Arquivo da tag: endowments

Scientific philanthropy: what has been done and the future of the practice

Publicado em por
Responder

“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.

The mechanism of endowment funds is already used by several scientific organizations around the world, such as the NIH Common Fund, Harvard University, The Endowment for Basic Science, and in Brazil, the USP Endowment, the FMUSP Medicine Endowment, among others.

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”.

(MYHRVOLD, 2000)

Mackenzie Scott Donates $1.5 Million to IDIS

Publicado em por
Responder

IDIS – the Institute for the Development of Social Investment – has received a donation of $1.5 million, equivalent to R$7.5 million, from American philanthropist MacKenzie Scott.

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.

IDIS launches the second edition of the Endowment Performance Yearbook, analyzing data from 59 organizations

Publicado em por
Responder

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.

Endowment funds: New country for an old form

Publicado em por
Responder

Originally published in Alliance Magazine on 06/06/2023

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.

Brazilian endowments outlook

Publicado em por
Responder

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.

Click here to download the Brazilian Endowments Outlook