The omnipresent demand for so-called ‘trust-based philanthropy’ is, at best, naïve. At worst, it can be counterproductive and dangerous. What our sector has to achieve instead is unbiased funding.

In current conversations among philanthropists, providing unrestricted funding seems to be the only allowed and ethically appropriate way of working with organisations in the field. In 2019, Vu Le coined the term MYGOD for this imperative approach:

‘If funders actually want to help organisations strengthen their infrastructure, it’s simple: stop providing restricted capacity-building grants and just give Multi-Year General Operating Dollars—MYGOD!—and get out of the way.’^[1]

The second key component of this new gospel of philanthropy is the unconditional trust in local capacity and knowledge to address issues. The imperative is to give to organisations led by and serving marginalised communities and trust that organisation to know what’s best for its operations and programmes^[2].

This approach – albeit not entirely new – has spread like a wildfire in philanthropy, particularly in the United States. The dire need for funding operations of NGOs and charities during the years of the Covid-19 pandemic has additionally accelerated this development.

Today, any foundation that insists on a log frame in applications, makes future partner organisations revise proposals and undergo due diligence is often subject to serious criticism (to say the least).

I am providing four arguments why so-called trust-based philanthropy is at best naïve, and, at worst, can be counterproductive and dangerous. In conclusion, I suggest an alternative to strive for: unbiased, data-driven, and transparent philanthropy.

1. It is not what it claims to be

The idea of trust-based philanthropy itself is a myth. Many of the ‘new philanthropists’ who are moving large amounts without any professional staff and organisation behind them in a supposedly trust-based approach are de-facto relying heavily on the extensive due diligence done by others over decades of work. They hire consultants behind the scenes to do it for them. We all know contracted experts that have been involved in conducting exactly this type of due diligence in a hush-hush way. The resulting actual basis for a funding decision, I argue, is then actually weaker, less targeted, and less up to date than a professional review and due diligence process. And it has nothing to do with trust.

Ruth Levine has recently noted that ‘(MacKenzie) Scott’s giving shows that foundations that do engage in intensive due diligence and establish close relationships with grantees can do that work not only for themselves, but for the collective benefit of the larger philanthropic community and the organisations and communities they seek to help. Scott’s selection of grantees would not have been possible without the knowledge developed and shared by other funders with specialised expertise.’^[3]

2. It is a US-centric approach

Is it a mere coincidence that ‘MYGOD’ ends with ‘Dollars’? It is almost ironic that the dominant discourse on trust-based philanthropy has spread from US philanthropy over to other parts of the world. Ignoring that the role of philanthropy in countries with functioning tax and social security systems has never been to maintain basic levels of health or other social services. In these countries – such as in most European ones – it is the government that uses taxpayers’ money to maintain the ‘service public.’ Philanthropy has an additive, complementary role here, and in order to perform in this role, it needs to make strategic choices. In fact, in the dominant philosophy in Europe, philanthropy must not replace the ‘service public’, thereby allowing the government to withdraw from its key responsibilities.

The other US-Centric misconception underlying trust-based philanthropy seems to be that it assumes that charities and NGOs are subject to comparable governmental and judicial control in their respective countries. The numerous examples of well-meant funding to NGOs that actively supported terrorism and insurgence – e. g., in Central and Latin America – are too many to be counted here. These examples alone should teach us that unconditional trust-based funding is not only naïve but can be dangerous.

For more on trust-based philanthropy, read Executive Editor Charles Keidan’s editorial, ‘Is the trust-based philanthropy bubble about to burst?‘

3. It can contribute to a perpetuation of inequalities in giving

Social science tells us that trust itself can be based on stereotypes and can be subject to extreme bias. Once we start trusting someone, we will favour their approaches, support their opinions – and make those outside of their realm those with different opinions and approaches, the outgroup.

In philanthropy this is particularly dangerous because this is where the Matthew Effect comes in: we will inevitably give to those whose approaches are in line with our ingroup, our trusted few. And this is indeed what we see in a lot of places: a few organisations become ‘donors’ darlings’ –  apparently more worthy of their trust and money than others.

Over time this might lead to a vicious effect: what has started as an idea to support innovation and grassroots philanthropy will end being a system of distribution of funding that favours a few. And without the need to give a reason for it.

To be fair: The jury is still out on this. There simply isn’t a huge amount of actual research looking at the effects (positive and negative) of unrestricted funding on the work of partner organisations and overall market^[4].

4. Philanthropy needs to support diversity, not parochialism

Trust alone will never be sufficient as a philanthropic principle. Trusting an organisation and subsequently entrusting it with financial resources must be the result of a transparent, criteria- and data-driven process.

Such a process will allow for funding divergent approaches and projects, if – and only if – technical quality criteria are met and ensured. Foundations can learn a lot from science here. I had my revelation on this early in my career when I led a review meeting of a panel judging research proposals in physics. A well-known professor, highly respected by the entire field, commented on a proposal: ‘I don’t believe in it for a second, but methods and data are state of the art. And that is what this review meeting should be about, not about my beliefs. Go for it.’

This is exactly what philanthropic decision making must be about: promoting diversity rather than trust-based parochialism.

The alternative: Unbiased, data-driven and transparent philanthropy

It may well be that I have entirely misunderstood the concept of trust-based philanthropy. And don’t get me wrong: I am a big believer in trust and trusted relationships with our partners. But the way trust-based philanthropy is discussed at large today, proclaiming the end of traditional philanthropy, cannot be the right way forward.

As an alternative to making trust-based donations, I am arguing that we must strive for unbiased philanthropy. 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.

Rather than ‘getting out of the way’ we should pave the way together. If we as a sector – and that means: every single foundation and every single of their employees – succeed to eliminate biases to the extent possible from our processes and resulting funding decisions and make the remaining bias transparent, then, and only then, we will be able to choose the right organisations and programs to support.

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

Simon Sommer is a co-CEO at the Jacobs Foundation.

Editor’s Note, 11 April 2022: A link to the report ‘Risk of Terrorist Abuse in Non-Profit Organisations‘ from the Financial Action Task Force was added in paragraph two of section 2 to cite the statement: ‘The numerous examples of well-meant funding to NGOs that actively supported terrorism and insurgence – e. g., in Central and Latin America – are too many to be counted here.’ For more context on this report, the European Foundation Centre (now Philea) has said there is a ‘lack of evidence’ to the claim that non-profits are particularly vulnerable to terrorist abuse.