The organizations want to support the nonprofit sector which has been battered by the pandemic.
  • The MacArthur Foundation and four other major foundations have committed to increasing their payouts to the nonprofit sector by more than $1.7 billion, through the first philanthropic social bond issuance.
  • The organizations hope to boost the U.S. economy and shore-up the nonprofit sector, following the COVID-19 pandemic and recent social unrest.
  • The nonprofit sector employs about 10% of the U.S. private workforce.

The John D. & Catherine T. MacArthur Foundation and four other major foundations plan the first philanthropic social bond issuance to boost their donations for nonprofits by more than $1.7 billion to help advance social progress and mitigate the fallout from the COVID-19 pandemic.

“It’s our belief that philanthropy needs to step up to bring about a more just and equitable recovery from this crisis,” John Palfrey, the president of the MacArthur Foundation, told Karma. “I would love to see…that we are a part of the solution toward a more racially equitable and more just society in the aftermath of this pandemic and this unrest.”

The organizations include the Ford Foundation, the Doris Duke Charitable Foundation, the W.K. Kellogg Foundation and Andrew W. Mellon Foundation. They have historically supported sectors such as higher education, racial equity, social justice, arts and culture, human services, and the environment.

Each organization is pledging a different amount towards the total, which will be deployed over the next three years. The Ford Foundation is making the largest contribution of $1 billion.

All the organizations have large endowments, but some say they will turn to the private sector for cash because of the volatility in the market.

The MacArthur Foundation says investment professionals caution philanthropic organizations from drawing too deeply from their endowments at a time when there is increased turbulence in global capital markets, which can adversely affect the value of portfolios.

The organizations have not disclosed further details about the bonds, but MacArthur says it plans to work with Morgan Stanley on the bond issuance.

The philanthropic sector is taking action after advocacy groups announced a plan, this year, to ask Congress to raise the annual donation amount charities are required to give, to help stabilize the U.S. economy with an additional $200 billion over three years.

Advocates such as the Institute for Policy Studies want Congress to mandate a “charity stimulus” that would require philanthropic organizations to disburse 10% of their endowment capital yearly, up from the existing 5% requirement.

Chuck Collins, the Institute for Policy Studies’ director for the program on inequality and the common good says the bill is gaining momentum.

A poll conducted by Ipsos shows Americans support the proposed charity stimulus bill to help the nonprofit sector, which employs 10% of the private U.S. workforce.

Collins says philanthropic organizations that are stepping up are doing the right thing but the legislation is still needed.

“We need more foundations to step up and increase their payout,” Collins told Karma.” I also think it’s not a substitute for a government mandate to have a three-year emergency payout, because it’s going to be a multi-year challenge.”

MacArthur’s Palfrey says he welcomes the action.

“We had begun the conversation of increasing our payout before these recent calls,” he said. “Those of us who have the resources right now should not be hoarding them. The idea of hoarding food in a famine…is something you shouldn’t do.”