Financial endowment

==Criticism and reforms==
[[File:Fossil Fuel Divestment Student Protest at Tufts University.jpg|250px|thumb|Students at Tufts University in 2013 "marched forth on 4 March". The march was a divestment campaign with the goal of pressuring universities to [[Fossil fuel divestment|eliminate investments in fossil-fuel related ventures]].]]

===Donor intent===
{{See also|Donor intent|Community foundation}}
The case of [[Leona Helmsley]] is often used to illustrate the downsides of the legal concept of donor intent as applied to endowments. In the 2000s, Helmsley bequested a multi-billion dollar trust to "the care and welfare of dogs".<ref name="Rosenwald">{{cite journal|last=Rosenwald|first=Julius|date=May 1929|title=Principles of Public Giving|journal=The Atlantic Monthly}}</ref> This trust was estimated at the time to total 10 times more than the combined 2005 assets of all registered animal-related charities in the United States.

In 1914, Frederick Goff sought to eliminate the "dead hand" of organized philanthropy and so created [[the Cleveland Foundation]]: the first [[community foundation]]. He created a corporately structured foundation that could utilize community gifts in a responsive and need-appropriate manner. Scrutiny and control resided in the "live hand" of the public as opposed to the "dead hand" of the founders of private foundations.<ref>{{cite web|title=Cleveland Foundation 100 – Introduction|url=https://www.clevelandfoundation100.org/foundation-of-change/invention/introduction/|access-date=2019-04-04|website=The Cleveland Foundation Centennial|language=en-US}}</ref>

===Economic downturn===
Research published in the [[American Economic Review]] indicates that major academic endowments often act in times of economic downturn in a way opposite of the intention of the endowment. This behavior is referred to as [[endowment hoarding]], reflecting the way that economic downturns often lead to endowments decreasing their payouts rather than increasing them to compensate for the downturn.<ref>{{cite journal|last1=Brown|first1=Jeffrey R.|last2=Dimmock|first2=Stephen G.|last3=Kang|first3=Jun-Koo|last4=Weisbenner|first4=Scott J.|date=March 2014|title=How University Endowments Respond to Financial Market Shocks: Evidence and Implications|journal=American Economic Review|publisher=[[American Economic Association]]|volume=104|issue=3|pages=931–962|doi=10.1257/aer.104.3.931|doi-access=free|hdl=10220/20933|hdl-access=free}}</ref>

Large U.S.-based college and university endowments, which had posted large, highly publicized gains in the 1990s and 2000s, faced significant losses of principal in the [[2008 economic downturn]]. [[Harvard University endowment|The Harvard University endowment]], which held $37 billion in June 2008, was reduced to $26 billion by mid-2009.<ref>[http://www.bostonherald.com/business/general/view/20090911harvard_fund_loses_11b_decline_less_than_predicted/ Harvard fund loses $11B], a September 11, 2009 article from the ''[[Boston Herald]]'' {{webarchive|url=https://web.archive.org/web/20090915194554/http://www.bostonherald.com/business/general/view/20090911harvard_fund_loses_11b_decline_less_than_predicted/|date=September 15, 2009}}</ref>  [[Yale University]], the pioneer of an approach that involved investing heavily in alternative investments such as real estate and [[private equity]], reported an endowment of $16 billion as of September 2009, a 30% annualized loss that was more than predicted in December 2008.<ref>[https://www.wsj.com/articles/SB125261190641700555 Yale Endowment Down 30%] {{webarchive|url=https://web.archive.org/web/20180414092025/https://www.wsj.com/articles/SB125261190641700555|date=2018-04-14}}, a September 10, 2009 article from ''[[The Wall Street Journal]]''</ref>  At [[Stanford University]], the endowment was reduced from $17 billion to $12 billion as of September 2009.<ref>[http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/02/BAQ519HJA6.DTL Stanford University endowment loses big] {{webarchive|url=https://web.archive.org/web/20090906103714/http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fc%2Fa%2F2009%2F09%2F02%2FBAQ519HJA6.DTL|date=2009-09-06}}, a September 3, 2009 article from the ''[[San Francisco Chronicle]]''</ref> [[Brown University]]'s endowment fell 27 percent to $2.04 billion in the fiscal year that ended June 30, 2009.<ref>{{cite web|title=Politics|url=https://www.bloomberg.com/apps/news?pid=20601103&sid=ajuf5s.QOqzY|access-date=14 April 2018|website=Bloomberg }}</ref>  [[George Washington University]] lost 18% in that same fiscal year, down to $1.08 billion.<ref>[http://media.www.gwhatchet.com/media/storage/paper332/news/2009/08/27/News/Gw.Endowment.Drops.18.Percent-3758164.shtml GW endowment drops 18 percent] {{webarchive|url=https://web.archive.org/web/20090831222725/http://media.www.gwhatchet.com/media/storage/paper332/news/2009/08/27/News/Gw.Endowment.Drops.18.Percent-3758164.shtml|date=August 31, 2009}}, an August 27, 2009 article from ''[[The GW Hatchet]]''</ref>

