Daniel

Daniel Ferrell-Schweppenstedde

Policy and Public Affairs Manager

Charities Aid Foundation

Please share

Philanthropy questions itself to stay relevant

What are the issues that drive this process?

26 October 2020

Philanthropy as a sector is hugely varied. The range of organisational forms and approaches on show is as wide as the range of motivations that have led people to give or volunteer – whether those are emotional, political, religious or something else entirely. As a result, we must be very careful about speaking about philanthropy as if it were a homogenous field (as Beth Breeze argues in a recent article pushing back on broad-brush critiques of philanthropy).

However, at a time when the global philanthropy sector is going through a major period of self-reflection in light of rapid social and economic change, there is still enough of a common thread to identify a set of topics that should be of interest to anyone engaging with funding for social good.

Our unusual (if not unique) position here at CAF - sitting at the nexus between civil society organisations and donors of many different kinds - allows us to engage with an extremely wide range of players in the field of philanthropy; so here is a snapshot of some of the key themes that we have found to be at the forefront of people’s minds over the past months.
  

The changing nature of how philanthropy is defined and organised

Who is a philanthropist

There is a growing awareness on the part of institutionalised philanthropy that the definition of who can be philanthropist is changing. Pinning it to measures of net-worth or financial amounts increasingly sounds outdated, and risks excluding the growing number of people at more modest levels of wealth who want to give in a thoughtful way to achieve social change (in particular in the global context).

But this is not just about different people engaging with existing models of philanthropy due to demographic and societal changes; it is also about the different ways that individuals can now organise themselves and direct resources towards the causes they care about. Platform approaches play an increasingly large role in mobilising resources, driving change and shaping discourses and dominant narratives in society - and they also come with their own set of ethical challenges.  Many of those giving in this way may not even define themselves as philanthropists, but to understand how philanthropy is changing and what it might look like in the future we need to take them into account.

From an organisational point of view, the old models of a hierarchically-structured charitable entity or an endowed trust or foundation have not yet become obsolete; however, they are certainly no longer the only option. As big donors in the US look to new structures such as Limited Liability Corporations (LLCs), and, at the other end of the spectrum, the opportunities for mass giving broaden, the question will be whether those more traditional models still have unique value; and if so, what that value is.

Platform approaches play an increasingly large role in mobilising resources

A changing view of grantees

Funders are questioning how they see the organisations and individuals they support and fund. Some forward-thinking foundations are moving way from a narrative that sees their grantees as ‘dependents’, and instead re-positions them as key partners (or even the central players) in how funders actually achieve impact and change. Civil society organisations (CSOs), meanwhile, are assessing how language introduces power dynamics that may be detrimental to achieving their goals (for example, questioning the use of the term ‘beneficiaries’).

This will influence how philanthropy is organised. For example, funders may take on less central roles and see themselves instead at the periphery of a process. Or they may become more attuned to the needs of grantees, focus on building partnerships, or change their funding approaches in response to different trends in such a way that provides a framework for which practices they continue to embrace. In this sense, a change in language that reflects a mind-set shift can affect operational practices as well.

Increased demands around transparency and accountability

Individuals are demanding more information on how different institutions and organisations act, and philanthropy is not immune from these demands. There will be higher levels of scrutiny as people, more and more, want to know where money is coming from and where it is going; particularly in light of the fact that a lot of it receives generous subsidies in the form of tax relief. Increasingly, opacity and withholding information will not be an option as digital technology and the internet gives people the power to find information for themselves - or, to identify where there are gaps and bring these to light. This can be hugely empowering for citizens, but does bring for philanthropic funders new risks of misinterpretation or ill-founded speculation that could affect their reputations. The funder community is addressing this topic already, with transparency being a key element in the accountability discussion for all types of non-profits.

One of the advantages often claimed for philanthropy is its independence; the argument being that because it is not beholden to voters or shareholders it can take risks and experiment where others might not dare to engage for various reasons. (Although, there are valid questions about how much philanthropy genuinely fits this description). One paradoxical result of greater transparency – if done in the wrong way ─ is that it could reduce the freedom and independence of philanthropic funders and thus constrain their ability to take risks. Which is not to say that greater openness and accountability is not the right ambition to have for philanthropy, but rather that we must acknowledge that there may be trade-offs to take into account. We explored this issue in greater detail in a Giving Thought podcast interview with philanthropist Fran Perrin.

