Foundations’ stock-in-trade is not just money, it’s knowledge. David Emerson, the outgoing chief executive of the Association of Charitable Foundations (ACF) tells Charles Keidan how ACF has concentrated on providing a forum for sharing and distilling that knowledge. He talks about the emergence of a common identity for a diverse foundation sector, about how foundations are increasingly exploring the use of all their assets in pursuit of their mission and how this summer’s referendum on Britain’s membership of the European Union shows that the social sector doesn’t know its constituents as well as it thought it did.
You have been in post since 2003. How have things changed for British foundations?
The first thing that jumps out at me is this issue of time. Change is slow but foundations have time on their side, time to reflect. So what is it that makes foundations change? What are the levers? I think if we’ve done anything, it’s been to provide a space where foundations can get together, influence each other, and begin to get more confidence that they are in their basic role of converting private wealth into public benefit. They are beginning to see that more conceptually as an activity than as ‘oh, we’re a foundation that gives grants on penal reform and the homeless, and we try to make them as effective as we can.’
One of the things that I feel proudest of is that, in 2005, I got Luther Regan Jr, the then head of finance at F.B. Heron foundation over to an ACF conference to talk about using your endowment for mission. This is before social investment and now all of that is common parlance. Looking back, I think that was a more significant move than I realized, but really it’s only an example of what we do – sharing experience and ideas – and I think that’s how we help foundations take a more conceptual approach, and realize they’re not just grantmakers, they are using private wealth for public benefit, and there are more ways of doing it than through grants.
Is ACF’s development reflected in the approaches you see your members adopting as well as the growing number of members?
It’s definitely about approach. I think foundations have got more of a beneficiary focus, they’ve got a clearer understanding of their assets and how they can be deployed. I sense a greater confidence. You can now begin to talk about a foundation sector in the UK, which you couldn’t before in any meaningful sense.
What do you think has caused this change?
It’s about them sharing. We provide a space where foundations can talk honestly without being asked for money. They can’t discuss what works and what doesn’t in front of grantseekers, but if you provide some space and some support and encouragement, then I think you can begin to see foundations developing more confidence and seeing more possibilities than if they are just individuals doing the best they can with their resources.
Trust is obviously important in this process and I notice it’s also the theme of the upcoming ACF conference, your final one as chief executive.
You’re spot on. We’re not transactional funders. Grantmaking for foundations is about relationships, and that has to be about trust. If you’re going to give your money effectively, you can’t micro-check every aspect of the money in every aspect of the process. Having done some basic checks, you trust the individuals in the grantee organization to use the funding for best purposes. You trust them to know how to vary it, they trust you to be able to come back and say ‘actually we were doing this and it didn’t work, but we think this will work – can we still continue?’ That doesn’t mean it always works well, and people do worry about impact assessment and measurement. We obviously have issues with potential grant fraud. But in the end, at the core of what we do is relationships between foundations with assets, and those who need them to improve their lives and the lives of others. The best grantmaking, it seems to me, works with a high degree of trust.
Alongside that there has been a shift to providing data about the UK foundation sector with reports like the Foundation Giving Trends series. Why is research like this so important?
That’s trust again. We now have evidence, so people can look at us and say ‘oh, that’s what you do.’ The Foundation Giving Trends which we took on from the Pears Foundation focuses on the top 300 foundations – who they are, how much they give, how big their assets are. By giving that information out, people don’t see foundations as these mystery people behind a cloud, they can see why they give their money and where. So for me, that evidence is partly about trust, and it’s partly about people understanding what we’re doing and who we are.
You have developed points of view to represent the sector more in recent years.
I think that’s another sign of confidence. As foundations have become clearer in understanding what they’re doing and why, it becomes more natural to say, ‘we are giving this much money here, this gives us a right to say, this matters or this doesn’t matter, it gives us a right to say to government, if you do this, this voice won’t be heard.’ ACF has always been cautious about speaking on behalf of members because they’re so varied, but they have begun to urge us to put a representative point of view.
Can you give an example of an issue where you’ve taken a position on behalf of members?
When the government started pushing social investment, it was trying to tackle every foundation and get them to do it. We did some research – how many foundations were doing it, why some were and others weren’t – and we were then able to present the findings to the government which, in turn, had a much better and focussed dialogue, because it was only talking to those that might be potentially interested and not to those who could never do it, however keen they were.
