Lilly Family School of Philanthropy held another edition of the Principles & Techniques of Fundraising course in February. Guilherme Sylos, Prospection Director at IDIS, traveled to Indiana, USA, to participate in this intensive one-week training. The course provided participants with a comprehensive overview of fundraising strategies, combining theoretical fundamentals with practical tools to strengthen philanthropic initiatives.
“The program deepened my understanding of fundraising as a strategic matter, reinforcing the importance of donor engagement and impact-driven philanthropy. The knowledge acquired will be essential for strengthening partnerships and expanding the social impact agenda,” said Guilherme Sylos.
Members of the February class
Although the training was centered on the American context, it addressed common and essential topics for organizations worldwide. Subjects such as donor behavior and decision-making, the science behind fundraising, how and when to make major gift requests, and the importance of long-term relationships were covered throughout the course.
During the sessions, key insights were shared on the distinction between pure fundraising and the creation of trust-based relationships, not just with the organization but also with the donor. Building a strong relationship can take months or even years before fundraising efforts yield more significant results.
TRAINING HIGHLIGHTS
Two key points were emphasized repeatedly by different speakers: Planning and Relationship/Trust Building. Asking for a donation or any other type of financial support should only happen after thorough research and strategic planning regarding the donor, whether they are a corporation, a high-net-worth individual, or a foundation.
Once research and planning are complete, a relationship of trust must be built. Through this connection, the fundraiser can also ‘leverage’ with the donor to open new doors. In fundraising strategies, these stakeholders are crucial, as they are already familiar with the organization and can validate its work.
This trend is reflected in the growing concept of Trust-Based Philanthropy, which emphasizes the importance of mutual trust between investors and social organizations, as well as listening to the people and communities impacted. Establishing this trust is also crucial for organizations to secure substantial support.
Another topic discussed in the debates was the new U.S. government and how its actions might impact American and global philanthropy. According to the speakers, there is a sense of uncertainty, yet also optimism. The more hopeful perspective is that foundations and philanthropic families will be moved to increase their international donations, which could benefit Brazil.
The effort to create a more culturally, socially, and institutionally favorable and fertile environment for philanthropy involves creating structures and mechanisms that can channel philanthropic capital, answering to the motivations and objectives of social investors, while strengthening causes and organizations of public interest.
This is the case of philanthropic funds, instruments created for raising and distributing resources which have increasingly become an alternative for companies, civil society and public institutions that seek to act quickly and robustly to minimize damage in emergency situations, unite efforts and enable social agendas, or ensure the sustainability of institutions and causes in a long-lasting way.
Philanthropic funds are created to receive donations, which may come from different sources and which are destined to provide sustainability to causes or to specific organizations. The basic foundation of philanthropic funds is to, on one hand, ensure reliability in the management and resource allocation process and, on the other hand, create, strengthen or diversify the source of resources for socio-environmental ends. Despite this general basis, they can take on different shapes and functions depending on its goals, which may hinder the understanding of what is a philanthropic fund and its different types.
In this article, we propose the classification of philanthropic funds based on their timeframe, dividing them into three types: temporary funds, permanent or continuous funds and endowment funds.
Temporary funds
In general, temporary funds are created to respond to urgent socio-environmental situations. They are designed to act during a determined time frame, aim to answer emergency demands and normally operate as wide fundraising mechanisms as a way to provide an immediate and significant response. The creators of these types of funds don’t always have a direct connection with the supported cause or institution but possess strong leadership and great mobilization capacity.
Examples of temporary funds are those created during the COVID-19 pandemic, such as theHealth Emergency Fund. Created by IDIS, Movimento Bem Maior and BSocial, in 2020, the initiative aimed to strengthen the public health sector’s ability to fight the coronavirus. In seven months, the fund raised BRL 40,4 million (equivalent to about USD 8 million in that year) which were designated to the purchasing of hospital equipment, Personal Protective Equipment (PPE) for health professionals, medications and COVID-19 tests. (To know more, check out theHealth Emergency Fund report and how to create an Emergency Fund, available only in Portuguese).
Temporary funds have also been used to minimize negative impacts caused by climate emergencies. The examples include funds created to support and reconstruct the communities impacted by the floods that hit Rio Grande do Sul – a Brazilian state – in May of 2024, leaving 497 municipalities impacted and 150,000 people displaced. One of them, called RegeneraRS, created by Instituto Helda Gerdau in partnership with Din4mo Lab, despite its temporary nature, aims to support the development of long-term solutions to strengthen the local communities.
