Our evolving hypothesis is that significant mission investment potential—$24 billion if foundations redirected 3% of their endowments—could be unlocked if private foundations had access to superior education services, social and financial performance data, and a trusted, high-quality intermediary providing inexpensive due diligence, structuring and underwriting. The next phase of this work is to test the hypothesis that implementing such actions to address the barriers will indeed unlock latent demand for PRIs and MRIs by private foundations. More specifically, the actions to consider include:
- Improve access to and reliability of financial and social outcomes data associated with PRIs and MRIs by developing a system that can sustainably capture related financial and social outcomes data, in order to (1) enable foundations to better understand the impact of PRIs and MRIs, (2) allow for benchmarking of investments and (3) provide analytics and insight for the impact investing community.
- Demonstrate a simpler and more efficient approach to financial, legal and social outcomes due diligence by developing a sustainable shared service enterprise (center of expertise or “clinic”) consisting of experts, faculty and students that can support foundations and social enterprises in executing PRIs and MRIs.
- Develop mission investing expertise and capacity to educate current and future leaders in the non-profit and philanthropic sectors.
Successfully building one or all of these capabilities at an academic institution has the potential to create powerful enablers for broader and deeper mission investing, accelerate positive social impact and recycle significant amounts of philanthropic capital.
At the University of Pennsylvania, the Center for High Impact Philanthropy, in collaboration with colleagues from the Wharton Social Impact Initiative, is developing plans to test this hypothesis.
CHART A
Strong growth in the number of foundations and endowments
The number of private foundations in the U.S. has risen from 64,845 in 2002 to 87,142 in 2013. Endowments have climbed from $340 billion to $800 billion over the same time period.
Source: Center for High Impact Philanthropy analysis of Foundation Center data