The biggest collective statement we made was when the government was talking about introducing a mandatory level of payout for foundations, as they have in the US. I won’t go through all the reasons, but it was very important for us say on behalf of foundations that their working environment, their effectiveness would be seriously damaged if you were to proceed with mandatory payout.
Do you think the mandatory payout question might resurface in the UK?
In a society where there is austerity, as there is at the moment, and you have some in that society who have considerable assets in a form that’s not well understood, like an endowment, you are always going to have people looking at that sum of money and saying, ‘why isn’t it used in this way?’ It’s a natural thing for politicians to say. What we have to do is continually be able to demonstrate the levels at which we’re giving which is sometimes at a higher level than a mandatory payout level.
What about cases of larger foundations whose payout rate is maybe only 1 per cent or less over a period of five years? Do you think they could be reasonably accused of ‘warehousing’ their assets?
We know that the Charity Commission has had discussions with some of those larger foundations, and it’s with the regulator that the responsibility lies. What I would say is that, for each foundation that appears to be warehousing, you need to look at what the reasons are. We would always urge a reasonable degree of spending, but we recognize that some foundations might give £20 million to a special legacy project, and not give anything for a couple of years. There may be some, but I think it’s very rare that substantial foundations are not giving out substantial money.
A recent development is the global Divest-Invest coalition of foundations calling on their peers to divest their endowments from particular assets such as fossil fuels. What is your view on that?
Foundations do two things, they manage money and they give it away, so one of the things we’ve done is put a focus on the management of endowment. I always go back to Jed Emerson’s horse and manure: we’ve talked about the manure, now we need to talk about the horse stomping around the field and what that does. The first thing is, you think about that endowment. You don’t just leave it sitting there and let the money come. On the divest/invest question, you would hope that all foundations are thinking longer term about the environment and the planet, but the roots are different. We are very conscious that some members believe the thing to do is to stay engaged with those fossil fuel providers and to try and change them. For other members, the way is to get out. What we would do is go one step back and say that the key thing is that you consciously think about your endowment, where it is and where you’re using it.
The key thing is that you consciously think about your endowment, where it is and where you’re using it.
Are you seeing your members showing interest in divestment from fossil fuels?
Among the members who’re involved, numerically, I think more are interested in divestment than are in staying in it. But we’re also seeing interest in how to use endowment better in line with the purpose of the mission more generally. We’ve tracked a change in attitude through our research and our key finding was a move from a minority to a majority interest in using the endowment in a certain way.
You mentioned the New York based Heron Foundation as ahead of its time because of its focus on endowments and mission. In our recent interview with its President Clara Miller, she said quite explicitly that the vast majority of US foundations are in breach of their fiduciary duty, because they’re not thinking sufficiently about the using their endowment to fulfil their mission, they’re much more focussed on their grant spending. Is that true in the UK?
I’m not sure I understand UK charitable law as it relates to fiduciary charity duty well enough to press it further. I think one of the key areas where ACF and I could do more is trustees’ responsibilities and their powers and opportunities to use the endowment. Heron have always been one of my models in this respect and I take very seriously what Clara’s said.
We will monitor Brexit and its implications for foundations, but at the moment we need to be working with communities across the UK to understand what their vote tells us.
The proposed British exit from the EU has been a difficult issue for foundations as well as the public. You’ve put out what many regard as a thoughtful statement about it. Can you elaborate on the Brexit experience from the foundation point of view?
I can elaborate on a big distinction, and credit to my European counterparts many of whom I met earlier this year, who helped me think this through: that distinction is between what the referendum told us and the decision to leave the EU. At the moment we’re much more focussed on the disenchantment and the alienation that the referendum made clear. Our members always felt they were close to charities and to communities, yet we didn’t see this coming. Another thing is that we are a UK-wide association, which is a huge strength, but how we are going to manage a relationship with foundations in Scotland and Northern Ireland, when both places voted differently? So I think at the moment, what I’m picking up is concerns about what did we learn? We will monitor Brexit and its implications for foundations, but at the moment we need to be working with communities across the UK to understand what their vote tells us.
What do you think those lessons are?
There are clearly lessons about alienation in huge parts of the country – in the North East and elsewhere, where there was EU money going in, but they still felt separate, as if they were missing out on society. Charities are about bringing people together and foundations facilitate that. They don’t just do grantmaking and run projects. They support voices including those of the disenchanted. We need to consider how well we’re doing this, and asking ourselves, is this a group that we should be supporting to make sure they’re heard or have more resources?