Another example is Together for Health, an initiative of the National Bank for Economic and Social Development (BNDES), managed by IDIS, with the prospect of raising and distributing BRL 200 million until 2026 (approximately, USD$ 32,9 million). The fund acts to expand access to healthcare in the north and northeast regions of Brazil through notices and structured promotion. To that end, it operates through a matchfunding system, in which for every BRL donated by a supporter, BNDES will donate another BRL to the fund.
Permanent or continuous funds
The second type of funds are the permanent ones which aim to enable and strengthen a cause or institution continuously. Creators of these types of funds are usually closer related or aligned with the cause in question. Although these causes may be just as complex as those that are supported by temporary funds, they are seen as less urgent. Examples include matters such as equity or equality, democracy and environmental preservation.
These funds are instrumental in mobilizing a large number of grantmakers or organizations (them being formally recognized legally or not, such as social movements) around the promotion of causes. When it comes to permanent funds, ELAS+, Agbara Fund and Pacto pela Democraciaare examples of those funds created by civil society initiatives and which are dedicated to social justice.
As for corporate social investment initiatives, the Fundo de Investimento Social Privado pelo Fim das Violências Contra Mulheres e Meninas fromAvon Institute in collaboration with Accor, represents the transition from a fund initially conceived as a temporary one during the COVID-19 pandemic – when domestic violence against girls and women increased – and which became permanent afterward. It became a strategic instrument for the Institute due to its promotion of the defense of women’s fundamental rights.
Not only in temporary but also permanent funds, the resources that compose them are totally distributed to their own philanthropic purposes. This occurs through a continuous flow of financial and programmatic management, with the aim of ensuring the total allocation of the funds raised.
Endowment funds
Endowment funds are destined to promote long-term financial sustainability for causes and institutions supported. Unlike temporary and permanent philanthropic funds, its operations are not supported by the use of the funds raised, but instead by the management of these resources to generate earnings which will then be put towards the philanthropic activities of the fund. The goal is to ensure the preservation of the retained wealth to allow periodic withdrawals to support the public interest causes or institutions.
In Brazil, this mechanism gained strength especially since 2019, with the enactment of the Endowment Fund Law (Law 13,800/2019), which, as well as creating an institutional and safe environment for its operation, brought visibility for the matter and its importance. In addition, the law also regulated the partnership between the endowment managing organizations and the supported institutions who may be private or public entities.
Major Brazilian endowment funds were founded before the creation of the law, such as the ones from Bradesco Foundation and Fundação Maria Cecilia Souto Vidigal. These funds, created with the goal of building the private social investor’s legacy, are more than 50 years old.
Among other reasons to create an endowment fund are also the promotion of more independence and operational stability for organizations in the long-term, which is the case with thePromoting Philanthropy Endowment, created by IDIS to expand the impact of strategic philanthropy and so, promoting more positive social transformations.
When it comes to public institutions, many of the biggest state and federal Brazilian universities have been building their own endowment fundswith the goal to promote even greater academic excellence through university extension projects, support for students sustainability in classes and other initiatives, such as the USP Endowment Fund.
Although philanthropic endowment funds can be divided into different types, in reality, many organizations use a combination of permanent and long-lasting funds for their projects and operations, meanwhile, temporary funds can, eventually, transform into permanent or long-lasting ones.
Therefore, the first thing to be determined when structuring a fund is its purpose: what is the goal for the mobilized resources? From this definition, one is able to outline the possible management and allocation of these resources to achieve the established philanthropic goal, comprehending the origins of those resources and the stakeholders involved in this arrangement.
The discussion regarding the significance of endowments, as well as their legacy and enduring influence on socio-environmental initiatives, is gaining momentum in Brazil. In an edition that encompasses a historical series from 2019 to 2023, IDIS – Institute for the Development of Social Investment launches the 2023 Endowment Performance Yearbook, presenting a sample of 74 out of 107 eligible funds, which together total BRL156 billion in assets (around USD 26 billion).
Profile of the sample of endowment funds analized in the Endowment Performance Yearbook between 2021 and 2023.
The survey, aimed at endowment managers, reveals that in 2023 funds achieved an average return of 10.6%, the highest since 2020, and that most funds prefer investments in fixed income, cash and equivalents, categories that concentrated 81% of financial investments in endowment funds.
