A little green can sometimes spice up traditional philanthropy. "I'd say any nonprofit paying attention to environmental issues is getting an extra look from clients," says Page Snow, senior vice president of foundation services at Foundation Source, a Fairfield, Conn.-based provider of outsourced support services for private foundations. "It adds cachet to even ordinary funding opportunities."
Snow describes one client who was asked to provide a standard capital grant to a local YMCA. The client wasn't interested, but said she'd help build a new children's center at the Y on the condition it be built with environmentally friendly features. The woman personally got involved in choosing the paint, carpet and air ventilation system, as well as the recycled gear for the playground. Ultimately, the woman provided more money to the Y than the original capital request.
"It's a great example of how letting funders do something environmentally friendly can take a traditional grant that might be uninteresting and make it something very enticing," Snow says.
Another way to put large sums of money to work into charitable endeavors is through program-related investments (PRIs). These are a hybrid of investing and philanthropy where foundations can help a particular organization while potentially realizing capital returns. PRI financing methods can include loans, loan guarantees, linked deposits or equity investments in charitable organizations or in commercial ventures for charitable purposes. (They aren't intended to be a way to make a killing, however. They must abide by tax laws regarding charitable intent.)
One Foundation Source client was interested in a new startup venture in San Francisco called City CarShare, a nonprofit organization that aims to reduce car ownership and its attendant problems, such as congestion and costs, by providing short-term rentals for as little as $5 an hour, plus 40 cents a mile. Snow said the client liked the concept for environmental and philosophical reasons, but he also saw a business opportunity. The organization needed seed money, so the client's foundation made a PRI where he gave startup funding.
Another charitable tool for foundations is mission-related investing, which is a way to invest money for both social and financial returns. By law, foundations each year must spend 5% of the value of their net investment assets on grant-making for charitable purposes; the other 95% can be invested in various investment options that typically run a wide gamut and don't need to be charity-related.
The goal of mission-related investing is to invest some of the other 95% in for-profit ventures that are aligned with a foundation's overall mission. Snow says one of her clients was a $30 million foundation whose goal was to invest in environmental causes. When she first got involved with the foundation, it had about 12 board members giving to various environmental causes in their local area.
"These were small projects that didn't have a strong focus," Snow says. After members saw Al Gore's film An Inconvenient Truth, the foundation was inspired to devote the 5% of its distribution requirement to climate change.
With that in mind, Foundation Source located an expert (a former Clinton administration official who worked on global warming policy) to sharpen the foundation's focus in that area. He directed the organization to a funding opportunity in an underserved area-making utilities more efficient-which could have a significant impact on climate change by reducing greenhouse gas emissions.
That area is now the foundation's sole grant-making focus. In addition, Snow says the foundation has asked its investment advisor to invest some of the remaining 95% in environmental opportunities.