Family foundations are shifting their main grant making from local causes to efforts aimed at addressing policy issues, especially economic inequality, according to a study published Wednesday by the National Center for Family Philanthropy.
They are also increasing their efforts to make their boards and staff more diverse, according to the study.
“Trends 2020,” as the report is called, is an update from the center’s 2015 study, which was the first national survey of family foundations, and offers a look into trends on their giving and governance.
While the total given from family foundations has grown since the study was first conducted four years ago, the number of grants awarded annually has decreased slightly so there are fewer but larger grants.
Other findings from the study:
- The giving levels and number of grants of the oldest family foundations — those created before 1970 — are notably higher than those formed since 2010.
- More family foundations are now giving $500,000 or more a year.
- Fewer family foundations are awarding 50 or more grants per year, while more are giving 25 to 49 grants annually.
Giving More
The reason for the shift toward fewer but larger grants isn’t clear, said Virginia Esposito, president of the National Center for Family Philanthropy, but it may be part of a strategy to boost payout by focusing on bigger grants. .
Another reason is likely related to a family-foundation founder’s comfort with risk.
“Seventy-one percent of all family foundations have been founded since 1990, and 56 percent of them have a founder at the table,” said Esposito. “Traditionally that entrepreneurial sensibility that a founder brings is likely to make them willing to invest more so there’s generally a great risk tolerance on the part of entrepreneurs and [wealth] inheritors.”
Changing Priorities
As in the 2015 report, the top areas of emphasis for family foundations include education (38 percent) and poverty, hunger, and homelessness (27 percent). But the 2020 study found that family foundations created in 2010 or later reported significantly different grant-making priorities than their older counterparts:
- 64 percent said giving to fight poverty, hunger, and homelessness is their top grant-making priority.
- Giving to boost economic opportunity and inclusion, jobs, and work force or employment training came second, while education, college access, and literacy were third.
- All family foundations created through 2009 placed education as the top priority.
Esposito said the shift in giving from education to economic opportunity and mobility shows a growing concern about economic inequality. She said 82 percent of younger foundations are much more “issues-based” than older family foundations, which tend to think and operate with a geographic or local focus in mind.
“That could reflect a more global economy mind-set, or it could reflect a more dispersed family,” said Esposito.
Board Diversity
The report shows that most family foundations are making an effort to bring the younger generations into the fold. In fact, more than half of the foundations in the study reported having multiple generations serving on their boards, with one in 10 reporting that the foundation has three or more generations serving on the board:
Seventy percent of family foundations actively involve the next generations in the foundation’s work in some formal way, including inviting them to participate in decision making or governance or to attend site visits. Nearly half (48 percent) said they invite younger family members to participate in board grant discussions.
Thirty-seven percent of family foundations said they plan to increase the number of younger family members who serve on the board over the next four years, and 28 percent said they intend to give younger relatives more say in the foundation’s operating and giving decisions.
Family foundations are also more focused on diversifying their boards in a number of ways, including bringing on more nonfamily members and board members who identify as LGBTQ.
Thirty-five percent of family-foundation boards reported they have at least one person of color, and one in 10 has a trustee who identifies as LGBTQ.
Looking Outside the Family
Jason Born, the center’s vice president for programs, said one of the most significant findings was that two-thirds of all family-foundation boards include at least one nonfamily board member.
“I was a little surprised by that two-thirds number and also that the total number and percentage of nonfamily board members has grown since we last did this study,” he said.
In 2015, 23 percent said they had two or more nonfamily board members, and for in the latest report, 26 percent said they had three to five. An additional 10 percent said they had six or more, changes Born sees as a clear trend.
Having a nonfamily board member is especially important to older foundations that focus on local causes when the family has moved away. They want people who understand the needs of the area serving on the board, said Esposito.
When it comes to diversity, said Esposito, older family foundations outpace those established in 2010 or after, often because those boards include a lot more people from younger generations who are more focused on diversity, equity, and inclusion and are incorporating those goals into their work.
For example, one family foundations in four said it uses those goals and strategies to guide giving, and one out of three has programs related to those causes built into its future plans. Meanwhile, 16 percent said they use outside experts for guidance, and 15 percent said those considerations influence their grant making.
The report includes responses from 517 family foundations with assets of at least $2 million or annual giving of at least $100,000.
The center collaborated on the study with Bank of America, which also provided some support for the report, and with Phoenix Marketing International, a research firm that designed and conducted the study.
Maria Di Mento directs the annual Philanthropy 50, a comprehensive report on America’s top donors. She writes about wealthy philanthropists, arts organizations, and key trends, among other topics. She recently wrote about a $125 million gift from hedge-fund manager Ken Griffin to a major science museum and a $100 million commitment from Nicole Shanahan for reproductive research and other causes. Email Maria or follow her on Twitter.