The publication’s foreword comes from Senator Flávio Arns, responsible for drafting Bill 2.440/23, created as a complement to Law 13.800/19 on Philanthropic Endowment Funds. Arns emphasizes that “endowment funds are essential for the social development of our country, as they promote projects and causes that transform the lives of Brazilians.”
According to the Monitor of Endowment Funds in Brazil, a project coordinated by IDIS, 115 Brazilian endowment funds have been mapped, and eight of these were created just this year. Endowment funds bring together a set of private assets with the aim of using income to provide long-term funding for the institutions and/or causes they support. In other words, the creation of an endowment fund perpetuates in the work of an institution or in support of a cause.
The Endowment Performance Yearbook provides a panorama of information on cash flow, allocation, returns, investment policy and the governance of endowments. According to the publication, R$3.5 billion was redeemed in 2023 alone, of which R$3.2 billion (around USD 550 million) was allocated for causes and R$270 million (USD 46.6 millions) was destined for expenses.
Five main causes supported by endowments analyzed by the Endowment Performance Yearbook 2023.
Education continues to be the cause that receives greatest support with 47 funds allocated to the sector. This was followed by research and knowledge, inequality/ economic and social development and social assistance. Most of the funds are concentrated along the Rio-São Paulo axis, with São Paulo accounting for 69% of the total number of participants in the survey.
“The Yearbook presents parameters and references for the work of managers. Now in its third edition, the publication is recognized as a guide for decision-making and has been fundamental to our advocacy actions in search of improved public policies in Brazil,” states Paula Fabiani, CEO of IDIS.
Regarding the number of donations received, in 2023, the 74 endowments received a total of BRL 517 million in donations, but the average amount granted per fund remained stable, dropping slightly from BRL 9.3 million in 2022 to BRL 8.8 million in 2023. Also noteworthy is the concentration of donations in just a few funds, confirmed in this edition by the fact that the five funds most engaged in fundraising received 75% of the donations. It’s no surprise, then, that fundraising continues to be the biggest challenge facing managers, especially those responsible for funds with assets of less than BRL500 million.
Another discovery revealed by the survey concerns the low ethnic and racial diversity in governance bodies. Representation from the black, brown and indigenous population on councils and committees is very low and did not exceed 8% of the members in any of the cases analyzed. The information presented in the publication was collected through an online questionnaire, answered directly by the managers of the equity funds.
Check out the full launch event (available only in portuguese):
Main findings of the publication
Bringing together five years’ worth of data (2019 to 2023), the survey confirms trends among several of the points presented and also highlights new developments.
Total donations to endowment funds have grown, but the average remains stable
For the second year running, the total volume of donations to endowment funds has grown. In 2023, the endowments received BRL517 million. Yet this increase may have been caused by the larger sample, since the average amount donated to each one remained stable, with a slight drop, from BRL 9.3 million in 2022 to BRL 8.8 million in 2023.
Assets grow fueled by donations
Between 2022 and 2023, the funds in the sample saw their assets increase by an average of 37.6%, a much higher percentage than the average rate of return, which indicates that the growth is largely due to donations.
The biggest slice of donations goes to a small group
The tendency for donations to be concentrated in a few funds is confirmed in this edition. The top five funds received 75% of the donations. This percentage is very close to that of the previous edition, which was 74%.
Endowment funds contributed BRL 3.2 billion to causes in 2023
The total redemption volume reached the expressive number of BRL 3.5 billion, driven by large funds (with assets of over BRL 500 million) which accounted for 90% of withdrawals. Of the total amount redeemed, BRL 3.2 billion was earmarked for the causes and BRL 270 million was used to finance the funds.
The Rio-São Paulo axis still dominates endowments
More than 80% of the endowment funds analyzed are based in the states of São Paulo and Rio de Janeiro, with São Paulo alone accounting for 69% of the sample. However, there are representatives from all regions of Brazil in the sample, encompassing 11 states.
Adherence to the Endowment funds Law model is still low
Only 19% of funds operate within the parameters established by Law 13.800/19, known as the Endowment Funds Law. The main reasons for not adhering are the lack of tax incentives and complex governance, both of which were cited by 13% of respondents. Taking into consideration that 70% of the organizations managing the funds in the sample enjoy immunity or exemption from taxes, not adopting the Law’s model could also be linked to a fear of losing their tax status.
Education remains the favorite cause
Education remains at the top of the ranking of favorite causes, with 47 endowment funds in support. Also among the top five are Research/Knowledge (2nd place) and Science and Technology (5th place), two causes also tied to Education. The third and fourth places are occupied by Combating poverty and inequality/economic and social development; and Social Care, both of which each receive support from 15 funds.
