Philanthropy is under attack from two opposite directions. On the one hand, critics call for a more entrepreneurial approach that deploys business-based principles (e.g. accountability, economies of scale, operational efficiency) to maximise social value creation and leverage the impact continuum. On the other hand, billionaire philanthropists, who have made their money through enterprise, are being accused of trying to solve the very problems that they have helped create. Terms like ‘philanthrocapitalism’ are no longer seen as a benign means of encouraging hybrid models like Venture Philanthropy. Instead, they encapsulate for many precisely what is wrong with the sector.
Anand Giridharadas, author of the best-selling Winners Take All is a forceful proponent of the latter point. He argues that ‘plutocrats’ have only their own interests at heart: ‘Philanthropy launders bad reputations’ and ‘elite giving cannot be separated from self-protection.’ Notwithstanding such critiques, in times of crisis, philanthropic capital can provide an efficient and swift means of funding new solutions, as its hybrid, risk capital nature makes it, in principle at least, more nimble than its public or private sector counterparts.
More than Money
Data current to the period of late March when conducting research for this piece indicates that private philanthropy is now mobilising to fund measures against the coronavirus (COVID-19), giving over $1.3 billion so far for response and relief efforts. This spending includes 177 funders making 207 grants available to 42 recipient organisations. However, more needs to be done. As the World Bank states, ‘even the most conservative estimates suggest that pandemics destroy up to one per cent of global GDP – comparable to other top-priority threats, such as climate change’. According to the WEF, SARS disease alone cost the global economy an estimated $50 billion in 2003, while a 2019 report by the World Health Organisation (WHO) and the World Bank indicates an even higher figure for the impact of a global pandemic, US$3 trillion (equivalent to 2.2 per cent to 4.8 per cent of global GDP).
Faced with such ‘wicked problems’, funding, while necessary, is just the starting point. Global giving needs to be effective, measurably impactful, and scalable if entrenched global problems such as pandemics are to be successfully tackled. Practitioners may see these exhortations as moot points since philanthropists already talk of a paradigm shift and know that they need to embrace a change in both mindset and modus operandi. Indeed, this thinking has heavily influenced the new discourse within the sector around investing for impact. However, the problems are structural rather than superficial, thus deserving concerted remedial action. Dentico and Seitz (2019) note, for example, that philanthropic organisations suffer from a lack of accountability and transparency and conflicts of interest are rife. In global health, foundations may neglect common-sense practices in favour of technical approaches that are inappropriate for poor populations. Responding effectively to COVID-19 creates a new opportunity for philanthropic capital – risk capital that can forego financial returns – to prove its worth. But how?
First, philanthropy needs to be collaborative. In today’s global development landscape, no one sector can go it alone. When it comes to pandemics, intergovernmental collaboration was historically the preferred method for responding to pandemics. Yet philanthropic organisations have also historically played an important in the global health landscape. As Youde (2020) points out, ‘private philanthropy not only made the first generation of international health organisations possible, it also set the stage for today’s global health governance system’.
To enable better public-private partnerships (the need of the hour), we need to increase collaboration, which in turn, requires higher levels of trust among stakeholders and thus greater disclosure. To date, little systematic data exists on the sector, which impedes collaboration and partnership building. Efforts are underway to address this (especially in emerging markets) with the OECD’s global philanthropy network, NETfwd that is now starting the second edition of its research on philanthropy and development. Foundations could help by being more proactive in submitting data to the organisation not just for broader research but also on their work on the pandemic. The OECD tracks development assistance so could identify opportunities for multi-sector collaboration. Governments could also facilitate partnership building through more effective regulatory frameworks that encourage rather than hinder giving and that build on the current momentum to drive greater transparency in the sector.
