Towards a coherent philanthropy: why foundations must invest their funds in impact projects

Understanding how foundations work

A foundation is a legal and financial entity created to serve a mission of general interest. It relies on three main mechanisms:

• The initial or endowment fund: a starting capital, sometimes considerable, given by a founder or a group of founders.

• The financial management of this endowment: to endure, the foundation invests its capital, most often in traditional financial markets, in order to generate regular income.

• Redistribution: the income from these investments is used to finance actions, often in the form of donations (grants, scholarships, support for charitable or research projects).

For decades, this model operated according to a very simple logic:

• On one side, financial management, aimed at maximizing returns (often placed in standard products, sometimes even contradicting the foundation’s social mission).

• On the other, philanthropy, which uses these returns to support projects with a positive impact.

This dissociation was long perceived as normal, even necessary: “first make the money grow, in order to give later.”

The problem of coherence

But this model is now being called into question. How can a foundation claim to defend the climate, human rights, or education… while investing its capital in destructive sectors (fossil fuels, food speculation, polluting industries)?

This financial dichotomy has two negative effects:

• It undermines the credibility and reputation of foundations.

• It limits their transformative potential, as their own funds sometimes support the very causes they seek to fight.

This is where the principle of coherence comes in: aligning the foundation’s investments with its philanthropic mission.

Impact investing: a virtuous coherence

This is not to say that a foundation must replace its donations with investments. Free, selfless giving remains at the heart of philanthropy.

But it is important to understand that:

• The funds invested to generate the income for donations can also be placed in projects with a positive impact.

• Thus, every franc invested already works for the foundation’s mission, even before being redistributed as a donation.

In other words:

• Investment generates an immediate impact (through the choice of projects aligned with the Sustainable Development Goals, ecological transition, or social inclusion).

• The income from this investment then makes it possible to give more to projects consistent with the same mission.

It is a virtuous circle: Impact investments → Sustainable income → Reinforced donations.

The advantages for foundations

Adopting this coherence offers numerous benefits:

• Ethical alignment: the foundation fully lives its mission, without contradiction between its asset portfolio and its donations.

• Strengthening legitimacy: donors, beneficiaries, and partners perceive the foundation as both trustworthy and visionary.

• Financial stability: impact investments, often tied to the real economy (renewable energy, social infrastructure, sustainable agriculture), offer resilient returns less exposed to speculative bubbles.

• Attractiveness to younger generations: many philanthropists and wealthy families today wish to give meaning to their wealth.

The advantages for banks and financial actors

Banks, wealth managers, and investment funds also find direct interest in this evolution:

• New financial products: demand from foundations pushes the development of impact funds, green bonds, or hybrid vehicles.

• Strengthened partnerships: banks become partners in the foundation’s mission, and no longer merely technical service providers.

• Reduction of long-term risks: responsible investments reduce exposure to climate, social, and regulatory crises.

Systemic and societal advantages

Finally, this coherence has effects at the global level:

• Acceleration of the ecological and social transition: billions in capital, today invested neutrally or harmfully, are reoriented toward positive projects.

• Ripple effect: if foundations, often exemplary, lead the way, other investors (pension funds, insurers, family offices) will follow.

• Reduction of paradoxes: avoiding the vicious circle where investments worsen crises that donations then attempt to repair.

A historic opportunity

We are entering a new era of philanthropy: an integrated philanthropy, where the boundary between investing and giving turns into a virtuous continuum.

Foundations now have a historic opportunity to reinvent their role:

• No longer simply “distributors of donations,”

• But financial actors in their own right, capable of channeling all of their capital toward building a fairer, more sustainable, more resilient world.

It is in this spirit that the Geneva Foundation for the Future, through its AGILE tool, offers a shared and rigorous method to help foundations, banks, investors, and project leaders align their practices.

Thus, finance regains its meaning: not an abstract mechanism of speculation, but a living force at the service of life itself.

To access all content, log in or create your user account.