NEW ISSUE Endowments contribute little to the funding sources of supported institutions
Among endowments created for the benefit of the managing organization itself, half contribute less than 10% of the funding sources of the supported institution, while 25% account for all funding. Among the funds that serve an institution other than the managing organization, 96% contribute with less than 10% of the supported institution’s sources of funding.
Portfolio allocation prioritizes fixed income and liquidity
The data confirms fund managers’ preference for fixed income, cash and cash equivalents. These categories concentrated 81% of the financial investments of endowment funds in 2023, maintaining a more or less stable level over the last five years, and giving the portfolio a high degree of liquidity, since 53% of the investments can be redeemed within 30 days.
Average return of 10.6%, the highest since 2020
The average return on the funds in the sample in 2023 was around 10%, with no major variations between the different asset sizes. This is the best figure since 2020, surpassing IPCA by more than 5 percentage points (4.62%), but around 3 percentage points below the CDI (13.04%).
Achievement of return targets in 2023 has the highest percentage in the period analyzed
Of the sample of 74 funds, only 43% adopt a return target. Among them, the IPCA + 5% is the most common target. In 2023, 66% of them achieved their goals, the highest percentage in the period analyzed by the Yearbook.
In-house financial management remains the preferred model for managers Almost two-thirds of funds (63%) practice exclusively in-house financial management, and this model is more common among those with lower assets.
Funds with external financial management performed better in 2023
Contrary to the experience in 2021 and 2022, when the scenario of rising interest rates benefited the more conservative investment options usually preferred by in-house managers, in 2023, funds that adopted exclusively external management, or even those that adopt both management models combined, showed superior returns, far exceeding the IPCA and almost touching the CDI.
Responsible investment policy is more intention than practice
Only 23% of the funds in the sample adopt a responsible investment policy and implement it. Seven percent declare they follow the policy but admit that it is not yet taken into account across all decisions. Of those that do not have a responsible investment policy, two-thirds say they have plans to implement one.
Most funds have well-structured governance
Most of the funds analyzed have well-organized governance, 78% have Advisory Boards, 66% feature Fiscal Boards and 62% have Investment Committees.
Women are present in governance bodies, but in low numbers
Opening space to a variety of genders on boards and committees is a reality for most endowment funds. Women are represented in 83% of the general meetings, in 90% of the boards of directors, in 74% of the investment committees and in 60% of the supervisory boards. However, when the total number of women is compared to the number of men, we see that women don’t even occupy half of the seats and, in the case of investment boards, account for only 7% of members.
NEW CHALLENGES Ethnic and racial diversity in governance continues to present a challenge
While women have already managed to win seats on most councils and committees, this continues to be a distant reality for the black, brown and indigenous population (BIPOC). They are represented in 43% of the general meetings, in 36% of the boards of directors, in 11% of the investment committees. However, the BIPOC presence is numerically very low and in none of the instances does it exceed 8% of members.
Fundraising continues to be the principal challenge
The greatest concern for equity fund managers continues to be fundraising, except for those with more than BRL 500 million in assets, for whom profitability is the main challenge. Profitability is also a concern for other funds, almost always appearing in second place, except for foundations with assets of up to BRL 10 million, which cite their own consolidation as the second-biggest challenge.
Managers expect to receive more donations in 2024
When asked about the outlook for 2024, more than half (56%) expected to raise more funds, and 41% said they expected an increase in the amount allocated to causes. Managers were more conservative on investment performance, with 38% forecasting an increase in gross profitability in 2024 and nearly half (48%) expecting last year’s figures to be repeated. But few were willing to risk pursuing profitability, as 88% of managers stated that the portfolio continues to present the same level of risk as in 2023.
The generation and dissemination of knowledge is one of the pillars for achieving our mission. Through publications, technical notes, articles, courses, training and events, we inspire, support and promote private social investment and its impact.
And we can go even further, and generate even more positive impacts, if we go together. Check out the main knodwledge projects planned by IDIS to be carried out in 2025.
Giving Culture
Fourth edition of the largest and most in-depth quantitative study on the behavior of the Brazilian individual donor. The special chapter will focus on the influence of emergency donations in the giving culture.
Launch forecast: August 2025
Philanthropy and Private Social Investment
14th edition of the most important event aimed at the Brazilian philanthropic community. The program, which includes national and international speakers, will be held in a hybrid format. In 2025, the event is scheduled to take place on September.
