There is shouting at the gates of institutional philanthropy these days. Give more…give without conditions…give more equitably…give with urgency. We were hearing these shouts before 2020. The pandemic and its consequences have justifiably turned up the volume and multiplied the voices. And there has been a response. One of the most striking has been that of MacKenzie Scott, one of the wealthiest women in the world, who has given away over $8 billion in just over a year. She is giving not only in quantity but also in quality, with unconditional grants to multiple organizations, many of which have never received so much philanthropic support and many of which are working for racial and social justice. Is this a sign of more fundamental change coming to philanthropy or is she an outlier? In Canada, many foundations have responded to the urgency of now with more giving, fewer conditions, more core support and a necessary, if still insufficient, lean towards organizations and communities that have been historically underfunded. But the shouts for change go further than the amount and manner of funding. Some question the value of the long term and the legitimacy of endowments in a society confronted by the immediacy of challenges posed by inequality, injustice and environmental crisis. In this view, there is little merit to an institutional foundation model with a source of capital that is spent over time and with strategies that have impact over the long term. MacKenzie Scott’s approach certainly suggests that it is possible for philanthropy to move quickly, flexibly and at scale on today’s issues. But does it blow up the long term institutional model? No, it doesn’t.
Why is this model still valuable? Otherwise put, why do long life foundations matter? Because they are an important part of an ecosystem. In a balanced ecosystem, one element depends on and contributes to many others. Take one away and the ecosystem is damaged in unexpected ways. What part do foundations play in the social ecosystem? They contribute knowledge-building, convening and network creation, organization and infrastructure support, influence and connections. They act as signals to others around ideas and innovations that will matter not today but maybe five or ten years from today. In a thoughtful recent blog for the Center for Effective Philanthropy, Ruth Levine illustrates how knowledge and infrastructure building by foundations contributed to MacKenzie Scott’s approach even if overlooked in the applause. As she notes, “Scott’s selection of grantees would not have been possible without the knowledge developed and shared by other funders with specialized expertise… Without the work done within staffed foundations, it’s unlikely that ready-made recommendations and knowledge about nonprofits’ strengths and needs would have been available to Scott…Foundations that provide support for evaluations of various kinds, collect and analyze feedback from communities served, and make investments in organizational capacity and culture-building create value that extends far beyond a one-time grant.”
What matters to our social ecosystem is the continuity of foundation giving, and their ability to give sustainably to bring about outcomes that may only be realizable in the long term. Some examples of valuable philanthropic long-term investments are longitudinal research studies, or experiments in designing and testing new social programming, or support for policy development studies, or core support to build networks and collective impact backbone organizations that require investment for years before generating maximum social benefit. Our country’s most complex challenges, such as developing solutions to addiction, homelessness, adaptation to climate change, and generational poverty, require a long-time horizon and much patient philanthropic capital.
Is there room for improvement? Can foundations be better at what they do? Of course. There could be more investment by foundations in their own staff capabilities and in more systematic learning and sharing. They could simplify their processes, reach out more to their communities of interest, listen better. They could strengthen their support for their own field infrastructure, including data infrastructure. Ruth Levine suggests that “given that the value of foundations’ due diligence and strategy development is greatest when it’s available to others, foundations can engage in funder collaboratives that facilitate knowledge sharing, and they can look for opportunities to build on, rather than duplicate, others’ due diligence activities.”
Would our social ecosystem be more fragile, less sustainable without institutional foundations? Yes. Let’s not lose it by throwing out the long life philanthropic model. We can do better but we should not do without.
A talk given to a panel discussion on the future of North American philanthropy hosted by Alliance Magazine on July 14, 2021. Here is a summary and recording of the panel discussion
We Canadians live in a small country that sits next to a very large, influential and noisy one. Inevitably our trajectory has been influenced by what goes on to the south of us.
This is true when it comes to the history of organized philanthropy, especially in English-speaking Canada. Cross-border personal and business connections shaped the creation of private charitable trusts in Canada at much the same time as they were created in the States. One of our early 20th century Prime Ministers, Mackenzie King, worked at the Rockefeller Foundation for some years. And the Winnipeg Foundation, our first community foundation, was created in 1921 on the model of the Cleveland Foundation created in 1914. So, we have been practicing philanthropy, using the same basic models, for over a century. But being a smaller country with a population stretched pretty thin over huge territory it has taken us longer to knit ourselves together. While the Canadian Centre for Philanthropy, now Imagine Canada, was created in the mid-1980s, other philanthropic networks focused on grantmaking foundations in Canada are not even 30 years old.
