Brazil has undergone seismic political change. The headlines are being dominated – quite understandably – by the new Government, led by President Jair Bolsonaro.
As a result, a piece of legislation that has become law as of 4 January 2019, one that will improve the lives of millions of ordinary Brazilians, has largely gone unnoticed. Bolsonaro approved a provisional measure from the former President Michel Temer to regulate endowment funds.
Endowment funds use capital specifically for causes of public interest. By nature, they are intended to help the most vulnerable and protect the heritage of our societies. But why, you may be asking, do they matter so much? Why are these endowment funds important for Brazil? Well firstly, as a result of this new law, we estimate that US$1.2 billion could be pumped immediately into social schemes such as bringing children out of poverty. Or perhaps to fund an exceptional cultural or educational institution such as the Brazilian National Museum, which was destroyed by a huge fire in September 2018. Or endowment funds could help to defend environmental habitats and tribes indigenous to the Amazon, for example.
Previously, endowment funds weren’t regulated so there were no safeguards to where the resources were being allocated, and even if they were being used to do good at all. These funds could (entirely legally) be directed towards non-cause related expenses such as tax debt payments or to labour lawsuits’ expenses, meaning that philanthropists and corporate donors were naturally wary of using endowment funds. This new law will unlock billions of dollars in philanthropic funds for improving Brazilian society.
The organisation of which I’m Chief Executive, IDIS, has led a coalition that aimed to enshrine the regulation of endowment funds into law. Our coalition – Coalizão pelos Fundos Filantrópicos in Portuguese – campaigned for this legislation to first of all be improved, so that the entire non-profit sector as a whole benefits, and second of all to become a law that would improve the lives of millions of fellow Brazilians.
For decades, endowment funds have proven to be a successful mechanism directing philanthropic resources in other countries. The Bill & Melinda Gates Foundation, valued at over $40 billion is an endowment fund. And in France, following the approval of a specific law in 2008, more than 200 endowment funds were created, among them the Louvre Museum fund. This protects and promotes the Louvre, both domestically and globally, ensuring that one of France’s great landmarks remains a cultural treasure for the millions of people who visit every year.
The new Brazilian Government seized on this golden opportunity. It listened to this growing movement, one that’s popular within both the private sector and in civil society at large, with business leaders and politicians waking up to the benefits.
This is a time when Brazilian politics is fractured, and our civil institutions are under pressure. The regulation of endowments cannot of course solve all of the problems in Brazilian society. But it will encourage philanthropists and big business to direct huge revenue streams towards supporting vital social and environmental causes. And, these resources will also improve our capital markets, since these will be long term and patient investors. In the coming years, we hope to see a fairer and more transparent Brazil, and a country that works for all Brazilians.
Paula Fabiani is chief executive at the Institute for the Development of Social Investment (IDIS)