Launch forecast: September 2025
Family Philanthropy
Brazil has a great potential for more strategic family philanthropy. In a workshop with active philanthropists, we will create a theory of change for engaging new people, identifying motivations, the necessary conditions for change and defining activities and interventions necessary for this to happen. The result will be systematized in a publication and widely disseminated.
Launch forecast:June 2025
Endowments
Advocacy action to positively influence the regulatory environment and increase the knowledge of society in general about the mechanism, through communication and knowledge actions. The initiative includes the Coalition for Endowment Funds, formed by organizations and people who support the creation of endowments in Brazil. The group, which today has more than a hundred signatories. The project runs throughout the entire year.
Philanthropy and Private Social Investment
Resumption of the regional agenda, taking concepts, trends and practical cases beyond the Rio-São Paulo axis. With the aim of inspiring philanthropists and strengthening regional philanthropic communities, we hope to bring together 50 guests in person in Manaus for a morning of debates.
“It is not possible to think about sustainable development without considering scientific development”. This was one of the statements made by Dr. Marcos Kisil, a physician and founder of IDIS, during the First International Seminar ‘Science meets Philanthropy.’ Throughout a full day at the University of São Paulo (USP), leaders from various fields discussed the landscape, examples, strategies, and future of the relationship between the development of science and philanthropy, both in Brazil and internationally.
The event was organized by Gema Filantropia (Group of Studies on Models to Support Science) – an initiative of IEA-USP (Institute of Advanced Studies of USP) – and the José Luiz Egydio Setúbal Foundation, with support from IDIS. The goal is to stimulate collaboration between the scientific and philanthropic communities in Brazil. Leaders from universities, research institutes, philanthropic entities, funding agencies, government authorities in Science and Technology, and researchers engaged in the cause gathered at the meeting.
Throughout the day, the current homogeneity of funding in the field of science was emphasized, mainly provided by the governmental sector. The opportunity for the philanthropic sector to collaborate in these investments was highlighted, given its independence and capacity for experimentation and risk-taking, important and beneficial characteristics for the scientific field. Philanthropy has played an increasingly significant role in supporting science and technology, something that is still in its infancy in Brazil but already well-established in countries like the United States, England, Canada, and the European Community. The term ‘science philanthropy’ was coined to describe this trend.
During the panel ‘Discussion about the needs and proposals for a legal environment favorable to philanthropy in science’, alongside Laís de Figueiredo Lopes, partner at SBSA Advogados, Paula Fabiani, CEO of IDIS, emphasized philanthropic endowments as a strategic alternative for financial sustainability in science funding. These endowments, created to receive donations for specific causes or organizations, allow received resources to remain invested, with only the returns being used to fund the cause. She also presented an overview of the agenda for endowments in the legislature, which currently includes two Bills proposing incentives for donations to endowments.
The science has its own maturation time, requires experimentation, and demands long-term investment. Endowment funds enable the cause to have long-lasting resources, taking whatever time is necessary,” comments Paula.
Hélio Nogueira Cruz, a member of the Faculty of Economics and Administration of USP and former advisor to IDIS, indicated in the panel ‘Contributions and projects of the University of São Paulo in the field of scientific philanthropy’ that, despite the gains from the mechanism, there is still much to be done. “The experience with endowment funds is recent, and there is enormous room for their evolution,” he said.
Reinforcing international collaboration and seeking inspiration from other parts of the globe, the event also featured the remote presence of Joseph R. Betancourt, president of the Commonwealth Fund. The American organization directs its fund resources to support independent research on health-related issues, seeking to promote greater access and quality of care, especially for people in situations of social and economic vulnerability.
Dr. Marcos Kisil participated in the panel ‘Strategies and future actions to strengthen scientific philanthropy in Brazil’, highlighting the importance of philanthropy as direct support for scientific development. “I think scientific issues begin to have greater prominence in society when you disclose that development cannot occur through cyclical processes but must be through a permanent and sustainable process throughout history, which scientific philanthropy can directly support,” he comments.
At another moment, he indicated how philanthropy is indeed a powerful tool and platform but can also be misused by its holders. “You have philanthropists who deny science to such an extent that they are now financiers of the anti-vaccine movement in the United States. Showing that this power, this influence, these communication networks, can be contrary to science,” he says.
