Philanthropic leverage
Philanthropists want to feel connected to the impact they are making.
This is why our clients often tell us that they prefer donating to smaller charities or local organisations, because they feel they get a better sense of the difference they are making.
But donors can be bold and ambitious by supporting organisations that operate at a higher level.
In this piece, we want to introduce you to something called philanthropic leverage – a way of using philanthropic capital to influence how others (donors, governments or the private sector) give to good causes.
Take the Bill & Melinda Gates Foundation, for instance. The organisation forges coalitions with large international organisations and governments which then in turn can mobilise many more billions of dollars than the Foundation can alone.
And there are plenty of other examples to consider.
Whether you are funding philanthropic programmes like Resilience, or supporting charities like Client Earth, who use environmental law to help protect the planet – there are ways to support work that improves things systematically and for the long term.
Making friends and influencing people
Philanthropic leverage can influence people and improve the way money is spent in the following three ways:
- It can help support individuals who would not normally give to charity and introduce them to a community of donors – much like Giving What We Can.
- It can support charities that work with governments to make programmes, or policies, more effective and evidence-based. Government budgets for any type of social issue far outweigh the resources of most philanthropists. Organisations like this include J-PAL, or the UK’s What Works Centres.
- It can help charities find solutions to the major issues of our time. For example: a medical charity researching cures for diseases.
To match, or not to match?
Donation matching, where large donors pledge to match smaller donations, is one of the most popular examples of philanthropic leverage.
But it may not be as effective.
A common assumption is that the greater the match value, the more money is raised. But research has shown that donation matching, and even the offer of bigger matching makes no difference to the total donated to a charity.
Additionally, the opportunity to match funds could move a donor away from a highly effective charity, or neglected cause area, and toward an organisation that is already very well-funded or ineffective.
Rather than just the amount of money a charity is able to raise, it may be helpful for donors to think about which organisations will make the best use of a donation, or achieve a better result.
Cons about this type of giving
Funding high-leverage opportunities comes with its share of risks.
Firstly, when donating to charities, you are reliant on their strategy and success in influencing others.
Secondly, policymaking and developing and delivering social programmes is a long process which involves multiple stakeholders with vested interests.
Thirdly, risk is inherent in the case of funding research and development. For every successful experiment or trial there are likely hundreds or thousands that don’t lead to the right results.
So there are risks there - however, if an organisation has a track record of achieving results, the risk may be lower.
Tips to make leverage work
- You should be comfortable with risk and uncertainty but also do some research to understand the likelihood of success
- If you are passionate about a specific cause area – for example women’s rights – allocating a portion of your philanthropic capital to charities working to raise awareness or do advocacy work, could allow you to tackle an issue from multiple angles
- Philanthropists are ultimately accountable to themselves for their charitable giving - unlike businesses which are accountable to their shareholders, or governments which are accountable to the public. Some scholars of philanthropy make the case that one of philanthropy’s key roles is to trial new ideas, before they are then scaled by governments. Opportunities for philanthropic leverage therefore get at the heart of what many think philanthropy is for
- You can start off with smaller amounts of funding and pool your money together with other donors.
Remember that you hold the power. You can find out about the organisation or cause you want to leverage funding to, and use evidence of what works and what doesn’t to develop your giving.
Once you know what works, you can celebrate those wins and share inspiring impact stories with your network, to show others how to do the same.
Your efforts and the impact you make has the potential to influence a whole new community of donors who can support causes they care about.