IDIS launches the 3rd edition of the Endowment Performance Yearbook

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.

IDIS celebrates 25 years at the MASP in São Paulo, bringing together the Institute’s collaborators and partners

On October 3rd IDIS – Institute for the Development of Social Investment, celebrated 25 years in an event in São Paulo. The celebration took place at MASP – Museu de Arte de São Paulo Assis Chateaubriand, and was attended by collaborators and former collaborators, as well as many colleagues, partners and friends who are a part of the institute’s history. This was another stage of the campaign ‘Social Investment is about people’, celebrating not only the many years of IDIS’ history, but also all the people who have helped build and continue to do so with us.

Audience at the celebration in the MASP auditorium. Credit: Paula Miranda.

 

The anniversary started with the moving presentation by Maestro João Carlos Martins for an audience of more than 270 guests. He gifted the public with a performance of Playing Love, by Ennio Morricone, followed by a surprise presentation of the brazilian version of ‘Happy Birthday to you’, both on the piano. 

Maestro João Carlos Martins at IDIS 25 birthday celebration. Credit: Paula Miranda.

 

The event was followed by speeches from Luiz Sorge, president of IDIS board, Marcos Kisil, IDIS founder, and Paula Fabiani, current CEO of IDIS. 

“Today we’re here to celebrate IDIS’ 25th anniversary. But more than that, we are here to celebrate each and every one of us. To recognize everything that we have accomplished together and to bring new energies to continue our journey. […] It is about people because there is an empathetic approach. It is about people because it involves dialogue, collaboration, disagreements, consensus, mistakes and success, and it moves us”, said Paula during the opening of the event. 

Then it came the time to talk about the future of private social investment in the country. The philosopher and economist Eduardo Giannetti stepped onto the stage to talk about the role of philanthropy in the current scenery. He commented on the complexity of today’s world, which presents us with major global challenges, and highlighted hope as a key mechanism to ensure that young people engage in a better world. 

“I think we have to show young people how a life dedicated to others and to relevant causes can be beautiful and can bring an element of motivation”, said Giannetti in his opening speech. 

 

Check out the video of the opening session (available only in portuguese):

 

Afterwards, a tribute was then paid to Lírio Cipriani, founder of the Avon Institute, and our longest partner. In 2002, IDIS supported the creation of the institute and, since then, we have been following its journey ever since. The history of IDIS has been written so far side by side with the one of the Avon Institute – currently named Natura Institute. The moment represented a tribute to all our partners who have also helped to build this history with us. 

The programming also included the participation of a wide-ranging panel that dealt with the future of social investment through the eyes of the ones who support philanthropy as well as the ones who benefit from it. The session included Alcione Albanesi, President of Amigos do Bem; Benjamin Bellegy, Executive Director of WINGS; Carlos Pignatari, South America Director of Social Impact at Ambev; Claudia Soares Baré, Executive Director of Podáali Fund; Neca Setubal, President of the Tide Setubal Foundation; Raí Oliveira, Founder of Gol de Letra Foundation, who participated in video; and Selma Moreira, Vice President of Diversity, Equity and Inclusion at J.P. Morgan.

The panel ‘The future of social investment: the view of the ones who support philanthropy and the ones who are benefited from it’. Credit: Paula Miranda.

 

One of the main points discussed during the panel was the central role of those supported by philanthropy. 

“When we talk about the future of philanthropy, to Podáali [Fund], the future of philanthropy is to make indigenous people the main characters of their philanthropy. […] The name Podáali means sustainability, giving, because we already did this without knowing we were practicing philanthropy. […] If there is no respect, we are not making philanthropy, it is just one side trying to always be right”, says Baré.

Check out the video of the entire panel (available only in portuguese):

Over the last 25 years, IDIS has closely witnessed the development of private social investment and, consequently, of society as a whole. Everything we have achieved has only been possible thanks to the commitment, collaboration and collective work of different people with a common goal: building a better world with more equity. That is why we finish our celebration with a big toast to what we have achieved so far and all that we are yet to build! 