This might suggest that Canadian philanthropy compares with the United States in age but not maturity. I disagree. We have caught up quickly in terms of our thinking and practice as a field. And where I believe we excel in comparison to the United States is in our relative success at collaboration, a particular advantage when it comes to tackling the complex wicked problems that require collective action, such as dealing with climate change.
In general, Canadians are centrists and pragmatists. Without the extremes of ideological and values polarization that we see in the United States, foundations across the country can work together without having to declare a side. Yes, we are more willing than Americans perhaps to cede the lead to government, even allowing for some regional difference on this from West to East. This is in part due to the activism of the public sector. From the 1960s on we have had a progressive tilt to our federal politics which has brought us to a place where public education, public health and social security supports give the majority of our population a safety net that simply isn’t there in the United States.
And yet…. in the last 25 years, we have seen the constraints on government, which are both fiscal and human. We don’t expect government today to be the source of social innovation. And in the last 20 years I have seen a leap forward in Canadian philanthropy itself around collaborative initiatives - to generate ideas, to experiment and pilot test, and finally to begin to advocate for policy changes that we see as important to our future.
On the issues of 2021 and beyond – inequality, systemic racism, climate emergency – I think that Canadian philanthropy has much to offer inside and outside our borders. We live in a country which has a lot of expertise in extracting and burning carbon. And we have an enormous environmental space at risk, in land, water and air. Together, Canadian philanthropists are working on making space for policy development, generating ideas around carbon pricing, developing marine and forest conservation and driving collaboration in our urban centres to get to net zero. We live in a pluralist society of immigrants. Most of our large urban centres have welcomed and integrated large numbers of immigrants and refugees from East and South Asia, from the Middle East and from Africa over the last 25 years. This means that philanthropy has plenty of opportunity to work collaboratively and at scale on social inclusion. As settlers, we share the land with the many Indigenous peoples who are the original inhabitants. This means an opportunity for philanthropy to step up collectively to the work of relationship building and reconciliation.
Are we doing it as well as we could? No. Canadian philanthropy has weaknesses – our pragmatism can lead to too much caution, our modesty can become lack of aspiration. Organized philanthropy itself is not diverse and that means that there are important voices and perspectives aren’t included. Many foundations in Canada can be justifiably critiqued for opaqueness and elitism. And we can be too polite. This shows up in our relative reluctance historically to step up in public to advocate and organize for social change.
Yet events of the last year, and the consequences of the pandemic, are changing this, I think, in Canada as in the US. I have seen more foundations come together to speak publicly on the inequalities revealed so clearly by the pandemic. It showed us the gaps in health and childcare coverage, in support for racialized and vulnerable populations, in mental health services.
These gaps are now pushing funders to become bolder in making collective statements on the need and urgency for policy change. And in making collective commitments to change the work of philanthropy itself. Many Canadian foundations signed a pledge during the pandemic to free their grants from restrictions, to grant for longer periods and to make themselves more transparent and accessible. Funders are trying to listen better and to figure out how they can be better partners with community leaders. I am optimistic that we will pursue this path. As a small but connected country I think we can and will share more widely some of what really works in Canadian philanthropy for ourselves and beyond our borders.
I have been considering the importance of better listening over the last few days. Many voices are being raised in Canada calling for reflection, learning and inclusion in response to the grief and anger being expressed by Indigenous communities, and by other communities as well. People are talking about “hearing” these voices. That is necessary and important. But listening goes a step beyond hearing, I think, and it’s probably something we all need to practise more. It’s about hearing thoughtfully, or “with thoughtful attention” according to dictionary definitions. This requires some effort. It requires certain personal skills and traits, foremost being humility. To listen well also means to keep an open mind about what you are hearing, and perhaps a willingness to alter your thinking as a result of what you hear.
How might this relate to the world of philanthropy? Private foundations are often criticized as bodies that aren’t well set up for listening. If they are local or place-based funders of direct services, their funding decisions don’t fully take into account the experiences and views of the people they are trying to help. If they are national or systems change-focused funders, they don’t pay sufficient attention to the views of those ultimately affected by the systems they are trying to change. While there are exceptions and examples to the contrary, in general foundations have trouble listening well. This is true even though listening well might make them much more effective, whether they are local or national, policy-focused or service-focused funders.
