Is the trust-based philanthropy bubble about to burst?

 

Charles Keidan

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If trust-based philanthropy is the new orthodoxy sweeping the philanthropic world, then MacKenzie Scott is its undisputed champion.

Scott has turned the institutional philanthropy model on its head donating over $12 billion to nonprofits over the last two years. Without building an elaborate foundation infrastructure, Scott is easily out-spending major established foundations.

Take for example one of the UK’s largest trusts, The Wolfson Foundation, who recently celebrated its 50th anniversary. Wolfson, drawing on the guidance of expert panels and careful grant making, are rightly proud of reaching the milestone of donating some £1 billion (£2 billion in real terms) since its founding in 1955. Yet Scott donated $4 billion just last month. The scale of her wealth and speed of her giving is truly head-spinning.

One astounded philanthropist told me that a charity his family had helped to found received $10 million in their bank account. Scott’s representatives had asked for nothing in return. Not even a progress report.

Her giving is ‘pretty amazing’, Dr Carmen Rojas, president of the Marguerite Casey Foundation told Alliance. ‘People…got money without the pretend pre-work or reporting to fake evidence…that was transformative for leaders,’ she said.

Scott’s approach is mirrored by others. The trust-based philanthropy project, an initiative of progressive funders in the US, is educating donors about flexible, unrestricted, long-term funding and mindfulness about power and equity. The Grant Givers’ Movement, a grouping of progressive foundation practitioners, is doing something similar in the UK. Its recent report on the ethics of philanthropy comes straight out of the trust-based philanthropy playbook.

The shadow side of trust-based giving

Given all these superlatives, it may seem surprising that there are signs of mounting criticism of Mackenzie Scott herself and trust-based philanthropy in general, especially within the walls of institutional foundations.

So who and what is driving this disquiet? Could it be that a long-established philanthropic modus operandi – the model of institutional foundation giving – feels under threat? And this time not just from faceless DAFs and LLCs, but from an increasingly public philanthropist who does things her own way?

I have heard unsettled whispers about Scott’s methods – though whispers are all they are in the sector right now. The idea is that her grantmaking is disrupting relationships between organisations.

In Scott’s approach to grantmaking, an organisation will one day come to work to find a sudden influx of millions of dollars. Imagine the implications that has (beyond the obvious): if five organisations have been working together on the same issue, the one with suddenly three times as much money as everyone else has no incentive to keep working with the others or with their other funders.

Is the best philanthropy collaborative? Scott’s giving – which is done behind closed doors, without any way for grantees or potential grantees to get in touch – doesn’t allow us to find out.

Foundation CEO: trust-based philanthropy is a myth

These criticisms are now mirrored by Simon Sommer, co-CEO of Switzerland based Jacobs Foundation – one of the first major foundations to make similar views public.

Writing in Alliance, Sommer argues that ‘trust-based philanthropy is a myth’. Instead, what philanthropy needs is ‘unbiased funding.’ While Jacobs is little known in the US, the foundation is respected in European philanthropy circles for its forensic and analytical brand of philanthropy. Sommer’s evisceration of trust-based giving is therefore an indication that a good number of institutional foundations have similar misgivings.

Essentially, Sommer’s critique rests on four concerns:

First, trust-based funders are free-riding on institutional philanthropy by drawing on its expertise and due diligence processes. ‘They hire consultants behind the scenes to do it for them’, out of public view. In Scott’s case, it’s the due diligence of The Bridgespan Group that enables Scott to give magnanimously while professionally staffed foundations can seem hard-nosed and tight-fisted in comparison.

The second objection is that trust-based approaches are too US-centric and ignore the additive role that philanthropy plays in a European context where welfare systems are generally more robust.

Third, Sommer argues that trust-based giving promotes rather than reduces inequality although he acknowledges that more empirical evidence is needed. ‘Grassroot philanthropy will end being a system of distribution of funding that favours a few. And without the need to give a reason for it’.

And finally, in a reference to culture wars, trust-based philanthropy may lead to parochialism by narrowing the range of causes and ideas which are supported – a concern that is likely to resonate with some in our sector who fear that conservative voices are too often excluded, including from the pages of Alliance.

For good measure, Sommer also warns that trust-based philanthropy ‘can be counter-productive and dangerous’ at worst – a lack of due diligence could lead to philanthropy supporting terrorism and insurgency.

Sommer’s call for data-driven based philanthropy based on evidence rather than preference echoes the technocratic philanthropy of leading liberal foundations in the US. Such an approach draws on philanthropy’s unique characteristics to advance causes through research, evidence, eco-system building, convening and shrewd use of resources all while giving the appearance of staying above the political arena.

