Many Small Foundations Wary of Impact Investing

Many small foundations are skeptical of impact investing, with 38 percent saying it will hurt returns, 36 percent saying they lack the capacity to do it, and 32 percent citing worries about risk, according to a new survey.

The report from Exponent Philanthropy, which represents foundations with few staff members, also found that 16 percent of respondents participated in “mission or impact investing,” and another 11 percent plan to do so in the next few years.

The findings are consistent with data about large foundations, which also shows low levels of participation in impact investing despite much public discussion about the practice.

Other findings from the survey:

• 34 percent of small foundations say racial equity is very relevant to their mission. The most common best practices in racial-equity grant making were monitoring grantees to make sure they followed through on the grant agreement and bringing subject-matter expertise to the board.

• 65 percent of small foundations give grants for general operating support.

• 55 percent give multiyear grants, with an average length of funding of 3.6 years.

• 31 percent don’t have a website.

The results are based on survey responses from 466 Exponent Philanthropy members. The report is available for free to members and for $298 to others.