MacArthur Issues $80 Million in Grants From Its Bond Offering

With $80 million in new grants it announced Tuesday, the MacArthur Foundation has committed nearly all of the $125 million it raised in a bond offering last summer.

Using a team of external advisers to help determine where the money should go, the bulk of MacArthur’s remaining bond proceeds are being directed to organizations led by or serving people of color.

MacArthur was one of a small group of foundations that used the debt market to finance big expansions of their grant making since the beginning of the pandemic. In total, grant makers including the Bush, Doris Duke, Ford, Kellogg, Mellon, and Rockefeller foundations and the California Endowment have issued about $3 billion in bonds since last summer.

The foundation debt, most of which came in the form of “social bonds,” which aim both to provide investor returns and better the world, came as foundations were under pressure to increase their grant-making budgets to help nonprofits respond to health and economic damage inflicted by Covid-19. The move attracted criticism from some people who argued that rather than enrich Wall Street underwriters through a bond issue, foundations should have simply culled more from their endowments to respond to the crisis.

MacArthur has less than $5 million left from its offering and will determine where to give it at a later time.

The Chicago-based philanthropy divvied the money among grantees in four categories: $36 million to achieve racial justice in both the United States and internationally; $22 million for Covid-19 mitigation and public-health equity; $16 million to support the self-determination of Indigenous people, including Native Americans; and $5 million toward projects that attempt to demonstrate that the provision of stable, affordable housing can divert people from the criminal-justice system.

Historically Low Interest Rates

Some of the other foundations that issued debt have announced where they will deploy their proceeds. The Bush Foundation in Minneapolis, for instance, announced in April that it intends to funnel its $100 million in bond proceeds to two community trusts that have not yet been identified, but the money will go toward helping build wealth among Black and Native American people. The Rockefeller Foundation said in October that its $700 million bond offering would support Covid relief, vaccine development and distribution, and green energy.

Since Ford announced its $1 billion bond sale last June, it has started a number of new efforts, including the Black Feminist Fund, which supports women-led groups globally, separate commitments to social-justice organizations in the Southern United States, grants to support economic recovery in Puerto Rico, and the Generation Equality Forum, which is a five-year, $420 million commitment to address gender inequality.

Historically low interest rates — MacArthur will pay less than 1.3 percent on its debt over a 10-year term — made using bonds a good choice, said John Palfrey, MacArthur’s president.

“In simple terms, I think we made a good trade,” he said. “We’ll probably never see that interest rate again. And the endowment has gone up much more than that. So ultimately I think we can come out in a very good position and it’s allowed us to make a significant amount of new grants in some key areas without withdrawing funds.”

About two-thirds of the MacArthur grants are to new grantees. And nearly half of the money will go to organizations outside of the United States.

The addition of a lot of new grantees was a conscious choice to reach beyond MacArthur’s established network of grantees and peers, identify strategies that have not been widely adopted, and “infuse racial justice” as a priority throughout all of the grants, according to a paper the foundation released as it announced the grant.

Palfrey said a relatively large share of international grants came largely as a result of the foundation’s Covid response in India and grants related to racial justice and reparations in Nigeria. While the foundation has a global reach, Palfrey stressed that MacArthur was committed to U.S.-based nonprofits, and the Chicago region in particular.

Grantees in the current round of giving include the Obama Foundation and Illinois Unidos, both in Chicago.