These are not just my observations. Many of them were made of American foundations in a 2019 study of foundation listening practices commissioned by the William and Flora Hewlett Foundation, known for its interest in effective philanthropic practice. This study, Bridging The Gap, offers some wise insights and options for funders who want to understand how to listen better. It defines listening for foundations as “efforts to consider the views, perspectives and opinions of the communities and people that a foundation seeks to help – and to incorporate these perspectives into strategic considerations and deliberations.”
As the study notes, many if not most foundations have good intentions about listening but stall at the activity stage. Understandably, for smaller foundations, it’s a lack of capacity (time and staff). For others it’s a worry about raising expectations among grantees, or concern about not getting honest feedback because of power imbalances, or the impediment of internal process barriers, or attitudes about the unreliability of or subjectivity of individual perspectives. For some, particularly those working at national or global levels on systemic efforts across populations, it’s a question of strategy. How to identify the voices of those who might be helped by a systems change? For many foundations, it is enough that their grantees do the listening for them and relay the perspectives or feedback indirectly to the funder.
The study authors rebut the reluctance of foundations to engage in direct listening by suggesting that “in almost all cases, foundations would benefit from building connections in some way with those they seek to help, primarily as a way to stay grounded.” They note that “for foundation initiatives that promote benefits that are almost akin to public goods (e.g. better functioning democracies, a healthier planet), scoping listening efforts can be particularly challenging….but there is likely value in experimentation to see if in fact, listening to the communities you are seeking to help with those public goods can shed new light on these efforts.” To help foundations think about how to overcome the barriers, the authors provide a menu of listening approaches, both broad and deep, ranging from listening tours to site visits to support for grantee-initiated listening efforts, as well as more intensive approaches such as focus groups, surveys, advisory committees, employing staff or bringing in board members who represent community, and even participatory grantmaking, where those who the foundation seeks to help are directly embedded in the decision-making.
Is this a good time for philanthropy to think harder about listening? The conversation about equity, inclusion and reconciliation in our country suggests that it is, very much so. And we have examples to learn from. Here are just three, from foundations of different sizes. The Lucie et Andre Chagnon Foundation conducted an extensive listening tour in Quebec among the communities of people it seeks to help in 2017-2018, followed by a survey. It shared its conclusions in an article in The Philanthropist. In 2020 during the pandemic the Lyle Shantz Hallman Foundation created space through its Support the Pivot grants for local organizations serving children and youth to reflect on how to adapt to the pandemic crisis; they brought in youth as advisors to help them assess the grant proposals. A joint initiative of the Counselling Foundation of Canada, Lawson Foundation, and Laidlaw Foundation pooled resources to collect feedback from grant recipients and to share the results in a 2018 report Grantee Voices: Strengthening Collaboration by Listening to our Grant Recipients.
The Hewlett study concludes that “listening is fundamentally an invitation to take in new perspectives and ways of thinking; however, for it to be systematic, it must be thought of as a set of muscles and structural reinforcements to be strengthened throughout an organization. Foundations, as institutions, must create cultures that are supportive of input, structures for carrying out high-quality listening, and the means for holding people accountable to these expectations. Internally, leadership must demonstrate an authentic interest in using this new information and signal that listening is a priority.” Good listening isn’t easy. But it’s both necessary and valuable in my view if philanthropy is to play its full and best role in our country.
Is Change Coming to Philanthropy?
The pandemic has changed us all, at least in the short term. Is it too soon to come to conclusions on how the pandemic has changed philanthropy?
In an interesting recent piece, Ben Soskis, a historian of philanthropy, comments on the shifts that he perceives in what he calls the “norms and narratives - that is, the rules governing accepted or valued charitable and philanthropic behavior and the replicable, archetypal stories that have developed to make sense of that behavior.” He singles out some important trends, which were developing in the United States well before the pandemic, but which have been accelerated by its impact. Some of them drive a democratization of philanthropic giving, such as:
Others drive the pressure for more fundamental change in philanthropy, such as:
A good deal of this has to do with the influence of digital technologies and social media. Some of it has to do with generational change in beliefs and values. Some of it has to do with the call for social justice, inclusion and reparation. All of this I would suggest is present in the Canadian philanthropic scene, just as it is in the United States. And it is forcing a conversation about change. I have already commented, in an earlier blog on the subject of today’s crisis and tomorrow’s challenges, on how the new emphasis on “distributive immediacy” is playing into the current Canadian discussion about disbursement minimums and the urgency of spending more, faster.