At the end of the event, there was the launch of his new book ‘Philanthropy at Risk: from scientific development to sustainable development’, which explores the need for deepening the relationship between philanthropy and science in Brazil, with practical examples of what is already being done, and furthering the discussions raised throughout the event.
“Although it is impossible to predict exactly what we will find with a new scientific tool, we must remember that science is not limited to expected results: the entire process generates knowledge, discoveries, and learning for researchers. Supporting science is never a waste of resources”.
The gift received will be the first contribution to IDIS Endowment, which is being stablished on the year the Institute celebrates its 25th anniversary. The mechanism aims to contribute to the organization’s sustainability and shall provide greater predictability for investments in projects to strengthen strategic philanthropy and the culture of giving in Brazil, including advocacy initiatives for a favorable regulatory environment and knowledge contents.
“The endowment will provide perpetual source of funding, which will be used to expand our efforts to strengthen strategic philanthropy in the country, as it provides us with greater long-term stability. It’s a recognition of the relevance of IDIS and the potential we have to generate even more positive impact,” explains Paula Fabiani, CEO of IDIS.
Ranked as the fifth richest woman in the world, the philanthropist is a signatory of the Giving Pledge. This commitment encourages people and families with substantial wealth worldwide to contribute a significant portion of their wealth to social causes and publicly pledged to donate at least 50% of her wealth during her lifetime. In Brazil, Elie Horn, founder of Cyrella, and the Latin American couple, David Vélez, co-founder of the digital bank Nubank, and his wife, entrepreneur Mariel Reyes, are also signatories of the commitment.
The publication shows an increase in donations to endowments, as well as the growth of resources allocated to socio-environmental projects
In its second edition, the Endowment Performance Yearbook, a publication by IDIS – Institute for the Development of Social Investment, and the Brazilian Endowment Coalition, had the participation of 59 endowments, constituting a sample almost 50% larger than the previous year, which had 40 respondents. The combined assets of the funds included in the survey are also substantially higher – BRL 13 billion in 2021 versus BRL 123 billion in 2022. The historical series covers data from 2019 to 2022, and the publication includes articles by experts that contribute to interpreting the findings.
The growth in the number of respondents provides an even more accurate picture of endowment in Brazil and reaffirms the Yearbook as a national reference for endowment managers.
“The first endowment legislation in Brazil dates from 2019. Since than, the topic is on the rise. As more endowments are created, the greater is the need for parameters and benchmarks. Our hope is that the Yearbook becomes an effective tool for decision-making and that the historical series contribute to an understanding of the evolution of endowment funds in Brazil”, comments Paula Fabiani, CEO of IDIS.
The sample analysis indicate that after a sharp decline in contributions to the funds in 2021, there´s been a recovery in donations received, nearly doubling the amount (R$ 174 million vs. R$ 330 million). However, donations continue to be highly concentrated in a few funds. In 2022, three funds recieved 64% of the total donation volume. In 2021, the top three attracted 53%.
Despite fluctuations in donations, the volume of redemptions made by the endowments increased over the period analyzed. It rose from R$ 158 million in 2019 to R$ 340 million in 2022, allocated to financing socio-environmental projects.
Education is the largest area of attraction for these endowments. From the perspective of the beneficiary organizations, over one-third (35%) are educational institutions. From the standpoint of the supported causes, 70% of funds with predefined causes claim to support Education in some way, with Science & Technology being the second most frequent cause. This is partly due to the large number of endowment funds associated with colleges and universities.
Brazilian endowments are still mostly executors, with 90% or more of their donations used for their own projects. More than half (51%) of the sample funds fall into this category.
The allocation of endowment funds’ investments remains heavily concentrated in fixed income assets, which have remained at around 70% (74% in 2020, 73% in 2021, and 75% in 2022). One possible interpretation is that the stable behavior of the managers is linked to the resource allocation rules contained in the investment policies.
The nominal return on endowment funds recovered in 2022 after a year of decline. This performance is common to all asset size categories. In the aggregated data, the average return in 2020 was 6.0%, followed by 3.4% in 2021 and 8.3% in 2022.
The first law that regulated endowment funds in Brazil dates back to 2019. Its sanction contributed to increasing the visibility of the mechanism and accelerated its adoption. Nevertheless, since compliance with the law is not mandatory, the number of funds that claim to follow the model established by Law 13,800/19 is still relatively low – 29% (17 out of the 59 participants) in the sample. The most frequent reason for non-compliance is that the funds were created before the law was enacted (33%). The other reasons mentioned by a larger number of managers are the high cost of maintaining two institutions (14%), lack of tax incentives for donations (12%), and complex governance (10%).