IDIS Team. Credit: Paula Miranda.

Commitment 1% calls on companies to boost engagement in donations to social projects in Brazil

This august, Brazilian companies announced their pledge to Commitment 1%. Envisioned by IDIS – Institute for the Development of Social Investment and Instituto MOL, this initiative seeks to promote donations made by companies to civil society organizations. Amongst the companies that confirmed their commitment to the movement are Cyrela, fama re.capital, Gaia Impacto, MOL Impacto, Pantys, PwC, RD Saúde and TozziniFreire Advogados as well as five other organizations are already at an advanced stage in the process of their adhesion.

 

Inspired by Pledge 1%, movement in the United States that gathers more than 15 thousand signatories, Commitment 1% aims to gather Brazilian companies that already donate at least 1% of their annual net profit and those that commit to reaching this donation level within two years. According to the publication Corporate Social Investment Benchmarking, in 2022, Brazilian companies donated R$4,026 billion. That value equals to about 1/3 of the total donated by individuals, according to IDIS Brazil Giving Research 2022. During the same period, donations made by individuals reached R$12,8 billion.

 

“The goal 

of this commitment is to contribute to the progress of private social investment in Brazil and encourage the longevity of donations as a strengthening strategy of organized civil society. The third sector plays a crucial role in reducing inequalities. Here, we have serious organizations that have been working for a long time in a meaningful way, and financing the work and strengthening of these initiatives is what will assure social transformation in the medium to long-term in the country. And this progress is the company’s responsibility as well”, emphasizes IDIS’ CEO, Paula Fabiani.

 

To the signing parties, the benefits of committing to the movement will be seen in several areas: access to a community of exchanges and knowledge, visibility to the actions taken and reputational gains with stakeholders and becoming an influential agent in your acting market.

 

“The companies that are committing with the 1% are providing and excellent example for others to follow the same path. As Ralph Waldo Emerson says: “Your actions speak so loudly that I cannot hear what you say.” – Aron Zylberman, Instituto Cyrela

At the same time as the recurring and strategic practice of philanthropy contributes to accelerating positive social change and strengthening civil society, companies can develop better relations with their contributors, suppliers and consumers. There is also potential impact on fundraising in the financial market (the strengthening of the S in the ESG helps drive valuation).

 

Launching event of Commitment 1% which happened in São Paulo in PwC Brazil’s headquarters.

The adhesion process includes the confirmation of the donations conducted and can be made online in the commitment’s website.

“Commitment 1%

 is an ambitious and impactful project, capable of driving and accelerating the way that companies commit to the present and future of society, investing to strengthen relevant projects that need resources to keep going”, emphasizes Rodrigo Pipponzi, cofounder of Instituto MOL.

 

Access the Commitment 1% website here, available in English.

1% changes the world!

Paula Fabiani, CEO of IDIS, is now PhD on strategic corporate philanthropy. Check out the full thesis!

Nowadays, it is increasingly relevant for companies to take measures that take into consideration social and environmental consequences of their actions. According to the ‘Corporate giving by the FTSE 100’ report made by CAF (Charities Aid Foundation), 69% of the public believe businesses have an obligation to support their local communities.

With that in mind, Paula Fabiani, CEO of IDIS, is now a PhD, having completed a thesis in which she researched about the Corporate Donation Chain approach and the potential it has to enhance strategic corporate philanthropy.  She completed her Ph.D. in Operations Management and Sustainability at Fundação Getúlio Vargas / São Paulo School of Business Administration.

 

“Academia has the power to transform. Through scientific rigor, which lends credibility to the academic world, research and publications have the potential to contribute to the creation of a better world. This is precisely one of my commitments: to always seek a deeper understanding of issues that can contribute to our society […] Through the lens of stakeholder’s engagement, I tried to help corporations to adopt a more strategic approach to their philanthropic activities”, says Fabiani.

The full thesis can be accessed in full here.

