GHJ’s Risk Management for Private Foundations Series: Navigating Challenges and Seizing Opportunities dives deep into the risks that private foundations face and offers practical solutions across a spectrum of areas including automation, cybersecurity and new giving strategies. Gain insights into implementing new ideas, ensuring compliance and exploring innovative partnerships to enhance impact. Learn more.

Many private foundations are concerned about financial risk, both in terms of navigating economic uncertainty and exploring impact investing opportunities that align with foundation values.

There are specific strategies that private foundations can implement to stay financially agile with cash allocations while also prioritizing different levels of impact and ESG investing.


From historic financial crises like in 2008 to the more recent 2023 banking crisis, many private foundations have been reassessing their depository and investment relationships.

"How to allocate cash is not a new question, but it continues to be a current question," says Bank of America Managing Director William Jarvis.

Foundations can create a liquidity spectrum with cash allocations in different instruments based on the time horizon. Jarvis recommends three sets of cash allocations.

  • Immediate use: Funds intended for grantmaking should be kept in short-term maturity accounts with no risk, such as bank account deposits or short-term U.S. treasuries. Private foundations may also consider money market instruments, which can offer a slightly higher return at a slightly higher risk.
  • One to two years timing: Excess cash that is not needed in the next one to two years could go into corporate debt instruments, but foundations need to pay attention to credit quality.
  • Long-term cash: For long-term cash that is not invested in a portfolio, foundations can consider long-term debt to low-volatility, dividend-paying equities.


Impact investing is a growing trend that helps foundations promote their mission while still generating returns, although such investing can yield the same or less than market return.

According to the 2023 Bank of America Study of Philanthropy: Charitable Giving by Affluent Households, impact investing nearly doubled among affluent individuals between 2017 and 2020, rising from 7 percent to 13 percent, but then fell back to 9 percent in 2022. This still appears to reflect a rising trend of interest in this area.

“Some families and institutional foundations are interested in having some type of mission-related investment but without a sacrificial return,” Jarvis says.

For those looking to incorporate mission-related investments, options include green bonds, community development financial institution (CDFI) instruments and qualified opportunity zones, which can have the potential to improve a community's neighborhood.

An underutilized investment opportunity to consider is program-related investments (PRIs), which provide low-interest financing to nonprofits rather than grants.

“It may not be on the radar of many private foundations that PRIs can be an alternative to grants,” Jarvis shares. “For example, loans can be made at below-market rate to nonprofits so they can improve property or use funds for general operating expenses. The Foundation can collect the loans as they originally structured or have the flexibility of making the decision to forgive the loan at a later point.”

"GHJ has seen some increase in PRIs in the form of loans or loan guarantees, but it is still relatively rare to see them used,” adds GHJ Managing Director Amy Eybsen. “They did not take off as much as I thought they would."

This could be a missed opportunity, both in terms of impact and returns.

“If a foundation acts as a catalyst to enable something to happen that otherwise could not happen, that can be very powerful,” Jarvis says. “I am interested in watching that as a type of investment.”

Foundations interested in exploring PRIs could consider contingent guarantees and partnering with other foundations of a similar size.

“Collaboration between donors could be impactful,” Jarvis explains. “For example, five or six foundations could get together and serve as a catalyst in something like a qualified opportunity zone.”


ESG investing adds non-financial factors to the evaluation rubric before adding company stock to the foundation's portfolio. ESG standards relate to environment, sustainability or governance, and there are different ways that private foundations can incorporate these investing metrics.

Traditional Socially Responsible Investing (SRI) is practiced through a values-oriented lens, which excludes companies from a foundation's portfolio that do not align with its values. ESG investing, on the other hand, seeks to include companies that mirror the foundation's values.

Jarvis offers tips on how to evaluate companies before the foundation invests.

“If you have the choice of two companies and one is better in environmental compliance, community citizenship and transparent governance, that one may also be better run and may be more likely to outperform over time,” he says.

However, foundations cannot factor in ESG without question. They must apply critical examination to determine the right fit, and they must take a look at asset allocation.

A company that is run better according to ESG metrics may be better-resourced, and as a result it may have a large capitalization bias, so foundations need to be careful to diversify their portfolios.

Foundations can choose the best way to incorporate ESG investments based on their structure. One option is to have two separate portfolios: one managed by a standard investment advisor and one by a specialized ESG consultant. However, Jarvis recommends that foundations eventually develop a more holistic approach to managing their portfolio.

Unlike program-related investments which are exempt from the jeopardizing investment excise tax, ESG investments do not fall under this exception and full due diligence should be undertaken by board members or investment committee members when investing in these types of funds.


According to Jarvis, the economic environment of the last couple of years is similar to that of post-World War II America.

“There is a full-employment economy with high savings rates, but also high inflation,” he shares.

Eventually, inflation decreased following WWII due to the Fed shrinking the money supply.

“It may be hard to meet the Fed's 2-percent inflation goal, but it could go down to just three to four percent, similar to the 1950s and 1960s,” Jarvis notes.

Private foundation CFOs and CIOs need to be agile and take advantage of short-term higher rates, as well as looking at the long term and investing for a world in which inflation may be higher than in the period from 2009-2021.

Jarvis says that this requires annual scenario analysis, stress testing and risk analysis for a 10- to 20-year period. Foundations can use an investment advisor or consultant to undertake this analysis, since it may be more specialized than the foundation's in-house expertise.

Amy Eybsen WEBSITE Standing

Amy Eybsen

Amy Eybsen, CPA, has more than 10 years of public accounting experience and is a managing director within GHJ’s Audit and Assurance Practice. Amy provides accounting, auditing and consulting services to a wide variety of companies and organizations that span multiple industries within the greater…Learn More