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Joel Holsinger’s first trip abroad in 2019 after joining the board of directors at global health nonprofit PATH convinced him he needed to do more to raise money for charity.
The investment manager, who is now also a partner and co-head of alternative lending at Ares Management Corp., saw firsthand how the tuberculosis prevention program was helping residents of Dharavi, IndiaThe largest slum. He also observed that the main obstacle to expanding the success of the program was simply lack of funds.
“I wanted to do something that had a purpose,” Holsinger told the Associated Press. “I want a charitable connection in everything I do.”
Shortly after returning from India, Holsinger created a new series of investment funds where Ares Management would donate at least 5% of its performance fees, also known as “promotes”, to charity. The first two funds of the resulting Pathfinder family have alone raised more than $10 billion in investments and, as of June, have pledged more than $40 million to charity.
Holsinger wanted to expand this model further. On Wednesday, they announced Promote Giving, a new initiative to encourage other investment managers to use the model, launched by a fund from nine firms including Ares Management. pantheon And Pretium. The funds that are now part of Promote Giving represent approximately $35 billion in assets and could result in charitable donations of up to $250 million over the next 10 years.
Unlike broader models such as ESG investing, where environmental, social and governance factors are taken into account when making business decisions, or impact investments, where investors seek financial as well as social returns, Holsinger said, Promote Giving strives to maximize returns on investment. Donations come only when investors receive their promised returns and only from the manager’s fees.
“We’re not doing anything that will reduce returns,” Holsinger said. “It’s basically just a dual mandate: If we do well on returns for our institutional investors, we will also drive returns that will go directly to charity.”
DonationParticularly those that operate internationally are in the midst of a difficult funding landscape. The dismantling of the U.S. Agency for International Development and deep cuts to foreign aid this year have affected nearly all nonprofits in some way. Nonprofits that do not typically receive funding from the U.S. government still face increased competition for grants from organizations that have seen their funding cut.
Camerley Schneider, PATH’s chief global health program officer, said this year has shown how fragile public health systems are and reinforced the need for the “agile catalytic capital” that Promote Giving can provide.
“There is nothing that can replace U.S. government funding,” Schneider said. He said the launch of Promote Giving is expected to encourage new private donors to step up to help offer solutions to specific public health problems. “I think it comes at a time when we really need to look at the overall architecture of how we’re doing this and how we can do it better at lower costs.”
Sal Khan, Founder and ceo Khan Academy, which offers free learning resources for teachers and students, says Promote Giving’s structure can provide nonprofits with stable income for many years that will allow them to spend less time raising money and more time on their charitable work.
“It has been really difficult for us to mobilize the philanthropy needed to make maximum impact globally,” Khan said. While Khan Academy has the knowledge base to expand rapidly around the world and several countries have shown interest, Khan said the nonprofit lacks sufficient resources to undertake the expensive work of software development, localization and infrastructure creation in every country.
Khan hopes Promote Giving can grow into a major funder that can help with those costs. “We’ll be able to build that infrastructure so we can educate literally anyone in the world,” he said.
Holsinger expects similar growth. He envisions investment managers signing up to Promote Giving the way billionaires pledge to donate half their wealth. To give promise And he hopes other industries will develop their own mechanisms to make charitable donations part of their business models.
Kate Stobbe, director of corporate insights at Chief Executives for Corporate Purpose, a coalition that advises companies on sustainability and corporate responsibility issues, said her research shows that companies that establish mission statements that incorporate existing causes beyond just profit generation have higher revenue growth and higher returns on investment.
Having a common purpose increases worker engagement and productivity, while also helping companies recruit and retain employees, said Stobbe, who said CECP will release a report later this week that will document those findings based on 20 years of data. “Creating initiatives tied to corporate purpose helps employees feel connected to something bigger,” he said. “It really contributes to that bottom line.”
Holsinger hopes to achieve similar wins with Promote Giving. He said that there is no dearth of solutions to many problems of the world. They lack sufficient capital to pay for the solutions.
“We just need to bring more capital to these nonprofits and these donors that are doing amazing work every day,” he said. “We’re trying to build that model that drives impact through charitable dollars.”
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Associated Press coverage of philanthropy and nonprofits is supported through the AP’s collaboration with The Conversation US, with funding from the Lilly Endowment Inc. AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.