Internacional ranking recognizes IDIS as leader in social impact advisory in Brazil

The French agency Leaders League, specialized in the creation of rankings and in-depth analysis widely used by entrepreneurs and executives in their decision making process, released the ranking for leading Brazilian organizations in social impact advisory. The evaluation criteria was based on the collection and analysis of data. 

 

IDIS conquered 1st place in the ranking, demonstrating our commitment in the support of social investors that are dedicated to the generation of social impact in Brazil. 

 

In regards to strategic advisory, we offer technical support to families, companies and social organizations that wish to start or enhance their social investment. We provide customized and participative advisory in six axis: strategic planning and governance; ESG agenda; endowment structuring and long-term strategies for financial sustainability; project design; implementation and organizational capacity building; development of calls for proposals and portfolio management; in addition to Monitoring and Assessment. 

 

“Initiatives such as Leaders League contribute to give visibility to the excellent work done by Brazilian organizations that generate impact through strategic advisory made with commitment, seriousness, creativeness and efficiency. This ranking is yet another tool to increase trust with social investors, both local and international. We are happy to lead the ranking, but also to congratulate the other organizations featured in it. The social impact advisory ecosystem in Brazil is vibrant, strong and diverse, and everyone contributes to it!”, comments Paula Fabiani, CEO of IDIS.

 

About IDIS

We are IDIS – Institute for the Development of Social Investment, a civil society organization founded in 1999 and pioneer in technical support to social investors in Brazil. With the mission to inspire, support and promote strategic philanthropy and its impact, we serve individuals, families, companies, corporate and family run institutes and foundations, as well as with civil society organizations, in actions that transform realities and contribute for the reduction of social inequality in the country. 

Our actions are based on the tripod of generating knowledge, offering advisory and developing social impact projects that contribute to the strengthening of the ecosystem of strategic philanthropy and of giving culture. We value partnerships and co-creating, and believe in the power of connection, of joint learning, of diversity and plurality of points of view.

Study indicates a correlation between good practices of Private Social Investment and the ESG agenda

Since aspects related to socioenvironmental impact and risk assessment started to integrate into the business strategy of an increasing number of companies, we have seen the market turn upside down and the subject gain strength and scale. It’s evident that the idea of sustainability and corporate social responsibility is not new, but the market logic has certainly changed since it was suggested that resources allocated to socioenvironmental projects of public interest should no longer be seen as expenses, but rather as investments that bring short, medium, and long-term returns. This is what we call private social investment – or strategic philanthropy, integrated into an ESG agenda.

We understand that private social investment practices have high penetration and can substantially enhance a company’s socioenvironmental actions. In other words, when done well, social investment can help unlock various other aspects of a corporate sustainability agenda. Empirically, the Third Sector has been working for years to demonstrate the impact that private social investment can have on an organization’s ESG metrics, especially in the social field.

To prove this hypothesis, IDIS – Institute for the Development of Social Investment undertook to analyze the correlation between private social investment and the scores of the brazilian stock exchange’s Corporate Sustainability Index (in portuguese, abbreviated as ISE B3). Established in 2005, it is currently the largest sustainability index in the country and was the fourth to be created globally, undergoing periodic revisions and analyses according to societal and market demands.

The companies included in the Index are chosen annually based on a ‘best-in-class’ process — a term used to describe practices or processes considered the best compared to market standards. The Index questionnaire is based on SASB Standards and maintains consistency with the Global Reporting Initiative (GRI), one of the world’s leading ESG measurement standards.

The survey analyzed the 2022-2024 triennium of companies included in the index, and during the evaluation period, it was very rewarding to identify that the practice of private social investment consistently ranked among the top ten topics most correlated with the ISE B3 score. In other words, companies that perform well in strategic philanthropy tend to excel in overall corporate sustainability.

It is also interesting to note that private social investment practices are aligned with aspects such as ‘foundations of corporate sustainability management’, ‘business ethics’, and ‘trends and purpose’. The alignment with topics that naturally have greater cross-sectional relevance indicates the tactical nature of private social investment in formulating and implementing integrated corporate sustainability strategies.