The sample analyzed showed that endowment funds tend to have well-structured governance. Almost all (90%) have a Board of Directors, with 72% of them having independent members. Seventy-one percent have Audit Committees, and 70% have Investment Committees.
Endowment fund managers still consider that the biggest challenge is fundraising, mentioned by nearly half of them (48%). Next are returns (17%) and consolidation of their own fund (14%).
Regarding the challenges faced by endowment managers, Supreme Court Justice Minister Luis Fux stated in the Yearbook’s preface: “Despite significant progress in consolidating endowment, financial difficulties cannot be disregarded in order to provide them with efficient management in the current scenario of successive economic crises. Their administrators, consequently, need reliable information to provide them with (i) the basis for making strategic decisions, (ii) risk control, (iii) attracting profitable investments, (iv) assessing the cost-benefit of new practices, (v) and establishing solid parameters for governance and transparency. In this context, the new edition of the Endowment Performance Yearbook is very timely.”
This is an initiative of IDIS – Institute for the Development of Social Investment and Brazilian Endowment Coalition. The publication is supported by 1618 Investimentos, ASA – Santo Agostinho Association, José Luiz Egydio Setúbal Foundation, Maria Cecília Souto Vidigal Foundation, Pragma Gestão de Patrimônio, Santander Bank, Umane, and Wright Capital Wealth Management.
About IDIS and Brazilian Endowment Coalition
For over a decade, IDIS has been dedicated to promoting the advance of endowment funds in Brazil, leading the Brazilian Endowment Coalition. With over 100 members from different sectors, the initiative seeks to develop this model of financial sustainability for organizations and causes through advocacy.
Among the network’s achievements is the approval, in January 2019, of the regulation of the instrument through Law 13,800/19, known as the Endowment Funds Law. The coalition remains active in seeking improvements in the legislation on more specific issues. IDIS also provides advice for the implementation of endowments, participating in projects for Unicamp, Unesp, Ibram, MAR – Museu de Arte do Rio, ASA – Santo Agostinho Association, Hospital AC Camargo, among others.
by Paulo Fabiani, CEO at IDIS, and Andrea Hanai, project manager at IDIS
A relatively new phenomenon on the Brazilian scene, endowment funds are strengthening social causes and organizations
With a long history behind them, endowment funds have become an effective mechanism for the sustainability of causes and organisations around the world. The first known example dates from the first century BCE, when Plato left his farm to support the Academy he had founded. Since then, many institutions have been establishing significant endowments, such as Harvard University, the University of Cambridge, and the Metropolitan Museum of Art. Wealthy families and individuals have also created endowments, such as Gates, Rockefeller, Mott, and others. In Brazil, the adoption of the mechanism is more recent, however, it has been expanding rapidly in this century, following the strengthening and maturity of the philanthropic environment.
The first endowments in Brazil emerged in the 1950s, as a way for families and businesses to build lasting legacies. In the absence of a specific regulation on the subject, they used the international experience as a reference to create their own governance, policies and rules to manage the endowment structures. Nevertheless, at first very few took this step, and by 2000, there were only six known endowments in the country.
In Brazil, the adoption of the mechanism is more recent, however, it has been expanding rapidly in this century, following the strengthening and maturity of the philanthropic environment.
A leap forward
However, in the following years, civil society organisations and families began to recognise the importance of endowment structures for the financial sustainability and perpetuity of their philanthropic activities, a trend which was accelerated by the work of IDIS (Institute for the Development of Social Investment) and other civil society actors to promote a better regulatory environment for endowments. A turning point was the disastrous fire at the National Museum in Rio de Janeiro in 2018, which led politicians to seek solutions to the lack of long-term financing for museums and other cultural institutions. In 2019, the endowment fund boom gained traction with the enactment of the first relevant law (Law 13.800/19), aimed at setting a regulatory baseline for the development of the endowment industry.
In the following years, civil society organisations and families began to recognise the importance of endowment structures for the financial sustainability and perpetuity of their philanthropic activities.
The legislation has contributed significantly to a more favourable environment, by ensuring visibility to the mechanism, and bringing attention to long-term strategies and sustainability. It has also established a framework, both legal and institutional, that engenders confidence in donors.
