its overall $12.5 billion endowment over the next decade into so-called mission-related investments (MRIs) that generate both financial and social returns.
Related Video: Why Alliances With Nonprofits Are Important To Corporations
Since April, Ford has committed $30 million in MRIs aimed at solving the affordable housing crisis in the United States. That includes backing fair-rate housing developers like Jonathan Rose and Avanath, along with a community-improvement development bond from Capital Impact Partners. Next up, the investment team plans to dedicate money to improving financial services for the poor, backing creative ways to provide savings, insurance, and payment options.
Ford Foundation president Darren Walker acknowledges that $1 billion is just a fraction of what it will take to solve systemic inequalities. He sees Ford’s commitment as a signal to other U.S.-based private foundations—which together hold an estimated $650 billion in endowments—to rethink their broken funding model. “The challenges we face as a planet and as a nation cannot be solved by grant-making dollars and philanthropy alone,” he says. “There is an urgency that will require us to get uncomfortable as institutions.” Before they make change, they must reflect it.