What these trends also suggest is that the institutional model of the grantmaking philanthropic foundation needs deep re-examination. For years people have wondered when the paradigm of the grantmaking foundation, run behind closed doors, with decisions made by small and non-diverse groups, was going to be shaken up. Perhaps the time is now? And if so, how?
In this climate, which has the potential to lead to more radical philanthropic foundation reform, the idea of participatory grantmaking has been getting increasing attention. As the term suggests, this is about including more people in the decision-making about the distribution of grants. It can range from simply consulting or being advised by people who may be affected by the grant, to giving over entirely the decision-making power on grants to communities who will receive the funds. While it has been documented as a practice over the last decade (see Grantcraft’s 2018 Guide to Participatory Grantmaking) it has not been a mainstream practice at all, given the fear that many foundations have of losing their core function of grant allocation. Indeed, this is the kind of change that could radically reshape the foundation paradigm.
In an indication that the trend is getting hotter, a new book, Letting Go: How Grantmakers and Investors Can Do More Good by Giving up Control, by Ben Wrobel and Meg Massey, looks at both participatory grantmaking and participatory investing approaches. The authors describe the range of ways in which foundations could build participation, moving from setting up grants advisory committees all the way to handing over decisions entirely to community partners to choose priorities and allocate funds. Wrobel and Massey also make the point that philanthropic funding can be allocated in participatory ways through investing (see Deciding Together: Flipping the Power Dynamics in Impact Investing). Seeing (or hoping for) a movement developing around this, they have partnered with a group of foundation leaders in the creation of an online community of practice for foundations and donors interested in participatory approaches. They will also donate 50% of the book’s profits to the Decolonizing Wealth Project’s Liberated Capital fund, which supports Indigenous, Black, and other people-of-color-led initiatives working for social change.
Is this something that indicates a more fundamental set of changes are coming to philanthropy? Since the pandemic began, we have seen the relaxation of funding conditions, the shift of more resources to communities excluded up to now, and the attempt to simplify language and make foundations more approachable. But the yardstick for change is also shifting. The next effort may well have to be deliberate design for more inclusivity. As Meg Massey pointed out in a recent interview, there is never really a downside to bringing in other voices and perspectives, no matter what the context or philanthropic strategy. Certainly, the legitimate concern of foundation leaders about their accountability when decision-making is shared or ceded will need to be addressed. But there are ways to move forward. Perhaps we really are at that moment of paradigm shift in the norms and narratives, as Soskis puts it, that will shape the foundation model for the future.
Do discussions about “data” make your eyes glaze? Why is it important for you to pay attention and why now?
The answer is that, as the last two years have shown us, we need good data more and we need it urgently. We are surrounded by a sea of data. In the digital age, we can collect it, connect it and share it more easily than ever before. Charities and philanthropic foundations can track not only who their clients and grantees are but how they interact and the outcomes of these interactions.
Why is it important to look more closely now? Because we need good quality and shareable data to tell us more about who is doing what and what is NOT happening. The combined crises of rising inequality, systemic discrimination and the unequal health impacts of the pandemic tell us that we need data to throw light on the gaps and blind spots in our society. What is clear is that while we have all kinds of data at organizational level, we still don’t have a data ecosystem across the charitable sector that allows us to share and integrate data, and to give us all the chance to find these needs and funding opportunities faster in our society. On an individual basis, funders ask grantees for reports and data on the “problems” that charities are trying to solve. They ask for evidence on both performance and impact. Government funders do too. And charities themselves ask for data from each other. Certain rules govern these interactions. Some, such as the privacy rules governing the sharing of personal information, are set at a systemic level by governments. Others may be set by the organizations themselves. For example, foundations may choose, or not, to share data about the work they do and the impact they are having. But they don’t make these decisions in a vacuum. Increasingly, the system-wide norm within which funders and others operate is one in which data should be shared – think of social media platforms and the incentive they create to share information.
So, what do we need to share data better and faster? A February 2018 report from the now defunct Ontario think tank Mowat NFP, Collaborating for Greater Impact: Building an Integrated Data Ecosystem gave us a roadmap. The authors argue for recognizing the value of building an integrated data system with transparent but standard rules for sharing and integrating data, ways of linking data across organizations and a new norm around open and collaborative data-sharing. Mowat diagnosed the challenges in getting there, starting with a general lack of data literacy and capacity among charities (including foundations) who have little time or expertise for data collection and sharing. Resource-poor charities also have understandable worries about the costs of investing in data tools. And many are suspicious about risks to privacy or about how data could be misused.