Trust and legitimacy being contested

This is a discussion closely linked to the transparency issue. A funder can be completely transparent about its activities, yet not be trusted by the wider population for a whole variety of reasons, or experience an erosion in trust in its organisation. There is no longer room for complacency, and many funders may find that they constantly need to renew the case for their legitimacy and “license to operate”. We are already seeing this play out on the political level, with states trying to curtail the activities of particular large funders not predominately on the basis of a lack of transparency, but the very nature of their activities and objectives (for example, the Open Society Foundation stated that it moved offices from Budapest to Berlin due to an “increasingly repressive political and legal environment” in Hungary). Nor do funders exist in isolation, and many are increasingly considering how their actions not only affect trust in them but in philanthropy as a whole.

Where the money comes from (and how it is invested)

Recent scandals around the philanthropic donations of the Sackler family and the disgraced financier Jeffrey Epstein have brought to light the ethical issues over whether some money should be seen as “tainted”. This is far from a new question, as we explored in an episode of the CAF Giving Thought podcast last year and also in a blog looking at the lessons for philanthropy from the toppling of the long-controversial effigy of Edward Colston into Bristol Harbour by Black Lives Matter protestors this year). As a result, a wider debate has emerged around the provenance of philanthropic funds and how it ties into the legitimacy of philanthropic actors. And it is not just where the money comes from that matter these days - we also need to look at how it is spent and invested, because in our highly interconnected financial world the same issues apply across all these contexts.

The question of what is acceptable is also not straightforward, as multiple tensions between different factors come into play: it is not just what is legally permissible, but what aligns with the ethics values and charitable mission of an organisation (and, increasingly, its supporters). These questions have been addressed in a wide range of reports (e.g. ACF’s Intentional Investing and the latest report on investment from emerging from ACF’s Stronger Foundations initiative). There is still an outstanding High Court ruling on whether charities must align their investments with their charitable objects. Large banks are increasingly applying ESG criteria - UBS recently made sustainable investments its preferred solution for clients of its global wealth management business (worth USD 2.6 trillion). Philanthropy (in particular from the perspective of being a financial services client) is taking note of these developments.

Decisions for wider organisational development are predominantly set at leadership level

Changing nature of leadership

Even prior to the pandemic, the question of whether leaders of philanthropic institutions were taking enough necessary risks or engaging with adaptive leadership practices was widely discussed. Achieving objectives (no matter how they are defined) is increasingly seen as reliant on a set of factors such as the ability to collaborate across sectors, the flexibility to adapt to shifts in the external environment and the willingness to take risks.

Then there are the questions of leadership style, internal structures and the ability to design inclusive environments, also tying into recruitment strategies and issues of participation and power in grant-making. Decisions for wider organisational development are predominantly set at leadership level – and these decisions are increasingly being reflected upon in light of wider societal developments and discussions in the philanthropic sector.

Connecting with the wider environment

Philanthropy being defined less as a ‘one-way street’

Philanthropy is aspiring to be more connected to its wider external environment. The independence of philanthropic funders can be an advantage, allowing organisations to take risks and experiment. However, it can also become a problem if the change that is being pursued externally does not necessarily filter back into a funder’s own operations. Changes in society need to inform how philanthropy is organised. Leaders in the field of philanthropy are increasingly challenging the status quo and thinking about how to move away from ‘just handing out money’ to driving social change by leading through example.

Tackling pressing issues and going beyond set remits

Philanthropy, at its best, is seen by many to be a solution-oriented sector that can offer answers to the most pressing issues of our times. But this requires imagination and a willingness to engage with the rapid changes that we are seeing across society. This inevitably throws up questions around scope, risk-appetite and mission fulfilment.

