Editors’ Note: HistPhil co-editor Benjamin Soskis weighs in on the Ford Foundation’s announcement that it will commit $1 billion over the next decade to mission-related investments.

Today, the Ford Foundation announced that, over the next decade, it would direct $1 billion dollars from its $12 billion endowment to mission-related investments (MRI). As the foundation explains, Ford “will gradually carve out funds from its existing investment portfolio and deploy them over time into funds seeking to earn not only attractive financial returns but concrete social returns as well.” To start, these investments will focus on affordable housing in the United States and access to financial services in emerging markets. According to Ford, it’s the largest commitment yet made by a foundation to mission-related investing. As such, it’s a pretty big deal. And like nearly all big deals, the potential pay-offs come with some serious risks.

The significance of the announcement stems from the challenge it poses to the ways in which most philanthropic foundations have traditionally regarded their financial assets. The critic Dwight Macdonald once famously described the Ford Foundation as “a large body of money completely surrounded by people who want some.” The definition holds for foundations more generally but it’s important to amend it by adding that the people who actually get most of the money are investment managers, tasked with maximizing returns, which are then pumped back into the endowment. By law, foundations must pay-out at least 5 percent of their assets toward grant-making or administrative expenses, and most hover right at that threshold. As Ford Foundation president Darren Walker wrote in an essay announcing the MRI commitment, “If philanthropy’s last half-century was about optimizing the five percent, its next half-century will be about beginning to harness the 95 percent as well.”

It’s a bold approach, though not necessarily a novel one. There is a considerable history of efforts to blur the boundaries between financial and philanthropic investments, as with the experiments in “philanthropy and five percent,” below-market rate housing rentals in England and the United States that flourished in the second half of the nineteenth century. Some philanthropists embraced similar programs in the early decades of the 20^th century, as with the Russell Sage Foundation’s investments in Forest Hills, Queens and John D. Rockefeller, Jr.’s financing of the Paul Laurence Dunbar Apartments in Harlem.

But over the course of the twentieth century, as philanthropy matured as an institution, the presumption of perpetual life solidified and the authority of external financial advisers strengthened, so that the endowment became increasingly regarded as a sacrosanct resource, a reflection of institutional status that had to be preserved, and if possible, enlarged. There was little inclination to put philanthropic capital at risk by weakening the distinction between investing and grant-making.

The late 1960s witnessed a softening of these divisions when Ford, along with the smaller Taconic Foundation, pioneered the field of “program-related investments.” This advance created the technical space for foundations to add loans, guarantees, and equity investments (to, say, support business ventures in low-income and minority communities) to their toolbox, alongside grants. Over the following decades, Ford managed more than $650 million in PRIs. But the funds dedicated to these programs were limited and treated as part of the foundation’s program budget. According to IRS guidelines, PRIs are considered charitable, and not financial, investments, and are not held to the same “prudent investor” standard as MRIs. They are important instruments, but cannot claim the same scale of resources available to MRIs—some $865 billion, the most recent tally of total foundation assets.

In the last few decades, a number of foundations have pushed the sector to go even further in aligning endowment funds with philanthropic mission. This has involved mission screening—as when foundations have divested from the fossil-fuel industry. It has also led a corps of relatively small but influential foundations to embrace mission-related investing. Most notably, last December the F.B. Heron Foundation announced that it was directing the entirety of its $270 million endowment into investments that fit its mission of “helping people and communities help themselves out of poverty.”

The leadership of these foundations has generated quite a bit of excitement within the sector about the transformative potential of mission-related investing, but it has not been commensurate with the scale of the resources involved. The combination of those two buzziest of words, “impact investing,” can produce an intoxicating compound that dulls critical perspective. After all, a 2015 survey of foundation CEOs by the Center for Effective Philanthropy found that only 2 percent of total endowment funds in their control were directed to impact investing—hardly a sign of an imminent revolution in the philanthropic sector’s practice.

With today’s announcement, however, the hype and the dollar signs seem better aligned. And Ford’s Darren Walker clearly regards this as a preliminary step in a broader sector-wide shift in how endowments are deployed. As he told HistPhil, he hopes that Ford’s experience will make it easier for other major foundations to make similar commitments. He also points out that Ford’s investment can expand the evidence base behind MRIs, which will improve the marketplace for them. This will hopefully help attract the big fish: for-profit institutions. MRIs can’t be perceived as a “niche” non-profit endeavor, urges Walker. (There is also, perhaps, a bit of hedging here, in the acknowledgment that impact investing is still in its infancy and the suggestion that, when calculating the investment’s returns, field-building must be included in the dividends).

Walker highlights certain features of the philanthropic and financial sectors’ “changing landscape” that makes the moment especially ripe for such evangelism. These include the pioneering work of other foundations, including Heron and the Rockefeller Brothers Fund; the movement to refine metrics for social investing; and the 2015 guidance issued by the Treasury Department that assuaged concerns about MRI’s by making clear that investments with low rates of return would not be penalized as “jeopardizing investments.”

But there is another recent development in the sector that he did not mention, but that has also transformed the landscape: the rise of philanthro-capitalism. This is the idea that capitalism itself is the most powerful instrument for advancing philanthropic goals. Under Walker, Ford has positioned itself at the critical periphery of this movement. Walker has championed what he has termed a “New Gospel of Wealth.” This charge harkens back both to Andrew Carnegie’s 19^th century call to philanthropists to embrace an ethic of stewardship and to the complaint of Henry Ford II, when he resigned from the Ford Foundation’s board in 1976, that the foundation had forgotten that the foundation was a “creature of capitalism.”

Walker acknowledges philanthropy’s debt to capitalism and insists on its obligation to preserve and refine that system, “to square the dynamism of markets with society’s highest values,” as he writes. He seeks to use the power of markets to address the inequities that markets themselves have created, to harness capitalist institutions to assist those left behind by capitalism. “The problems we seek to solve cannot be solved by philanthropy alone,” he tells HistPhil. The apostles of philanthro-capitalism would certainly agree. Yet they are far less prone to register the market’s failings. At its best, the movement taps huge reservoirs of resources and talents for philanthropic ends; at its worst, it encourages an unthinking adulation of business practice.

And so Ford’s commitment to mission-related investments must be understood not only alongside Walker’s recent decision to accept a seat on the board of PepsiCo—as part of an effort to bring his perspective “as someone who is deeply concerned about the welfare of people in poor and vulnerable communities” to the company. It also should be understood in the context of the spread of the use of limited-liability companies as philanthropic vehicles, such as the Chan Zuckerberg Initiatives, which can invest in for-profit enterprises.

In this respect, there’s another strain of risk involved in Ford’s commitment to MRIs, besides those associated with below market-rate yields. As the divisions between grant-making and investing erode, as more strain is placed on that thin dash holding apart philanthro-capitalism’s component parts, philanthropy might find its ability to offer a critical perspective on the economic system in which it is ensconced blunted. This only underscores the significance of the investment Ford is making and is pushing other foundations to make: the potential returns, both positive and negative, could reshape philanthropy in the 21^st century.

-Benjamin Soskis

Benjamin Soskis is the co-editor of HistPhil and a Research Associate at the Center on Nonprofits and Philanthropy at the Urban Institute.