Good-hearted philanthropic foundations make news headlines when they funnel millions of dollars into charitable causes. Even smaller foundations make a splash when they lend their support, such as when the Landfall Foundation of Wilmington, North Carolina, stepped in early to distribute $388,000 to 82 local nonprofit organizations and schools after Hurricane Florence.

But that’s not the whole story. In fact, it’s only about 5 percent of the story.

We seldom hear about the really, really big money: philanthropy’s own investments. Federal law requires that foundations give away 5 percent of their endowments each year. The other 95 percent is typically invested in Wall Street markets to sustain and increase the philanthropic pot.

According to the Foundation Center, about 86,000 charitable foundations hold more than $890 billion in assets. In 2015, they gave out a total of $62.8 billion, averaging 7 percent across the industry. What to do with the rest of that money—$827.3 billion—has presented both problems and opportunities.

When a donor writes a check to a foundation, unless that donation was earmarked for a specific purpose, that money goes into this large pot of capital, and most of that gets invested in Wall Street. Some larger foundations, with more than $5 billion in assets, get annual returns as high as 6.3 percent on their investments, according to a 2016 analysis done by The Quarterly Journal of Economics. And often, maximizing returns has been accomplished without much consideration of the foundations’ overall missions.

More foundations are starting to recognize the wasted opportunity for investing their massive amounts of capital and are correcting course.

The F.B. Heron Foundation, a private foundation with a $275 million endowment as of 2016, has been a leader in this shift. The foundation’s primary mission is to help communities and people help themselves out of poverty, and investing in job creation is a major component of that.

In 1996, after a Board of Trustees meeting in which too much time was spent on investment returns and not enough on its charitable activities, the foundation began to regularly take a deep look at its investment holdings, a process that involves diving into complicated financial instruments, often managed by outside institutions, to find out what it really owned.

That has resulted in a few surprises, foundation president Dana Bezerra said.

In 2015, Heron noticed that within one of its holdings in a real estate investment trust, one company in particular was generating a large number of jobs in the communities in which it operates. That company was the Corrections Corporation of America, the largest operator of private prisons in the United States.

“It’s hard for a private poverty-fighting foundation to justify why we hold private prisons in our investment portfolio,” Bezerra said. “That was a moment of pause for the Heron foundation,” she said.

That experience emphasized for the foundation that it had to look at its investments not just for jobs production but also for community, social, and environmental impacts.

“Every enterprise consumes capital. Air, water, labor,” Bezerra said. “They emit things. Wages. Pollution. What’s being consumed, what’s being emitted?”

The result is that the Heron foundation created its own metric for evaluating the investments in its portfolio, which it calls its “net contribution.” The foundation now reviews all its investments through that wider lens, and, as of December 2016, said all of its assets are fully aligned with its mission.

To be sure, these are often small shifts, just one fund to another, still within conventional Wall Street vehicles. But more foundations are changing their views on the function of their investment portfolios.

Starting in the 1990s, an initiative spearheaded by the Annie E. Casey Foundation, F.B. Heron Foundation, and others created a clearinghouse of information, networking, and best practices for those philanthropies that wanted to engage in what is now called “impact investing.” The result of that work today is an independent nonprofit called Mission Investors Exchange. It has more than 200 member foundations, including multibillion-dollar institutions such as the Bill and Melinda Gates and Ford foundations.

Impact investing is broadly defined to apply to many different kinds of financial support, said Matt Onek, the chief executive of the exchange. That support includes everything from making sure the foundation’s endowment is invested in markets that are supportive of the mission to making low-interest loans available to nonprofits working in those narrow markets.

It could mean taking an equity stake in a for-profit company if that company’s goals—developing life-saving medications, for example—aligned with a foundation’s mission of finding a cure for a disease. It could also mean divesting the foundation’s investment portfolio of assets that could undermine the mission or exacerbate the problems that the foundation was set up to solve.

That’s what Heron did with its private prison assets.

“It could start with knowing what you own on the endowment side, and slowly learning how to make that more aligned with your mission and values,” Onek said.

And while it’s true that some foundations still set their grant-making budgets at the federal 5 percent minimum, some are going further.

The Bill and Melinda Gates Foundation, the largest foundation in the U.S., with a $50.7 billion endowment, runs a $2 billion Strategic Investment Fund to pursue mission-related investments that can draw on the power of private enterprise to solve global problems. That’s outside of the usual charitable grants that the foundation makes to nonprofits each year, which amounted to $4.7 billion in direct grants in 2017, or about 9.2 percent of the foundation’s total endowment.

Increasingly, more foundations, Onek said, are “starting with the problem, instead of the type of capital, and asking what is the best tool to address this problem.”

As a career programming executive at several foundations, Edgar Villanueva found that threading that needle is often tricky in the rarefied world of private foundations.

A self-described Southern Christian Native American, Villanueva said he was under tremendous pressure to conform to a corporate culture when he took his first job at the Kate B. Reynolds Charitable Trust in Winston-Salem, North Carolina. Its initial endowment came from the family of the former chairman of the R.J. ­Reynolds tobacco empire.

Villanueva, now board chair of Native Americans in Philanthropy and vice president of programs and advocacy at the Schott Foundation for Public Education, is the author of the new book, Decolonizing Wealth, which describes problems in the philanthropic field. He agrees that foundations are starting to align their investments with their missions, citing the Nathan Cummings Foundation, which had $443 million in assets in 2016. That philanthropy in March 2018 announced it would redirect 100 percent of its assets into mission-related investments.

He doesn’t see aggressive enough action, however. The Ford Foundation, the nation’s third-largest foundation, with a $12 billion endowment, announced in 2017 it was shifting $1 billion in assets to mission-related investments.

“I basically said, ‘That’s a start,’” Villa­nueva said. “It’s not really moving the needle or anything. What about the other $11 billion?”

“But you know, the fact that Ford is Ford, if they are taking that one step … it’s going to draw a lot of attention, and other foundations, I hope, will begin to have those conversations about what they can do,” he said.

That includes making changes to how foundations operate inside their walls.

Villanueva’s book covers the legacy of exploitation and trauma that elite foundations inflicted, often inadvertently, on marginalized communities and his personal journey toward discovering how that can be repaired.

He saw that firsthand at the Kate B. Reynolds Charitable Trust, where he was hired by the trust’s first Black president specifically to make inroads into minority communities.

“There’s a major good old boys network, right?” Villanueva said. “Looking at where the money was going—when we said that this money was explicitly for low-income families, communities—we were finding well-resourced organizations, Duke University, all these health care systems. …”

Making those changes proved to be a challenge in negotiating built-in networks and learning how to say no to some long-standing grantees to make room for others, changing expectations and requirements that previously had eliminated some groups from eligibility, and getting out of the ivory tower and into those communities.

“I actually rewrote the job description of the program officer, which historically was like a loan officer job description out of the bank, to be more like a community organizer,” he said.