For these reasons, Mowat argued for the creation of a “data charter” for the charitable sector that establishes a code of practice and protocols for data sharing. Mowat also suggests that governments and philanthropic funders provide support for capacity-building and even act as backbones or sponsors of datasets and of data centres or labs. This case is made in a persuasive recent CBC opinion piece by Marina Glogovac, the CEO of CanadaHelps, the digital fundraising platform: “The sector cannot be successful if it continues to be starved of the resources needed to modernize, work more efficiently, and operate effectively in the digital era. We must better enable them through government support and funding, but also challenge charities themselves to take on the hard work of becoming data-driven digital organizations. To make this critical transformation, charities need access to high-quality resources and training programs”. The federal government is prepared to finance small business adoption of digital technologies (see the 2021 budget commitment of $1.4 billion to small businesses to provide training and advisory services for digital adoption and its $2.6 billion to the Business Development Bank to help small and medium-sized businesses finance technology adoption). As Marina Glogovac rightly says, this commitment should absolutely apply to charities as well.
What else can we ask government to do? We can ask for better regulatory frameworks for data collection and sharing. Mowat pointed out in 2018 that “there have been very few signals that the federal and provincial governments are interested in modernizing, or aligning, the current legislative/regulatory framework for data collection and sharing in the charitable sector. One of the largest gaps in Canada is legislation that permits system-level linked data, drawing upon both government administrative data and data collected by charitable organizations and service providers in the community.” The Mowat paper recommended a “charitable data policy framework which would provide a strategic, integrated perspective on the data issues facing charities”, including challenges navigating the legislative and regulatory environment and barriers accessing government administrative data.
Nothing has changed since February 2018 when Mowat’s paper was released (other than Mowat itself going out of existence due to lack of funding). In April 2021, the Advisory Committee on the Charitable Sector noted in its second report that “while there is considerable available data, there is a lack of coordination, integration, and comparability of data to support policy and program design, targeted research, and public awareness of the economic and programmatic impacts of the sector.” It recommended the co-creation between the sector and the federal government of a national data strategy.
How do we get there? Marina suggests it’s time for us to have a federal Minister for Charities and a Development Bank of our own. The Advisory Committee suggests that we need a “home in government” to provide a place for comprehensive policy development (including on data). In a post-pandemic world, fuelled by smart and shared data, the evidence for a new policy framework for the charitable sector that includes data seems more and more compelling.
How much does language matter to philanthropy? Deeply, as it turns out. A stimulating piece by Rhodri Davies from the Charities Aid Foundation on the uses and misuses of philanthropic language got me thinking recently about how much it affects us.
I can’t count the number of times that I have seen the word “philanthropy” defined in various articles and books. While people can agree on its linguistic derivation, and that this derivation points to both goodwill and humanity, beyond this the application of the word is very broad. It is used to describe small gifts and large ones, almsgiving and social change, institutional and personal giving, social obligation and elite display, public and private interest. It has both positive and negative connotations, both engaging and exclusive elements. It is about both transactions and relations, about the exercise of power and the creation of equity, about spending and investing, about amassing and disbursing. What a remarkably elastic term!
Its elasticity is both an advantage and a disadvantage. It can be adopted to fit many different activities. But it also creates difficulties for policy makers and regulators who want to define and control it. So, they revert to more technocratic and legal language. In Canada, as in other jurisdictions, for reasons of history and policy our policy makers and regulators, as well as lawyers, do not think about the broad universe of “philanthropy” but about the narrow world of “charity”. They use the term “charity” to define both the activity of giving and the organizations which pursue missions deemed to be charitable. Many of the terms that we might use to describe the context and work of philanthropy are not to be found in law. The key federal statute that governs philanthropic and charitable organizations is the Income Tax Act. What this means in practice is that the lexicon of government regulation constrains thinking and understanding of the practice of philanthropy to a narrow focus on the transaction of the charitable gift. The language of the law and regulation focuses on a giver and a receiver, on the disbursement of funds to “qualified donees”, on the conditions that permit and shape a donation.
Why does this matter? Because if those who practice philanthropy are caught up in the language used by government and law, they too will focus on the transaction and its conditions rather than on the relations and the impact of what they do. Language shapes our mindset. As Davies points out in his piece, “many of the words we use are laden with historical baggage, and carry implications about the nature of philanthropy and the relationship between giver and receiver that shape our approaches even if we are not aware they are doing so.” He cites the implications of using words like “grantee” and “beneficiary” with their hidden connotations of passivity, recipient of largesse, implied gratitude, and of course the underlying imbalance in power between giver and receiver. If the activity of philanthropy is described as grantmaking, and the measure of philanthropy is the disbursement quota, then we limit ourselves hugely in terms of our thinking about the roles and value of philanthropy.
