The humanitarian crisis unfolding in the Middle East is powerfully demonstrating the spiraling global need for greater overseas aid funding and private philanthropy.

The United Nations has warned that the world is currently experiencing the highest number of violent conflicts since the Second World War. These conflicts, together with the climate crisis and the fallout from Covid-19 are reversing decades of improvement in education, health, and equality for millions and tragically stalling progress on the UN’s sustainable development goals (SDGs).

Even before the Covid-19 pandemic, the annual funding gap to meet the SDGs was estimated to be around US$2.5 trillion. Three years on, that has grown to $3.9tr and that calculation was prior to the crisis in Gaza. Governments are increasingly unable or unwilling to boost their aid and there are also fears philanthropy may be flatlining or at least facing serious challenges.

A recent survey of millennial investors in the US – the next generation of potential philanthropists – found that most were looking at alternatives to philanthropic donations.

The survey of 1,216 next-gen family-office members found that 60 percent were looking more towards impact investing and away from distributing grants.

Last year, the scion of one of the world’s richest families closed down its philanthropic activities. André Hoffmann, whose family’s stake in Roche is valued at ($US21.65 billion), said transferring money long-term because one feels guilty doesn’t help and was a ‘senseless strategy’.

After two decades in the NGO sector, I have some sympathy for this view.

Our traditional approaches to funding aid and development do not always support the breakthroughs at scale that the world’s most vulnerable people need. And the need now – post-COVID and amid new conflicts in Ukraine and the Middle East – is greater than ever.

‘There are some tasks that philanthropy is uniquely well positioned to do – such as providing emergency humanitarian relief, work in high-risk, fragile settings. This will be more in demand than ever given the global spike in conflicts.’

A white paper by Unlock Aid Group highlighted that a small group of for-profit contractors and big international NGOs were the only players that could absorb the mega funding grants that were awarded in aid and development.  They argue this group of organisations controls the entrance of any smaller players, which can act to stymie game-changing innovation and potentially even deter the kind of collaboration that would allow the expansive use of scalable, innovative approaches.

The sector’s traditional approaches to funding can fail to incentivise results and lead to systemic underinvestment in new technologies that may significantly increase our impact.

Donors’ low tolerance for risk and short-term payment structures are inconsistent with the financial model that is needed to nurture the development of new, technology-based business models.

Aware of our own limitations in being able to support greater innovation, Save the Children created a social impact fund as a way for more nimble, innovative approaches to access large bilateral and multilateral funders and scale for impact.

One of our early investments was in life-saving social enterprise ThinkMD, a business that has developed smart software that helps frontline community health workers in places like Bangladesh to improve maternal and child health diagnostics. In fact, peer-reviewed research suggests that when using the technology, less-educated community health workers are between 90-95 percent as effective as US doctors in diagnosing such issues.

We are now in the process of rolling out this technology across more than 50 countries, providing a financial return to ThinkMD, but also making a significant contribution to the third UN Sustainable Development Goal of ensuring healthy lives and promoting wellbeing for all ages. Of course, we are not alone. A handful of other leading charities and some of the world’s most progressive philanthropic foundations are now adopting similar strategies.

This investment is still a drop in the ocean compared to what is required to tackle the need in our world. Yet, it is an approach that offers new hope. And while traditional philanthropy has its limits, it also has a critical role to play – both private philanthropy and government aid. It is a false dichotomy to say there should either be philanthropy or market-based interventions like impact investing.

We need both. There are some tasks that philanthropy is uniquely well positioned to do – such as providing emergency humanitarian relief, work in high-risk, fragile settings. This will be more in demand than ever given the global spike in conflicts.

Apart from emergency responses, aid has also played an important role in supporting several large-scale successful health interventions, such as eradicating smallpox, significantly reducing the prevalence of polio and river blindness, and reducing the incidence of diarrheal diseases.

And there is some hope that philanthropy will remain strong. It is estimated 2.4 billion people will enter the ranks of the middle class by 2030. There are also projections that women will inherit 70 percent of intergenerational wealth transfers by 2035. Analysts argue these two trends, plus a post-pandemic reset in charitable donations, could spark a philanthropic resurgence.

However, alongside this precious philanthropic support, we need to do a much better job of crowding in private sector capital at the scale we need to achieve the Sustainable Development Goals.

Paul Ronalds is the Chief Executive of Save the Children Global Ventures