United States: 4 Takeaways From Council On Foundations 2016 Annual Conference

From left to right: Maria Teresa Kumar, President and CEO, Voto Latino, Shiza Shahid, Co-Founder, the Malala Fund, Robert Ross, President and CEO, The California Endowment, at the Council on Foundations 2016 Annual Conference.

From April 9 to April 12, I had the good fortune to be part of the Council on Foundations 2016 Annual Conference. The Council welcomed nearly 1,400 leaders in the philanthropic sector to Washington, D.C., for plenary programs and concurrent sessions focused on "the Future of Community through the lenses of identity, purpose, and place." Here are four of my biggest takeaways from the Conference:

1. When you want to fill a room to capacity, talk about the Chan Zuckerberg Initiative. One concurrent session was so popular that attendees filled the seats, stood along the walls and sat on the floor. The topic that drew this crowd was "Philanthropy Outside the Tax-Exempt Model." The discussion covered the alternative vehicles for individual and corporate giving, such as public benefit corporations, L3Cs and B-Corp certified companies, which have been embraced by a new generation of philanthropists, most notably Mark Zuckerberg and his wife Dr. Priscilla Chan.

Last December the couple announced the Chan Zuckerberg Initiative and pledged to give 99% of their Facebook shares over their lifetimes to support its mission — advancing human potential and promoting equality. Most interesting to a room full of foundation folks was that Chan and Zuckerberg formed the Initiative as a limited liability company, rather than as a foundation, because they felt an LLC would provide "the greatest flexibility for the most impact." Like a foundation, the LLC will allow them to support nonprofit organizations and invest in companies aligned with their social mission. But unlike a foundation, the LLC will offer them much wider latitude for their investment activity and — here's what may have been the clincher — allow them to participate in policy debates around their social goals.

The biggest aha moment for me came during the discussion about taxes. Chan and Zuckerberg made a point of saying that the Initiative's structure does not provide them with a tax benefit, other than that they will be eligible for a tax deduction when the LLC makes any donation to a nonprofit organization. It seems the new generation of philanthropists might view taxes differently than all the generations before them. For them, minimizing taxes is not necessarily a driving force. In fact, some in this generation are asking: if paying taxes can be viewed as contributing funds that work to improve the human condition in some cases, isn't a tax deduction antithetical to putting the most resources toward making positive change?  Mind = blown.

2. MRIs and PRIs finally have some momentum. In an earlier blog post regarding IRS Notice 2015-62, we explained "mission-related investments" or MRIs and "program-related investments" or PRIs.  We made the point then that these strategies were trending in the press and at sector conferences, but most foundation directors and trustees had yet to jump on the bandwagon. During the pre-conference session on impact investing, I got the sense the landscape is finally shifting. No longer was there much talk about the "why's" of MRIs and PRIs; instead, the focus was on the "how's" of incorporating them into a foundation's operations.  Below are a few key points from the discussion.

First, performance. Tom Mitchell, Managing Director at Cambridge Associates, acknowledged that, in the initial stages of the development of impact investing, it was plagued by performance stigma. With innovations in technology, an increase in disclosure and more institutions incorporating the approach, impact investing has evolved. Over 140 of his firm's clients are pursuing MRIs, with the largest percentage (35%) being foundations. What is driving MRI investors currently?  In his view, consistency with values, change and impact, constituent concerns (especially for community foundations) and improved performance. For example, in emerging markets, an ESG portfolio has been more resilient than a traditional mix of investments. The performance measurement of private impact funds is just beginning, however.

Second, investing through a financial intermediary. We heard from Jane Henderson, President and CEO of Virginia Community Capital (VCC), a community development financial institution providing a range of credit and financial services to people, businesses and communities not served by mainstream lenders. VCC secured its first PRI in 2011 to support small business lending in economically distressed communities. Other PRIs have followed, including a $1.5 million PRI from the Jessie Ball duPont Fund in 2013 to stimulate economic development. In its ten years of existence, VCC's social returns have included 4,997 jobs created or retained and 7.0 million square feet of business and housing spaces created or rehabbed. We also heard from Sted Garber, Senior Investment Analyst at The Annie E. Casey Foundation, which prefers to invest its social impact dollars through financial intermediaries. Its approach is geared toward leverage and co-investment, with the idea of influencing other investors and sharing risk. The foundation's practice is to be the source of no more than 25% of the capital in a project, except with respect to strategic PRIs.

Third, transaction costs. Various panelists acknowledged what many of us already know to be true — the transaction costs of PRIs can be greater than expected. The simplest PRI deals can have legal costs approaching $15,000. For one foundation, it seeks deals greater than $250,000, due to the transaction costs. When one panelist was asked how she justifies  the transaction costs of MRIs and PRIs, she responded, "because it is so important." To her, with the declining federal support for community and regional development, foundations that are willing to make PRIs can be the difference between something happening and not happening in a community.

3. Good governance remains a top priority for the sector. Governance was the subject of multiple sessions. Some sessions focused on the fallout from a failure of proper governance, while others stressed how critical it is for foundations to adhere to the highest standards of governance and for the sector as a whole to regulate itself. One example of self-regulation is the National Standards for U.S. Community Foundations, a peer accreditation program meant to showcase those community foundations that are committed to go above and beyond the requirements of federal and state law to demonstrate accountability and excellence. Eight community foundations in Massachusetts have received the accreditation. Of more interest to family foundations may be Independent Sector's Principles for Good Governance and Ethical Practice. The 33 Principles, last updated in 2015, cover legal compliance and public disclosure, effective governance, strong financial oversight and responsible fundraising.

4. We may be witnessing the next great generation. The young leaders who spoke at the plenary sessions were impressive and inspiring. Each has been able to mobilize his or her community — whether local or global — to drive change. Nick Tilsen, Executive Director of Thunder Valley Community Development Corporation, described how the youth in his community on Pine Ridge, one of the poorest in the U.S., have become the innovators and energy behind a new era of community-led economic and social progress defined by entrepreneurship. Maria Teresa Kumar, the founding President and CEO of Voto Latino, which has helped mobilize millions of Latinos in the U.S. and sparked a movement of civically engaged young people, told us of her life's path as an "accidental advocate" galvanized by 9/11, and urged, "We are experiencing the next great generation, but we must give them the tools to thrive." And we heard from Shiza Shahid, the co-founder of the Malala Fund, which was created after Malala Yousafzai, the young Pakistani activist, was shot by the Taliban for her campaign for girls' education. Shiza recalled the moment after Malala's amazing recovery when Malala and her family realized her story could be a catalyst for the movement to educate girls and that they must grab this immediate opportunity to channel the world's outrage in the form of the Malala Fund. Alluding to the many alternatives available for individuals and corporations to make a difference, Shiza challenged us all to "Break down silos...so that we're not living in a world where impact is something only a handful of nonprofits do."

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions