This article was first published by IFC, a leading publishing house for the global wealth management industry, and is available here.

2020 was nothing if not challenging. The COVID-19 pandemic brought the world to a standstill and widespread public protests called for an end to systemic racism. In civil society, charitable organisations felt pressure on their income generation as charity shops closed and fundraising opportunities dwindled, all while the need for charitable services soared. Many philanthropic funders rose to the occasion and expanded their grants programmes to accommodate the uncertainty and increasing need.

In addition to that encouraging response, it may be that the disruption of 2020 provides philanthropy an opportunity for a “reset” – to take stock of existing practices and look to improve. Three key areas are ripe for review: Funder flexibility, racial justice, and collaboration.

I. FUNDER FLEXIBILITY AND TRUST

The events of the last 18 months have highlighted the need for philanthropic funders to be responsive, impactful and flexible with their grantees. Early in the pandemic, discussion grew on both sides of the Atlantic about loosening onerous reporting and compliance obligations on grantees as a concession to the unprecedented challenges grantees were facing. However, the benefits of trust and flexibility are not limited to times of acute challenge, and a discussion has begun to develop into a wider commitment among some funders to a more flexible approach overall. In the US, a movement for ‘trust based philanthropy’[i] offers an interesting model for consideration, and in the UK, the hashtag #FlexibleFunding[ii] has been used to promote similar concepts.

Trust Based Philanthropy focuses on key principles:

  • Do the homework – The onus should be on the funder to take active steps to learn about the grantee during its preliminary investigations and pre-grant due diligence process.
  • Provide multi-year, unrestricted funding ­– Single-year, project-restricted funding limits the grantee’s ability to develop resiliency and devote its staff time to charitable operations. Grantees in need of funding for core costs need to devote staff time and cost to seeking that funding and are at risk of mission-drift.
  • Simplify & streamline paperwork – Funders should identify how information they gather from grantees can be obtained in ways that are less time consuming and burdensome. For instance, requesting grantees submit a grant application that they have already submitted elsewhere.[iii]
  • Offer support beyond the check – Capacity of grantees, particularly grantee leadership, can be fostered in a variety of monetary and non-monetary ways. While funders may provide a sounding board to counsel grantees, this principle is not to be confused with the idea that the guidance of donors with business skills will “professionalise” grantees.

Two additional principles focus on communication – Be transparent & responsive; and solicit & act on feedback.

If ‘trust’ and ‘flexibility’ sound a bit woolly and amorphous, they actually apply to giving in quite practical ways. In relation to grantee due diligence, a funder can get to know a grantee organisation in ways that require less grantee staff time without compromising fiscal or fiduciary compliance. Funders can review publicly available documents and can accept information compiled for another purpose (including applications produced for another funder). Taken with public documents, meetings and phone calls can be used as an opportunity to obtain most if not all the information a funder may require instead of requiring a grantee to complete a full application form after one or more preliminary meetings. Initial funder research may also avoid wasting both parties’ time if the grantee does not meet eligibility requirements.

Most funders will be free to make unrestricted grants to many, if not all of their grantees. If a default position applies at all, funders should default to unrestricted funding with project-based restrictions limited to scenarios where this is prudent for some specific reason. Where a grant for a defined project is made with reference to an agreed budget, it should reflect the true cost of delivery.

In relation to reporting, there will again be many scenarios where limited or no bespoke reporting is required for a fiscal or fiduciary reason. Funders wishing to measure impact should be led by grantees as to the best way to demonstrate impact in the particular circumstances and should be open to doing so with reference to general reporting produced by the grantee, or for other (or mixed) purposes.

Funders need not sacrifice compliance. They can and should maintain grant making records that include notes of conversations and meetings, memos extracting relevant information from generic or repurposed reporting or grant applications, and records of the transparent communications it has with grantees.

Advisers with a role in drafting grant-making policies, template documents, or internal procedures for funder organisations should avoid defaulting to an overly-cautious or unnecessarily formal position. An informed discussion with a foundation client (properly documented to avoid later confusion) can get to the bottom of the approach a client wishes to take.

Overall, with some fairly small adjustments of approach, funders can redefine their relationship with grantees, empowering the organisations that know most about the funded work to lead.