In Canada, after the financial crisis in 2008, [[University of Toronto]] reported a loss of 31% ($545 million) of its previous year-end value in 2009. The loss is attributed to over-investment in hedge funds.<ref>{{cite journal|last=Burrows|first=Malcom D.|year=2010|title=The End of Endowments?|journal=The Philanthropist|volume=23|issue=1|pages=52–61}}</ref>

=== Endowment repatriation ===
Critics like Justice Funders' Dana Kawaoka-Chen call for "redistributing all aspects of well-being, democratizing power, and shifting economic control to communities.".<ref>{{cite journal | title =What Do Our Times Require? Funders Propose a Philanthropic "Green New Deal" |journal = Nonprofit Quarterly | date = March 12, 2019 |url=https://nonprofitquarterly.org/2019/03/12/what-do-our-times-require-funders-propose-a-philanthropic-green-new-deal/ }}</ref> Endowment repatriation refers to campaigns that acknowledge the history of human and natural resource exploitation that is inherent to many large private funds. Repatriation campaigns ask for private endowments to be returned to the control of the people and communities that have been most affected by labor and environmental exploitation and often offer ethical frameworks for discussing endowment governance and repatriation.<ref name="justicefunders.org">{{cite web |title=The Resonance Framework: Guiding Principals and Values |url=http://justicefunders.org/resonance/guiding-values-principles/ |website=Justice Funders |access-date=19 May 2019 |archive-url=https://web.archive.org/web/20190519032843/http://justicefunders.org/resonance/guiding-values-principles/|archive-date=19 May 2019}}</ref>
<ref>{{cite web |title=Linden Endowment Repatriation Broadside v1.3 |url=http://endowmentrepatriation.org |access-date=19 May 2019 |archive-url=https://web.archive.org/web/20190519033340/https://endowmentrepatriation.org/|archive-date=19 May 2019}}</ref>

{{Blockquote|text=Many might say that, by definition, philanthropy is about redistributing resources. Yet to truly embody this principle, philanthropy must move far beyond the 5% payout requirements for grants and distribute ALL of its power and resources. This includes spending down one's endowment, investing in local and regional economic initiatives that build community wealth rather than investing in Wall Street, giving up decision-making power for grants, and, ultimately, turning over assets to community control.<ref name="justicefunders.org">{{cite web |title=The Resonance Framework: Guiding Principals and Values |url=http://justicefunders.org/resonance/guiding-values-principles/ |website=Justice Funders |access-date=19 May 2019 |archive-url=https://web.archive.org/web/20190519032843/http://justicefunders.org/resonance/guiding-values-principles/|archive-date=19 May 2019}}</ref>|source=Justice Funders}}

After the Heron Foundation's internal audit of its investments in 2011 uncovered an investment in a private prison that was directly contrary to the foundation's mission, they developed and then began to advocate for a four-part ethical framework to endowment investments conceptualized as Human Capital, 
Natural Capital, Civic Capital, and Financial Capital.<ref>{{cite web |title=Introduction to Net Contribution |url=https://www.heron.org/intro-net-contribution |website=Heron Foundation |access-date=19 May 2019 |archive-url=https://web.archive.org/web/20190519032324/https://www.heron.org/intro-net-contribution|archive-date=19 May 2019}}</ref>