‘We need to make methods, criteria, weighting, involved experts transparent, and document our decisions. And this is exactly the opposite of what many of the new philanthropists are doing.’

‘Trust, then, might be a result of such a diligent and transparent process rather than its starting point.’

Where now – trust or science?

Personally, I’m deeply impressed by the direction of Scott’s giving focused on racial and social injustice but do have some sympathy with Sommer.

As a young foundation director, I recall being endlessly frustrated by suggestions that ‘grantees know best’ and foundation staff should just give them money and back off. I used to resent suggestions that grantmaking foundations were simply there to make grants. It seemed to diminish our skill, expertise, agency, and under-estimate what funders brought to the table. To me, grants were a tool not an end in itself. ‘Responsive philanthropy’ as it was called back then just seemed to miss all that.

Yet the suggestion that ‘we are here to make change, not grants’ rarely went down well with my erstwhile colleagues. My call to build up evidence, demand high standards of our partners, and my willingness to be critical of charities was tolerated but never really embraced. I was setting the bar too high. The same was true of any suggestion that charities could be un-collaborative and that funders were not solely to blame. Suggesting that charities may not always know best (and that sometimes funders who have a helicopter view of a whole field actually know better) could be met with disdain.

Most of all, as a foundation professional, I hated elite gala dinners – a major source of trust-based income for charities. I viewed the giving of unrestricted money at these events as incompatible with the changes I sought because it was locked into a system that replicated hierarchy – indulging the wealthy in return for writing big cheques. Looking back, these events were a perversion of trust-based philanthropy – the opposite of the purposeful, driven and directed philanthropy I tried to pursue.

Today I have more appreciation of the virtues of trust-based giving as I’ve come to recognise the need for a more full analysis of the exercise of power both by philanthropists and by professional grantmakers. A good question to ask of critics of trust-based philanthropy is how willing they are to invite scrutiny of their own power – how their wealth was made, who sits on the boards, how they invest their assets and yes, how well they respect, partner and trust their grantees.

There is more to say on this debate and hopefully, Scott will engage directly with some of these critiques. Maybe we will find our way to some middle ground. As Sommer himself notes ‘Instead of getting out the way, we should pave the way together.’ Maybe that’s something that both advocates and critics of trust-based philanthropy will eventually agree on.

Charles Keidan is Executive Editor at Alliance.

Tagged in: Editors' comment Funding practice Trust-based philanthropy


Comments (3)

Jo Davies (previously CEO of a UK grant-making trust)

Thank you for this article - it raises important questions. For me, the biggest one is about the definition of trust-based philanthropy. I believe in trust-based philanthropy – but where the definition is a funder firstly doing their homework on the sector and context they fund, alongside sensible due diligence on organisations they partner with and support. Then it's about building relationships and mutual trust over time, getting to know a partner and their work, their successes and challenges and doing what you can to help them overcome those challenges – that may mean more funding, it may be helping them source expertise (and paying for it). Trust-based philanthropy for me means trusting a partner to know best how to spend a grant, but working with them to understand the reasons for the allocation of funds. It's only by working with partners that donors build an understanding of the reality on the ground, the context grantees are working in, what is feasible, the particular challenges each faces and how they can best be supported. That support can also be non-financial. Introducing organisations to each other to discuss a mutual challenge and potential solution is something donors are often uniquely positioned to do. You can’t do that if you don’t get to know and build mutual trust with your partners!


Gary Shearer

Thanks for this balanced view on what has become an increasingly emotive subject within the philanthropic sector. The reality though is that we all need to learn to get over ourselves and what we think we know and can activate with ‘our funds’ and ‘our approaches’. As a private Foundation, without ever assigning buzzwords around our practices, we have been operating in a trust based way providing unrestricted funding for almost 2 decades now. We listen carefully, and enable and support those at the coal face, and as a result, we now have really deep partnerships with our lead initaitives. Our approach is not research driven, but outcomes are measured and verified as each area of focus or investment progresses. Some for almost the full 20 years now. And the longer we engage, the deeper everything goes. Including trust. And the capacity and ability of each initiative/entity to deliver. It really works!


Steve Francis

What a helpful and thoughtful article! As someone new to mission-driven work at a non-profit after a 30-year career in for-profit technology, I am often struck by the lack of true cooperation between multiple organizations working on the same problem. It appears to me that the funding process, often focused on grants for a period much shorter than the work is expected to take, leave organizations insecure, fostering competitive, rather than cooperative, behaviors. If the non-profit where I now work were to suddenly receive an unexpected grant of 4X-10X our current annual budget, I'd like to think we would apply some of that, via sub-grants, to our critical partners, and use the balance to chart a 5-year, strategically thoughtful, path to impact in consultation with our current donors.


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