To guarantee the financial sustainability of a social organization is still one of major challenges of the third sector in Brazil. Many initiatives depend on one-off donations, grants, or temporary funding, which can jeopardizing the continuity of projects with a positive long-term impact.
In this context, the Endowments, also known as endowments, emerge as a strategic alternative for to guarantee financial sustainability to causes of public interest.. And it was precisely for that reason. to regulate this mechanism in the country where it originated Law No. 13.800/2019, known as Endowment Funds Law.
In this article, we explain what the legislation says, how endowment funds work, and why this structure can strengthen philanthropy and private social investment in Brazil.
What are Equity Funds?
You Endowments These are structures created for to guarantee financial sustainability long-term for organizations and causes of public interest.
They work as follows:
- An organization receives a donation and contributes it to the fund;
- This heritage is invested in the financial market;
- Only the income These investments are used to finance projects and initiatives;
- The core value remains preserved., ensuring continuity and recurring generation of resources over time.
In practice, it is a mechanism that transforms donations into a source of long-term funding..
This model is already widely used in universities, hospitals, museums, and social organizations around the world. In Brazil, regulation gained momentum with the creation of... Law No. 13.800/2019.
What does the Endowment Funds Law say?
THE Law No. 13,800, Law, enacted in January 2019, established rules for the creation and management of Endowments in Brazil.
The legislation authorizes the Public Administration to establish partnerships with Endowment Fund Management Organizations (EFOs), responsible for the management and administration of resources allocated to the supported causes.
The law also establishes important guidelines regarding:
- Governance;
- Transparency;
- Legal certainty;
- Financial management;
- Asset segregation.
The goal is to create a safer and more reliable environment to encourage long-term donations focused on the public interest..
How does an Endowment Fund work in practice?
The structure foreseen by Endowment Funds Law It is based on three pillars:
1. Fundraising
The fund receives donations from individuals, companies, philanthropic families, and organizations.
These resources can come from:
I – The initial endowment;
II – Financial donations and donations of movable and immovable property, including subsequent income, the use of which shall comply with the respective instruments, especially, if any, clauses relating to term, condition and charge;
III – Capital gains and income derived from investments made with its assets;
IV – Resources derived from the lease, loan, or sale of assets and rights that comprise its assets;
V – Assets bequeathed by will;
VI – Resources originating from other endowment funds;
VII – The exploitation of intellectual property rights resulting from the application of resources from the endowment fund;
VIII – The sale of goods bearing the brand of the supported institution.
2. Asset Management
The funds raised are invested by specialized managers, following investment policies and governance rules defined by the management organization.
The central logic is preserve core assets and use only the real returns on investments, adjusted for inflation.. This ensures that the fund continues to exist and finance causes indefinitely.
3. Support for causes
The fund's proceeds are directed towards financing projects and organizations aligned with the purpose defined by the donors.
The law provides support for areas such as:
- Education
- Health
- Environment
- Culture
- Science and technology
- Human rights
- Social assistance
- Public safety
- Sport
What is an Endowment Fund Management Organization (EFO)?
THE Law 13.800/2019 establishes that the equity funds They should be administered by a Equity Fund Management Organization (OGFP).
This organization is responsible for:
- Managing assets
- Define investment policies
- Ensuring transparency and compliance
- To manage the fund's governance.
The legislation also requires accounting, administrative, and financial segregation between the endowment fund and the supported organization.
This means that financial or legal problems of the beneficiary institution do not affect the assets of the endowment fund, increasing the protection of donated resources.
Why is the Endowment Funds Law important?
The regulation brought important advances to the strengthening the culture of giving and gives strategic philanthropy in Brazil.
Among the main benefits of the law are:
- Greater legal certainty – the legislation creates clear rules for donors, managers and supported organizations, reducing risks and increasing trust in philanthropic structures;
- More transparency and governance. – The law establishes governance parameters aligned with international best practices, strengthening the credibility of the funds;
- Long-term financial sustainability - you equity funds They help organizations to reduce dependence on one-off resources and create recurring sources of funding;
- Encouraging a culture of giving. By offering safer and more transparent mechanisms, the law helps to strengthen the relationship between donors and the causes they support.
Secure Management of Endowment Funds
For one Equity Fund For it to function efficiently, it is essential to have a specialized structure in governance, compliance and financial management.
In this context, the Sitawi Finanças do Bem, in partnership with the Endowments of Brazil, offers a A solution to democratize access to Endowment Funds in the country..
THE Endowments of Brazil it's the first Endowment Fund Management Organization multi-cause and multi-beneficiary adhering to Law 13.800/19. Its structure allows:
- Creating multi-purpose funds
- Creating funds for a single organization.
- Reduction of operational and legal costs.
- Independent governance
- Transparency and compliance
- Specialized professional management
Furthermore, the model facilitates the creation of Endowments in a more accessible and less bureaucratic way.
Do you want to create an Endowment Fund to support a cause in the long term?
If your organization wants Structure an Endowment Fund to guarantee recurring resources and build a lasting legacy. for a cause of public interest, Contact our team and learn how to get started.
