Even the largest nonprofit foundations are not immune to the recession, leaving many organizations scrambling to find alternatives to traditional grantmaking in order to reach their philanthropic goals.
The Bill & Melinda Gates Foundation, while still considered the wealthiest philanthropy in America, has seen its assets decline by 20 percent last year, bringing its endowment to $30.2 billion, the Chronicle of Philanthropy reported.
As a result, the foundation began looking for new ways to make a difference while operating with a smaller budget.
"Given that there’s less resources right now available for all of us, including the Gates Foundation, and we don’t want to lower our commitment, is there any way we can come up with a new set of tools?" Alex Friedman, the Gates Foundation CFO, told the Chronicle of Philanthropy.
As a result, the foundation announced that it has allocated $400 million for program-related investments in the form of low-interest loans, loan and bond guarantees and equity investments.
The loans will go toward various programs such as charter school expansions, agricultural financing for small farmers in Africa, and investments in global health technologies. There are currently six projects in the pipeline, though they have not yet been announced, said the Chronicle of Philanthropy.
The investment branch of the Gates Foundation will essentially borrow from the foundation’s endowment, and although the returns from the investments will go back to the $400-million fund, Friedman expects some of the deals to fail.
If not, "we’re probably not taking enough risk," he told the news provider.
Although the concept of program-related investments is not new, no nonprofit has committed such a large sum of money to the initiative, said the Chronicle of Philanthropy. As foundation endowments continue to remain suppressed – the Commonfund Institute reports that foundation endowments declined by 26 percent in the 2008 fiscal year – the strategy may become more popular among other nonprofit organizations.