Another example is the [[Ford Foundation]]'s co-founding of the independent [[Native Arts and Culture Foundation]] in 2007. The Ford Foundation provided a portion of the initial endowment after self-initiated research into the foundation's financial support of Native and Indigenous artists and communities.  This results of this research indicated "the inadequacy of philanthropic support for Native arts and artists", related feedback from an unnamed Native leader that "[o]nce [big foundations] put the stuff in place for an Indian program, then it is not usually funded very well. It lasts as long as the program officer who
had an interest and then goes away" and recommended that an independent endowment be established and that "[n]ative leadership is crucial".<ref>{{cite web |title=Native Arts and Cultures: Research, Growth and Opportunities for Philanthropic Support |url=https://www.fordfoundation.org/media/1758/2010-native-arts-and-cultures.pdf |archive-url=https://web.archive.org/web/20190513142508/https://www.fordfoundation.org/media/1758/2010-native-arts-and-cultures.pdf |url-status=dead |archive-date=2019-05-13 |publisher=Ford Foundation |access-date=13 May 2019 |date=2010}}</ref>

=== Divestment campaigns and impact investing ===
{{See also|Disinvestment|Impact investing}}
Another approach to reforming endowments is the use of [[divestment]] campaigns to encourage endowments to not hold unethical investments. One of the earliest modern divestment campaigns was [[Disinvestment from South Africa]] which was used to protest apartheid policies. By the end of apartheid, more than 150 universities divested of South African investments, although it is not clear to what extent this campaign was responsible for ending the policy.<ref>{{cite magazine | title =Does Divestment Work |magazine= The New Yorker | date =October 20, 2015 |url=https://www.newyorker.com/business/currency/does-divestment-work }}</ref>

A proactive version of divestment campaigns is [[Impact investing|impact investing, or mission investing]] which refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return."<ref>{{cite web|title=2017 Annual Impact Investor Survey|url=https://thegiin.org/assets/GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.pdf |archive-url=https://web.archive.org/web/20160902224437/https://thegiin.org/assets/GIIN_AnnualImpactInvestorSurvey_2017_Web_Final.pdf |archive-date=2016-09-02 |access-date=2017-03-14 |publisher=The Global Impact Investing Network}}</ref> [[Impact investment]]s provide capital to address social and environmental issues.

=== Endowment taxes ===
{{Main|Endowment tax}}
Generally, endowment taxes are the taxation of financial endowments that are otherwise not taxed due to their charitable, educational, or religious mission. Endowment taxes are sometimes enacted in response to criticisms that endowments are not operating as [[nonprofit organization]]s or that they have served as [[tax shelter]]s, or that they are [[Payment in lieu of taxes|depriving local governments of essential property and other taxes]].<ref>{{cite web|title=Ways and Means Questions Nonprofit Hospitals' Tax Status|publisher=The Commonwealth Fund 1 East 75th Street, New York, NY|url=http://www.cmwf.org/healthpolicyweek/healthpolicyweek_show.htm?doc_id=278529|access-date=2007-01-22|archive-url=https://web.archive.org/web/20061004064034/http://www.cmwf.org/healthpolicyweek/healthpolicyweek_show.htm?doc_id=278529|archive-date=2006-10-04|url-status=dead}}<br />{{cite web|author=Jill Horwitz|title=Testimony Before House Ways and Means Committee|date=2005-05-26|url=http://www.sph.umich.edu/cleh/papers/horwitz.pdf|archive-url=https://web.archive.org/web/20160305172650/https://sph.umich.edu/cleh/papers/horwitz.pdf|archive-date=2016-03-05|url-status=dead}}</ref><ref>{{cite web | last=He | first=Ray C. | title=Cambridge Seeks to Tax Earnings on Endowment | work=Volume 125, Number 44 | publisher=[[The Tech (newspaper)|The Tech]] | date=October 4, 2005 | url=http://tech.mit.edu/V125/N44/cambsurcharge.html | access-date=May 20, 2019 | archive-date=April 8, 2022 | archive-url=https://web.archive.org/web/20220408123247/http://tech.mit.edu/V125/N44/cambsurcharge.html | url-status=dead }}</ref>