Similarly, if the focus of philanthropy’s regulators is on the transaction and the accountability of philanthropy is defined as its management of the transaction, then the practice of philanthropy narrows and excludes. Must all grants automatically require applications and reports? Must communication between grantor and grantee be in written form? Must certain costs and certain activities be avoided because they are not defined as charitable? Does our language of transactions and accounts inhibit the creative and expansive appreciation of philanthropic action?
Davies suggests that “the language we use not only describes our world but fundamentally shapes our ability to experience it. Not having the right words doesn’t just mean that we cannot convey the full richness and value of civil society, but that we may not even be able to grasp it in the first place.” In the Canadian context, we can reflect on the meaning that languages other than English can bring to our understanding of philanthropy. In French, the word “bienfaisance” is used as a translation of “charity” when it comes to applications of the federal law to the definition of what is charitable. But in practice, the charitable sector in Quebec does not define itself around the term “bienfaisance” but more often around the term “communautaire”, putting the accent on collectivity, acting together to change or improve community or society. The idea of an “economie sociale”, of co-operative action for mutual benefit is more familiar to francophones than the concepts of charity or “bienfaisance”. These are more relational than transactional terms. Similarly, in Indigenous languages the term “philanthropy” would not be familiar; the Indigenous worldview and spiritual and cultural practice are based on reciprocal exchange of giving and receiving, of being in relation. Languages reflect the underlying assumptions and ways of thinking about the world and about how to act in it.
I agree with a final comment made by Rhod Davies: “Broadening our linguistic horizons [in philanthropy] is vital. It can help us to move away from reliance on forms of language and communication that entrench asymmetries of power, or which privilege certain forms of experience over others…it may even help us to experience our world differently (or at least understand the different ways in which others might experience it)…This is clearly important in the present, but it is perhaps even more so as we look to the future because limitations of language may become limitations on our ability to imagine alternative ways for our society and world to be.”
The 2021 federal Budget made disappointingly few regulatory announcements affecting charities, although it did commit to important new spending that will support many of the charities and beneficiaries who have been hard hit in the pandemic. There is no shortage of policy ideas and suggested law and regulation changes for the charitable sector. We have made priorities clear: in Catalyst for Change, the report of the Special Senate Committee; in the first report of the Advisory Committee on the Charitable Sector, in the Effective and Accountable Charities Act (Bill S-222) being discussed in the Senate, sponsored by Senator Ratna Omidvar and endorsed by a large group of the best charity lawyers in the country. But none of these made it into the Budget, except for an announcement (Chapter 6, section 3) that consultations with charities will be launched on potentially increasing the disbursement quota, in other words, the minimum amount that charities are required to spend from assets not used otherwise on their own charitable activities.
I absolutely support more public consultation and discussion on the question of spending by charitable endowments. The point, one would hope, would be to collect objective evidence on whether there is a policy gap or need for policy change based on evidence.
In this post, I want to put some facts on the table. In my last post, I expressed my thoughts on the merits of long-life foundations who balance the needs of today and the challenges of tomorrow in their giving decisions. Maintaining this balance also means maintaining the ability to hold the value of assets over time. Many donors to the endowments of charities are persuaded by the argument that their gift will support a charitable purpose over a longer run. They are also sometimes persuaded by the idea that their gift will give stability to a charity which will be able to depend on a stream of income from an endowment to pursue its purpose. Endowments are appealing to both charities and donors for these reasons.
So what is the policy issue raised by the Budget announcement? Malcolm Burrows in a post of his own points out that while the Budget text is coy about which charities are causing concern, the data that it presents points directly to foundations, their assets and their giving. It shows foundation assets growing over time while giving grows at a slower rate. According to the text, “while most charities meet or exceed their disbursement quotas, a gap of at least $1 billion in charitable expenditures in our communities exists today. Furthermore, growth in the investment assets of foundations has increased significantly in recent years. In 2019, charitable foundations held over $85 billion in long-term investments. But grant-making and other charitable activities have not kept pace.” It’s not clear what evidence supports the assertion that there is a gap of at least $1 billion in expenditures. It’s also not clear to what the growth in assets of foundations can be attributed. Finally, it’s not clear why the text would suggest that grantmaking and other charitable activities have not kept pace.
A few facts.