Moreover, the Law 13.800/19 has also ensured that public institutions of education, health and culture, among others, also benefit from these structures, regulating a mechanism that facilitates private donations and reduces dependence on already scarce public funds. In this context, the creation of endowments by public institutions that seek financial sustainability through an instrument that diversifies their sources of funds and increases their budgets is on the increase.
The Brazilian Endowments Outlook, published by IDIS in 2022, revealed for the first time the size and characteristics of the industry in the country. The study mapped 52 active endowment funds, 23 per cent of which were constituted after the enactment of the Law 13.800/19. Together, their patrimony totalled BRL 78.8 billion (approximately $14.3 billion). The most significant one is the endowment from Bradesco Foundation with assets equivalent to $11 billion, which puts it among the leading endowments not only in Brazil, but worldwide. Education is the chief beneficiary of this growing trend, supported by 24 Brazilian endowments, followed by culture (nine) and health (eight). Another sign of their growing popularity is that, according to the GIFE Census 2020, a survey among 131 corporate, family, and independent philanthropic Brazilian institutions, endowments were the source of 26 per cent of their budgets that year, corresponding to almost BRL 1.4 billion (approximately $300 million) in funds destined to causes and institutions, an amount which indicates the impact of endowments for the development of socio-environmental causes in the country.
The creation of endowments by public institutions that seek financial sustainability through an instrument that diversifies their sources of funds and increases their budgets is on the increase.
The challenges remaining
To explore endowments’ full potential, though, the philanthropic sector faces significant challenges: governance implementation, investment returns and fundraising capability are the main concerns. An emerging range of specialised consulting, legal and fundraising services, along with financial institutions and academic researchers, is now dedicated to supporting philanthropists, businesses, civil society organisations and public institutions in structuring their endowments. In another study, IDIS sheds light on the endowment financial performance and portfolio of investments to provide the sector with relevant benchmarking information.
Further advances in the regulatory environment for endowments are also needed. For example, despite being positive and innovative, the Brazilian endowment law does not foresee tax incentives for donors. The experience in countries like the US and the UK demonstrate that tax incentives create a fertile environment for the donations to such funds, resulting in large and long-standing endowments. In addition, the exemption from income tax on investment returns is not guaranteed by the Brazilian legislation, which cuts down endowments’ spending capability and the volume of resources destined for the causes and institutions supported by these funds.
In order to influence this environment, the Brazilian Endowment Coalition has been set up, a network that brings together 102 signatories and which urges tax incentives for donations and tax exemption of endowment funds as a way of accelerating the adoption of this mechanism and strengthening the philanthropic sector. Heading the coalition and supported by Brazilian donors and international organisations such as WINGS(with resources from the EU), IDIS reinforces its advocacy strategy by having regular communication with members of congress, monitoring bills, conducting studies and publishing case studies.
Notwithstanding the challenges, there is great potential and opportunity for endowments to flourish in Brazil. For the fourth consecutive year, Brazil rose in the overall ranking of the World Giving Index, jumping from 54th to 18th position, despite the difficulties arising from the socio-economic context and political turmoil of recent years. A giving culture is on the rise. As they become more popular, contributing to endowments provides another option for the exercise of citizenship and the promotion of socio-environmental equity and justice.
The first registered endowment in Brazil dates from 1956. The model, however, was not adopted by many organizations, and only in the decade of 2010 it started becoming more popular. The first law that regulates endowments was created in 2019 and since then the debate around them has been rising.
Little by little, there were news about new endowment, but there was no information about their number and sizes, or where they were located and causes they beneficiated. These are some of the questions that we at IDIS often hear. And the problem is that there was no data to answer them. Despite seeing the fruits of our efforts, we were not sure about the size of the endowment fund field in the country, nor its characteristics.
It was the urge to answer these questions, and many others, that led IDIS to develop the BRAZILIAN ENDOWMENTS OUTLOOK. After more than ten years of advocating for the regulation of endowment funds in our country, providing technical support for the creation of more than ten funds, and launching six publications on the subject, we wanted to have a clear picture of how far we have come.
The challenge was easy, as endowment fund managers are not used to disclosing numbers, let alone talking about their own difficulties. To our surprise, some traditional funds were willing to participate promptly, and this attitude spurred others to do the same. We gathered information on 58 endowment funds, six of which are still in the planning or structuring phase. In this publication, we have gathered the highlights we consider most important for the international public and those who are interested in learning more about this important aspect of philanthropy in Brazil.
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Examples of temporary funds are those created during the COVID-19 pandemic, such as the
