The Rockefeller Foundation is the latest grant maker to use a debt offering to free up hundreds of millions of charitable dollars without digging into its endowment.
The foundation will spend $1 billion over three years, including $700 million from a 30-year bond it offered in September, on grants and investments n Covid-19 testing, tracking, and vaccination development and distribution.
The foundation, started by Standard Oil founder John D. Rockefeller, will also use proceeds from the bond to invest in renewable energy in areas without access to reliable power. The foundation’s work introducing high-yield agriculture across the globe following World War II is referred to as the Green Revolution. Echoing that history, Rockefeller has dubbed its billion-dollar effort a push for a “Green Recovery” from the pandemic.
By taking advantage of low interest rates (the 30-year notes have a less than 2.5 percent rate), the bond offering is probably a once-in-a-lifetime opportunity, according to Dominick Impemba, Rockefeller’s chief financial officer.
“When we brought this to the board, we got clear messaging: ‘Do it once, do it big,’” he said. “So we feel like this is our big shot.”
In June, the Doris Duke, Ford, Kellogg, MacArthur, and Mellon foundations announced large increases in payout that were all debt financed. Ford went to market with the biggest offering, with $1 billion in “social bonds,” a designation that can allow investors to fulfill mandates to invest in projects that aim to improve the environment or social conditions.
Rockefeller is not offering social bonds, Impemba said, because up to $75 million of the proceeds will be used to refurbish the foundation’s Manhattan headquarters. But he said two large investors were convinced that the bulk of the work supported by the proceeds satisfied their internal criteria for making social investments, a key indication for Rockefeller that investor interest was strong.
Offering social-impact bonds, Impemba said, could have added two months to the bond-issuing process, which would have delayed the offering until after the election, something Rockefeller wanted to avoid.
Long Commitment to Alternative Energy
The foundation will not cut any programs as it moves the bulk of its focus to Covid-19 response and green energy, Impemba said. But Rockefeller’s other work in food and economic opportunity will complement the Green Recovery work to try to ensure that access to health care and energy is equitable.
The commitment builds on more than a decade of grant making in alternative energy. It also ensures that the leading role Rockefeller has played in developing a national response to Covid-19 continues.
The debt offering comes as foundations face pressure to increase the amount they make in grants to charities. Some observers suggest that by using bond offerings to increase payouts, foundations will be able counter those demands by showing that they are increasing payments without liquidating portions of their endowments to do so.
Impemba said the benefit of using a bond is that it safeguards Rockefeller’s ability to exist in perpetuity, a priority made clear by John D. Rockefeller when he started the foundation.
“We didn’t want to hurt future generations and hurt the endowment long term,” he said. “That was the main driver here.”
The Rockefeller Foundation’s expanded commitment to green energy promises to unleash billions of dollars in additional private investment in renewable energy. In 2015, another wing of the Rockefeller family’s philanthropy, the Rockefeller Brothers Fund, decided to divest of fossil-fuel holdings.
In a February interview with Wired, Rockefeller President Raj Shah said the foundation had a “few lingering” fossil-fuel investments and predicted the endowment could be totally divested by the end of the year.
Impemba said the board will be considering items related to divestment in the “next couple of months.”
“There’s more to come on that.”
