The endowment fund, the Swiss army knife of philanthropy?

Created by the French law of modernization of the economy of August 4, 2008 endowment funds have, since that date, a tremendous success since there are today more than 2600[1], a figure that has tripled in just 5 years to the detriment of other forms of structures such as Corporate Foundations or Foundations recognized as of public utility. According to the figures of the French Center of Funds and Foundations, Endowment Funds are now more numerous than Foundations in all French Regions (excluding Ile-de-France).

Objective achieved for this law, which aimed to “attract private financing for operations of general interest”. The ideas was to create a simple and attractive tool to facilitate the raising of funds for organizations of general interest and thus promote philanthropy in France, on the American model.

And, while the majority of endowment funds have been created by private persons (associations, individuals, etc.), public institutions are increasingly interested in this legal and financial tool: museums (the Louvre having been the first to do so in 2009), hospitals, local authorities, etc. now use it.

Simple, flexible and effective

The constitution of an endowment fund does not require a group of founders, (only an initial allocation of 15KE since January 2015 to fight against the creation of “empty shells” funds), nor setting a lifespan, nor even administrative authorization. The funds must simply be declared to the prefecture of the department of their head office. Their mode of operation is also more flexible since the only constraint of its board of directors is to be composed of 3 members.

On the fiscal side, again, endowment funds have real advantages since they benefit from the taxation of non-profit organizations. In addition, unlike Corporate Foundations, funds can receive donations and legacies and sometimes even appeal to the public generosity, after prefectural authorization.

Strong interest from local authorities

In addition to associations, public and local authorities are showing increasing interest in this funding tool. Cities like Paris (Paris Creation, Fonds for Paris), Nantes, Bordeaux, Rennes and Cannes have created endowment funds. “Perceived as simple, these creations ensure a rapid implementation of the legal structure. Incentive tax provisions are also a factor of satisfaction (…) whether for individuals or businesses”, can be read in the very comprehensive study of EY “Sponsorship for the benefit of French local authorities (September 2016)”. Often dedicated to the promotion of regional cultural heritage, some of these funds are also devoted to more social causes such as the fight against exclusion or the reduction of inequalities.

Large companies lagging behind?

Large companies on the other hand took a long time to take an interest in this new tool, preferring to set up a Corporate Foundation, mainly for image reasons. Indeed, a Corporate Foundation, created by authorization from the Prefecture, supervised by a Board of Directors with mandatory colleges (including a college of qualified external persons) is a real guarantee of seriousness and transparency, ensuring the good allocation of the amounts granted to solidarity actions (see article “Why create a corporate foundation?”).

The movement seems to be gradually reversed. For example, in 2013 Accor, the world’s leading hotel operator, transformed its Corporate Foundation into an endowment fund, Solidarity Accor, to benefit from new resources and to collect donations from a larger number of stakeholders. Employees as well as franchise partners or customers can now contribute financially to initiatives deployed in countries where Accor is present.

Major groups such as Danone, Seb, Dassault System, Peugeot, Bel, to name but a few, have since created their endowment funds which often benefit from more than substantial financial contributions.

SMEs in ambush

Endowment funds can also be particularly interesting for SMEs. As explained in our article “The circle of corporate sponsors, a virtuous circle”, the alliance of SMEs in the same legal structure can become a real force. The endowment fund, which is less constraining to create and manage than a Corporate Foundation, can thus become the ideal tool for these companies.

In this respect, the Synergie Solaire endowment fund is a remarkable example. With the aim of uniting the renewable energies (RE) sector, this Fund develops renewable energy access solutions for poor people around the world, who can not satisfy their vital needs (water, food, education, health) without any access to electricity. Since 2010, 162 companies of the French renewable energy sector have invested in Synergie Solaire to realize energy access projects, ie 36 projects in 13 countries for 340,000 beneficiaries!

It must therefore be noted that companies, associations, local actors, etc. have today various and attractive mechanisms to set up sponsorship actions to compensate, at least in part, the reduction in state aid. The combination of these tools thus becomes a powerful lever to the benefit of general interest causes that are both essential and unifying.

[1] Deloitte, Fonds de Dotation — L’Observatoire — 30 juin 2017