A private social investment strategy aligned with an ESG strategy helps to materialize the organization’s purpose for its stakeholders, generating tangible results for both the company and society. A company’s investment in socioenvironmental projects can be a good way to engage different stakeholders and initiate collective agendas with the government and organized civil society, promoting benefits for both society and businesses. Furthermore, it helps companies clearly and robustly demonstrate their socioenvironmental commitments, signaling to the market and consumers a real commitment to different causes.

Despite seeming logical, this alignment is not an easy task. In addition to connecting actions with business challenges and brand purpose, strategic action must consider material business aspects and a thorough mapping of stakeholders and different ways to engage them. Moreover, socioenvironmental actions should complement efforts undertaken by the Third Sector, promoting exchanges that enrich the performance of all actors. Study data shows that this is a relevant task that should be given importance by the private sector, as it is highly correlated with comprehensive corporate sustainability management.

 

Other findings

Regarding the scope of this study and the adoption of private social investment practices, some results stand out. For example, the most adopted actions in 2024, representing 93% of the 85 companies that responded throughout the triennium, were:

–  Considering collective agendas, such as SDGs, as a general reference for defining social investments;

–  Working in partnership with the community and other stakeholders in the formulation or execution;

–  Valuing the leadership of local actors and strengthening civil society;

–  Contributing to the participatory construction of public policies and/or collective sustainable development agendas.

Additionally, it was identified that the performance in private social investment topics is slightly better, both in average and median, in companies that operate, where applicable, through philanthropic vehicles, such as a foundation or corporate institute with its own structure. There was no statistically significant difference in total ISE B3 score performance between companies operating via philanthropic vehicles and those that do not. We can establish that scoring well in corporate sustainability is possible even in the absence of specific philanthropic vehicles. However, these vehicles remain important structures (alongside endowments, another modality capable of fostering co-investment) that mark firm corporate commitments in the face of numerous social dilemmas and issues. They will be even more effective if they can connect their areas of focus to the business, constituting important elements to boost the growth of a broader and deeper ESG agenda linked to purpose that permeates the entire organization.

In topics involving consultation with stakeholders to define investment priorities and maintaining open channels with the community, the difference between companies that claimed not to adopt such practices and those that do was more than 10 points. Companies that emphasize the leadership of local civil society actors in their private social investment actions demonstrate considerably superior performance compared to those that do not consider this aspect. Local dialogues, consistent positive social impact aligned with the company, open channels, and transparency in private social investment move the needle and demand new perspectives from companies. However, companies need to further advance this agenda, seeking ways to engage with local actors, working in partnership with the Third Sector in a complementary manner. Private social investment plays an important role: by building relationships focused on the community and surroundings, in line with internal company guidelines and demands, socio-environmental investment strategies are more assertive, targeted, and promote improvements in territories.

Another discovery is related to the practice of impact assessment by companies. Companies that assess the results of initiatives supported through private social investment have a higher performance in the ISE B3 and also showed a relatively high increase in performance between 2022 and 2024. In practical terms, systematic collection of impact indicators allows for reflective and strategic examination of the efficiency of a given social intervention, thereby enabling periodic review and improvement aimed at maximizing the desired and generated social benefits. Often, social projects end up generating unintended positive impacts that would go unnoticed without an evaluation that takes into account, for example, the beneficiaries’ perception of the changes in their lives.

In summary, we empirically know that by connecting the concept and practices of private social investment with the organization’s purpose and institutional values, considering the economic bias of the business and the perspective of key stakeholders regarding the socio-environmental value to be created by the company, it is possible to enhance the organization’s capacity to generate positive impact for society and real value for the business. This relationship is now quantitatively proven, considering an extremely relevant sample of Brazilian companies.

IDIS maintains the view that to catalyze lasting social transformation, Private Social Investment must be accompanied by a robust strategic planning, grounded in specific data and indicators, implemented with precision, and accompanied by monitoring and evaluation of its results and impact.

Access the full study, available only in portuguese here.