All charities must meet the 3.5% minimum disbursement quota. This quota applies to property that a charity isn’t using directly for charitable activities or administration, in other words mostly investments although the property can be cash, land or buildings also. Of course, most charities meet the quota by spending some of the value of that property on their own activities. Most foundations meet it by making grants. But many private foundations can meet it by spending their money on their own charitable activities as well. Some charities transfer property to agents because they work with non-charities. All of these disbursements, not just grants, must be considered in understanding whether there is a “gap” of some sort between assets and giving.
The Budget uses data collected by CRA. The last full year for which aggregate data is publicly available from CRA is 2018. This data suggests that foundations held a total of $91.9 billion, of which public foundations held $35.6 billion, one private foundation, the Mastercard Foundation held $23.7 billion and all other private foundations held $32.6 billion. It is important to know that one private foundation looms so large in Canadian data. The next largest grantmaking private foundations do not hold more than $2 billion each and the top 149 grantmaking foundations in the country by assets (excluding Mastercard) hold about 50% of all assets. Another important consideration is that Mastercard Foundation reports much more spending on charitable activities than on grants. It focuses much of its attention on Africa and its activities with agents in Africa account for a significant part of its disbursement.
The Budget shows a steadily growing rate of private foundation asset growth. A factor in this growth especially in the last three years is the unexpectedly large growth of the assets of the Mastercard Foundation which went from $12 billion in 2015 to $35.8 billion in 2019.
The conclusion is that it is important to look closely at aggregate numbers and to understand what the data can and cannot tell us. There is no black and white relationship between assets held and amount spent in grants. You cannot simply apply a 3.5% calculation to assets and derive a number that gives you a specific expected disbursement. The picture is even more complicated when you realize that the quota is calculated on an average asset value over 24 months and that charities may use disbursement “surplus” from a previous year to fulfil their quota, so not every year is the same.
Do we know if there is a “gap” in disbursements? What is the presumption underlying this statement? Should charities be spending more of their endowments, especially now? That is a normative question and as I have argued in other posts, larger private foundations have felt and responded to a moral imperative to change their practices and increase their disbursements during the pandemic. Indeed, there is data to show that larger private foundations have typically exceeded the minimum quota even pre-pandemic. Must the disbursement quota itself be increased and if so to an amount that will diminish the value of the endowment over time? This is a debate to have. But let’s make sure we are working from solid evidence before any policy change is made.
This has been an extraordinarily hard year for communities; the urgency of present needs has intensified the pressure on philanthropy to provide more resources, more flexibly, to more diversified recipients. It is certainly true that endowed foundations can act as counter-cyclical sources of funds to ease the strain on struggling organizations and charities. And a very great number of foundations have acted over the past 12 months. Data collected by Philanthropic Foundations Canada and other researchers suggests that a significant number of the larger private foundations in Canada have increased their grants in 2020, as well as granting more flexibly. Even before the pandemic, many foundations were granting annually more than the minimum required by law.
But the call to give more continues to resonate both in Canada and across the border. An interesting recent report by Benjamin Soskis, a U.S. philanthropy historian, reveals how giving norms and narratives related to timeliness are shifting to an “emphasis on “distributive immediacy”, the commitment of many large-scale donors to get funds out the door as quickly as possible; and the spread of crisis-based giving and a concomitant ethic of responsiveness.” In Canada, as in the United States, this shift has been accompanied by louder calls on government to increase the mandated minimum annual payout, which is now set at 3.5% of invested assets.
This seems a simple solution. You can mandate foundations to spend even more. Setting an annual percentage on disbursements is an easily measurable standard for foundation giving. But it’s more complicated than that. This solution focuses on quantity. But what about quality and time? Yes, this crisis has created urgency. But forcing more spending today does not resolve anything other than urgent need. And forced spending of larger amounts does not guarantee that those most in need receive it. After all, a simple quantity target can be met by sending bigger cheques to larger charities.
Let me ask a different question. How best do endowed foundations create social value? What can they do that donors, governments and businesses cannot or won’t? They can fund the innovative, the risky or the long term. They balance the urgency of now with the problem lying over the horizon. To do that, they manage their capital to pay into the future.
To create the most value to society, foundations must spend thoughtfully, and well. This takes time, effort and care. The key is to manage resources to mission. Some foundations do spend more to help the neediest in the present. Others support the work that will change systems for the better in the future. While some issues and needs can be solved with large infusions in the present, other issues take sustained investments into the future. Climate change, global health, migration and settlement, mental health and addiction -- these are issues that take long, collective and creative effort to solve.