So foundations should re-double their efforts to tackle alienation in British society?
We’re talking just after the Tory party conference, where suddenly the only permitted view seems to be ‘Hard Brexit’ – getting out of the single market, getting out of immigration, cutting every tie with Europe. I’m not saying we get into politics, but we need to make sure that the views of other groups across the country are heard, and I think foundations do have a small role to help charities support that voice.
The other aspect of this is how well placed UK foundations are to build relationships with philanthropy across Europe. To what extent do you think British foundations have a European outlook?
There are practical reasons why some don’t. Of course, there are those who are interested, who are funding on the environment, on refugees and on other pan-European issues and it’s crucial for them to maintain contact. But we’ve discovered in the last few years that we’ve had members from before Magna Carta. They were set up to respond to local need and for 800 years or more, that’s what they’ve been doing. Likewise, most of our members have developed a mission which is a focussed on Britain and it’s only more recently that foundations have the permission and the experience to fund in Europe. So if we don’t have all of our membership leaping up and down and saying, ‘you must maintain contact’, there are good reasons. Out of our 330 members, maybe 180 don’t have the power to engage in Europe, because it’s not in their charitable mission to fund outside of the UK. Those who do – Joseph Rowntree Charitable Trust, Children in Need, the Big Lottery Fund, Barrow Cadbury Trust, Nuffield Foundatioon – are really active and have been very effective.
I think there is great untapped potential for how membership associations – these very strange and unusual bodies – share their experience.
Would you welcome foundations from other countries in Europe, who are interested in some of the concerns you expressed about disenfranchisement, being more involved in the UK?
Of course! It can only be beneficial to have direct input and interaction, as I learned when I went over to Brussels earlier in the summer and talked to a couple foundations about how Brexit looked to them. It was fantastically insightful. I think all positive and thoughtful sharing about foundation experience has to be helpful, has to progress the sector.
As foundation sectors develop across the world, how do you see the value of umbrella bodies?
The one I’ve most enjoyed, which hasn’t been very high profile, is that for most of the 14 years I’ve been in post, I’ve talked three of four times a year to my counterparts in Canada, Australia and New Zealand, all of whom are national associations based loosely on the 1601 [Statute of Charitable Uses] Act, and we’ve had a wonderful sharing experience. We’ve been to each other’s conferences, that’s been a really positive experience. In a sense, I’ve learned as much from that as I have from the American foundations. It’s not a public grouping, but there’s a lot of experience in there. I think there’s a lot of potential in DAFNE, which is the equivalent of a Europe-wide ACF and we’re being supported by the Mott Foundation to explore that potential. I think there is great untapped potential for how membership associations – these very strange and unusual bodies – share their experience.
As well as promoting philanthropy infrastructure, the Mott Foundation has been involved in developing community foundations and community philanthropy. Do you also work with community foundations?
My perspective is that these are enormously fertile organizations that do great things, but in the UK for historical reasons, we’re on parallel tracks. I talk to them and always have done, we have some of them as members.
What have been the highlights of your tenure?
I’ve already mentioned the Heron conference. I still can’t believe I got to chair a meeting Desmond Tutu at Guildhall for an event with City Bridge Trust. That was a real personal privilege and highlight. It’s a delight to work with thoughtful people who run trusts and foundations. The Woburn Place Collaborative – that’s a group of social justice foundations – is a pleasure to work with.
For most charities, their modus operandi is money. Getting money, managing money. For us as foundations, it’s not money, it’s knowledge. That means we’re not competing in the same way. People are so generous, so supportive. To be in a world where you’re trying to get better knowledge, better experience, better understanding, not just more money – it has been the most enormous privilege and a joy to work with these people. That’s my highlight.
Would you have liked to push some of those foundations who are in this position of privilege a bit harder?
It’s not about pushing. How do any of us learn? We learn by understanding. We don’t change our behaviour because we’re told to, we change because experience tells us better. Foundations have their trustees, they have staff, they have their own priorities. I think what we have been able to do is give them a more comfortable space to reflect and say, ‘actually there’s another way of doing this, there’s someone else we can work with’, there’s a new outlook’, and that’s what I would celebrate.
Lead photo: David Emerson at the Czech Donors Forum.