Second, listening to communities would help. Too often, solutions put forth by philanthropists fail to consider grassroots ‘bottom-up’ approaches that incorporate input from the end beneficiary. With the current moves towards extended periods of social distancing in response to COVID-19, concerns about public compliance with preventative measures over the long-term is a challenge that philanthropists could address. By listening to communities and community leaders, charitable solutions are much more likely to respond to real needs and real human behaviour rather than surmise in a vacuum what might work best. The independence of philanthropy means it is well positioned to go where others fear to tread and divert funds for immediate humanitarian efforts to failed states with weak or non-existent health care systems. Conflict zones such as Iraq, Syria, and Yemen would be obvious candidates.
Third, a return to philanthropy’s risk capital roots and its appetite for creativity would be particularly timely. With the spread of a novel disease such as COVID-19, innovative solutions are needed. These could include embracing new innovative financing solutions in the global health sphere. For example, vaccine immunisations sukuk (a Shariah-compliant securitisation), which have raised $750 million over three issuances so far, are a step in the right direction. So are broader recent attempts by the International Committee for the Red Cross (ICRC) and the UNHCR to harness Islamic philanthropy. Embracing the multi-trillion-dollar intergenerational wealth transfer expected from a growing mass affluent class in the Global South can bring new capital to market. The Charities Aid Foundation (CAF) notes that if the global middle class in 2030 ‘allocated the same proportion of spending to charitable giving as the USA gives as a proportion of GDP (1.44 per cent) then they would generate $919 billion’. Equally, philanthropic capital is well positioned to leverage government efforts that support SMEs, by backing social enterprises focused on health care. The UK has just announced $400 billion in lending, grants and guarantees to keep business going. Venture philanthropy foundations, such as Omidyar Network or the Draper Richards Kaplan Foundation can use their greater risk-taking appetite to support new social enterprises that can offer preventative services and products to a broad segment of the population. Unlike a purely profit-driven enterprise, they can do so without unduly fretting about partial or total capital loss.
Opportunity in Crisis
The availability of philanthropy should most definitely not be an excuse for governments to get complacent or abdicate their responsibilities. They should earmark tax revenues for preventive spending. However, when time is short, and governments are struggling, policymakers and practitioners alike would do well to remember that philanthropic capital as grant funding is quick to market, readily leveraged and sector-agnostic. The partnership between the Bill and Melinda Gates Foundation and the Wellcome Trust is a case in point, having already created a $125 million seed fund for the accelerated identification and development of virus treatments. As such, although calling on philanthropists – as opposed to scientists – to help develop vaccines for coronavirus may not seem like an obvious policy strategy, it could provide a shot in the arm for fast-tracking a vaccine. Islamic philanthropy and Chinese corporate giving could further enable this as a feasible policy strategy. No one is suggesting that philanthropy is a panacea. But there is now a real opportunity for philanthropists to defy their critics, disrupt the market and bring new ways of thinking to help tackle the crisis and keep the virus at bay. Some Asian philanthropic networks are already vociferously calling for pro-active sectoral mobilisation in this space. Momentum is gaining but as more and more countries announce exponential growth in cases, many more need to follow suit.
Clare Woodcraft is the Executive Director of the Centre for Strategic Philanthropy, at Judge Business School, University of Cambridge. Kamal Munir is Academic Director of the Centre for Strategic Philanthropy, and Tayyab Ahmed is a Researcher at the Centre for Strategic Philanthropy.
Editor’s note: The above piece was researched and prepared during the third week of March, and the statistics quoted are accurate to that period.
 The use of venture capital practices to achieve philanthropic aims, such as direct investing, executive coaching and board management.
 Of course, not all philanthropic capital is risk capital, e.g. responsible, sustainable capital still seek competitive risk-adjusted financial returns. However, our understanding is that at the other end of the philanthropic spectrum, traditional philanthropists are willing to accept full loss of capital or only partial preservation of capital. For more explanation, see the diagram on the Charities Aid Foundation blog.
 Our view is that too many emerging markets are currently seeing the opposite with governments conflating supervision with control which stymies capital flows. As El-Mikawy of the Ford Foundation notes (p.43): ‘The lack of a clear regulatory framework in many Arab countries creates a sense of uncertainty about what is acceptable, when and how the state will regulate, control or restrict activities.”