II. PHILANTHROPY AND RACIAL JUSTICE

2020 saw a new worldwide focus on racial justice issues following the horrifying deaths of George Floyd, Breonna Taylor, and others at the hands of US police. A new movement for racial justice—for Black lives—looks to the systems that perpetuate and entrench racial inequality and harm. This moment is an historic opportunity for philanthropy to rise to the occasion.

Incorporating a commitment to racial justice into funder strategy[iv] is eminently possible, and now is the time to do it.

This moment is an historic opportunity for philanthropy to rise to the occasion.

Nevertheless, getting started may seem challenging. On the foundation board or even in advisory relationships, these topics can be seen as ‘too political’ to broach. Moving beyond silence[v] is a major step forward as is committing to a culture of learning and reflection – for both individuals and organisations. This is where an honest inventory by both leadership and staff can reveal whether there is overreliance on ‘default’ networks or default analytical frameworks that entrench or exacerbate inequality. Overall, unlearning racism[vi] and unconscious bias is a process. Collaboration[vii] and peer and stakeholder connections can prove invaluable, especially when entering into new grant-making or conceptual territory.

Funders should also consider their role in the philanthropic ‘funding gap’. Black-led non-profits have been clearly shown to receive less revenue and hold less unrestricted funding than their counterparts, even when that work is directly related to racial justice[ix] issues where lived experience can and should matter. It is time for philanthropy to abandon ‘colour-blind’ funding and to invest in organisations looking to educate and build capacity such as Philanthropic Initiative for Racial Equity[x] and CHANGE Philanthropy[xi].

Diversity all along the philanthropic chain is another critical component. The sector as a whole is now widely recognised to have a diversity gap[xii] with an astonishingly high percentage of white nonprofit executives in the U.S. and UK. [See: https://www.acevo.org.uk/reports/home-truths/] Examining diversity and inclusion in funder and grantee governance is not about quotas or box ticking; it is about shifting away from a culture that undervalues lived experience and representation. Family foundations are actually generally doing better on this than one might expect: According to the latest National Center for Family Philanthropy[xiii], one third of family foundations have Diversity, Equity, and Inclusion (DEI) initiatives in their future plans, and 25 per cent use DEI goals/strategies to guide giving.

The time is right for philanthropy to acknowledge the power it can wield and apply a racial justice ‘lens’ across the board – including areas that are perhaps less obviously connected to equality such as the environment[xiv] and the arts[xv]. Ultimately, funders should take care to be on the right side of history here and be clear that they are helping to build, rather than hindering, a more just society.

III. COLLABORATION

There has been a growing trend for a number of years towards collaborative philanthropy. Collective giving provides an opportunity to scale charitable projects and interventions and to expand impact. Collaboratives such as Co impact[xvi] and less formal affiliations of philanthropists have in recent years provided a model for those who recognise that the world’s largest, and often most intractable problems, can only really be addressed collectively. At a local scale, community foundations and local giving circles have grown in popularity and impact.

Collaboration in giving can be challenging, even off-putting. Finding like-minded partners is challenging and many funders fear that collaboration will spell an end to their control and freedom. In addition, proper collaboration requires effort and compromise. However the advantages are significant. Access to the expertise of partners, and the reach of coordinated effort top the list, but many collaboration proponents will also cite efficiencies at the macro and micro-level, the creativity of problem solving that can arise from collective work, and, of course, avoiding reinventing the proverbial wheel.

One unique and paradoxical aspect of the pandemic has been its universality. On one level, we are all affected by the same virus and its spread has highlighted how very interconnected we all are in a globalised economy. In one sense, then, we are all ‘in it together’. However, the virus has affected communities so differently, and the economic and racial lines of difference are so clear that it remains stubbornly obvious that our systems create great difference and alienation.

As Cath Dovey, co-founder of Beacon Collaborative in the UK says:

“We already know that society will change radically as a result of the impact of COVID-19. The pandemic is having an impact socially, economically, and politically that is unlikely to be reversed. This is happening locally, nationally, and internationally. Just as other sectors of the economy are being re-shaped, the charity sector will also emerge from the crisis differently. We have the opportunity, right now, to re-define how the charity sector works to make sure it is more effective, adaptive, resilient and can tackle injustice and inequality better than in the past. Organisations need funding to do this, but they also need partners who can encourage them to think about their future role the landscape, what they will do differently, and how they can best re-frame their activities – alone or with others – to ensure they meet their goals and contribute to a more positive future”.[xvii]

Collaboration amongst funders in this context is vital, and many funders are seeing its appeal.