Social and policy change in society often comes from people challenging the status quo and this can involve adopting a range of tactics - including those, such as political campaigning or civil disobedience, that may test the funders’ appetite for controversy and the legal constraints they operate under. Of course, funders can choose to support organisations using different, less radical means to achieve a similar goal. But this might come with trade-offs in terms of effectiveness or timeliness, depending on the issue at hand. It also raises questions about the risks of funders skewing the focus of a given social movement, or softening their edges through the choices that are made about what to fund or the criteria that funders set as to what activities are “legitimate”.

An increasing number of people in the philanthropy world are calling for funders to adopt more of a rights-based approach, and to shift from seeing their role as that of distributing charity to that of supporting calls for justice.

Some argue that there is a need to stand up for particular issues because they are about protecting democracy itself, which is seen as pre-requisite for philanthropy to be fully effective and able to engage with causes. Or that in trying to be neutral philanthropy is achieving the opposite and is in fact, by default, already picking a side - much like the idea that non-communication is a form of communication itself.

Expanding into support for social movements and rights-based approaches might open up possibilities to tackle a wider range of issues that require urgent action through policy change (such as the climate crisis or racial injustice). But, on the flipside, it could also move philanthropy closer to politics, leading to a politicisation of funding practices or even a polarisation of the entire field. This could then make collaboration on traditionally non-partisan cause-related areas harder to achieve.

Power dynamics: redefining impact and achieving missions

A series of interlinked discussions have been taking place in the world of philanthropy in recent years about how funders define “impact” and measure the extent to which they are fulfilling their missions. One discussion centres on the power relationship between funder and grantee, and how there are fundamental structural challenges baked into the very essence of philanthropy that might affect its ability to achieve certain goals. Some funders have recognised this, and are asking themselves whether they are using their grantees and partners simply as implementing vehicles of an external agenda that they set, or whether they need to redefine these relationships. Similarly, there is growing acknowledgement that funding can cause mission-drift in grantees, or can swerve movements and set the parameters for what’s permissible in terms of grantees’ activities, tactics, goals etc. (We have explored these topics in a number of episodes of our Giving Thought podcast e.g. here and here).

But if taking on a particular mind-set and approach to funding (such as adopting a systems change lens) is seen as the best route to achieving impact, this will also influence the relationship a funder has with the individuals and organisations they fund - for instance, as seeing them as equals, as change-makers themselves and central to achieving their mission, or allowing them to take a minority role in decision-making processes. Devolving power to those being funded thus becomes a tool to achieve greater impact.

The ways in which funders choose to deliver support can also have a wider impact on those being funded. The COVID-19 crisis has accentuated the importance of resilience and capacity building. Philanthropy needs to contribute to this to be able to achieve impact in the medium- and long-term, so as to minimise the resources needed for the recovery phase and to prepare for the impact of the next crisis. This ties in with discussions around shifting from restricted, programmatic funding towards unrestricted, core-cost funding; moving from short-term to long-term grants; and using ‘funder plus’  approaches (where financial support is accompanied by other types of support to help develop governance, leadership, digital capability etc.).

Another discussion refers to implementing principles of diversity, equity and inclusion from a holistic point of view; i.e. not just as a “cause” in itself but as something that all funders should be taking into account when it comes to funding practices, recruitment and governance, investment practices and so on.

Embracing these principles can be seen simply as a moral imperative, but it can also be seen in light of achieving wider impact: can a funder be truly impactful if it doesn’t reflect a desire to address fundamental structural inequalities in our society in the way it funds and in the way it organises itself?

mother and child south africa township

What's next?

It is clear that many philanthropic funders are already on a journey of understanding and interrogating their own approaches, often asking themselves difficult questions about whether they replicate through their practices the very thing that they want to change and thus risk undermining their own effectiveness. For all organisations these days there are challenges when it comes to balancing stakeholder demands and the need to live up to their own values with a wider environment that prizes efficiency and speed, but these are issues that will be felt particularly keenly in the civil society sector.

These are ongoing and difficult discussions, and there are no easy answers at hand. But if we want to ensure that philanthropy continues to be a powerful force for driving society forward in the future, then it is crucial that we engage with them. We here at CAF will certainly be doing that, and will continue to feed into these conversations so that we can share our own insights and learn from others.