I believe that foundation rates of spending should depend on the goals and strategies of individual foundations. To achieve their mission, some foundations will choose to spend far beyond the minimum annual disbursement set by law. Others will choose to conserve capital, disburse prudently and spend over many years to work on issues that will take years to resolve.
Larry Kramer, the leader of the Hewlett Foundation, in a thoughtful recent essay, suggested that “the question of how to spend over time—how best to help civil society do its work, and how best to innovate for good in ways that have lasting impact—is instrumental and pragmatic and depends on circumstances, strategies, and goals.” The blunt instrument of a one size fits all increase in mandated disbursements will remove some of that pragmatic ability to adjust to circumstances and strategies. Using the tool of regulation to remove discretion may result in net loss rather than net gain to society.
If the goal of public policy is to ensure that charitable endowments supported by public incentives are spent on public purposes, the minimum floor of a disbursement quota helps to do that. Should the state go further and in effect take a position against the future, against the very idea of a charitable endowment, by forcing endowed foundations to spend down? Some may spend down quickly. But it should be a choice. An aggressive, even temporary, increase in the disbursement minimum to 7% or 10% may get more money out the door for three years but will jeopardize disbursements well into the future. By forcing a disbursement that exceeds the annualized real returns on a typical foundation investment portfolio (according to recent US research these are not greater than 5% to 6%, historically or projected), the state would be saying that the needs of the future are less important.
This is a matter of choices about today’s crisis versus tomorrow’s challenges. Are foundation assets best spent down as quickly as possible? Perhaps, if your mission is to relieve the urgent needs of more people. But what if, like the Ivey Foundation of Toronto, it’s to build a network of institutions to think about complex policy issues such as sustainable growth over time? What if, like many private foundations in Montreal, including McConnell, Chagnon, Saputo, Molson, Webster and Trottier, it’s to build neighbourhood resilience for collective problem solving? What if, like the Max Bell and Muttart Foundations in Alberta, it’s to help train more leaders of charities to become skilled in contributing to public policy? Is this work going to be more effective if done with more money in a shorter timeframe? Capital spent prudently, with the help of skilled paid staff, and with adequate funds for convening, research and communications, is more effective in pursuing these missions. The pandemic crisis has highlighted the cracks and gaps in the systems of our society. But more money alone, while important, won’t fix them. Endowed foundations, using their flexibility, can also apply their knowledge, create networks, build capacity, and deploy resources to help develop the long-term solutions. This is an answer to the complex problems of today, and to the inevitable crises in our future.
A year ago, towards the end of April 2020, Philanthropic Foundations Canada hosted a conversation about Canadian philanthropy and its commitment to a world in the throes of a growing pandemic. In that conversation, the participants were forward-looking. Even though we were being pressed by fear to hunker down, to think locally, we wanted to look forward, and to discuss our opportunity as a country to re-imagine and to rebuild our own communities and the global community.
We could see already that the pandemic was not just a health crisis, but a crisis made worse by inequality. We could see that weaknesses and gaps in the global health system would get worse: access to water and hygiene, food security, children’s health and education, discrimination and violence against women and girls. And we could see that if the virus couldn’t be successfully fought in Brazil or Bangladesh or South Africa it would continue to be a danger everywhere.
More than ever, we need and will continue to need a robust global health system. The work of the World Health Organization is crucial – global data collection and sharing, global guidance, coordination of supplies and training of health workers and coordination of global research and development of therapeutics and vaccines against COVID 19. Indeed, the whole family of multilateral organizations in the UN system such as WHO, UNICEF and the Food and Agricultural Organization is critical to the work of building the global resilience of all (including resilience against the crises caused by climate change, ranging from forced migrations to new pandemics).
We face huge transitions. How can we as funders help to make those transitions easier for those most vulnerable who live next door to us and across the world from us? In the middle of the last century, many of the multilateral organizations that the world depends on were created with the imagination and leadership of Canadians. As individuals and civil society organizations we have opportunities now to engage directly in maintaining this global network. And certainly, foundations have the resources. We can fund. One way to do this globally is to support the WHO COVID-19 Solidarity Response Fund (see below for details). But let’s also use our time to think about transition, adaptation, resilience and creativity in the 2020s for our country and to advocate for an effective global system that helps us all cope more effectively with future crises.
Darren Walker of the Ford Foundation in a recent post on the post-pandemic world asks us to consider: “If the pandemic revealed our global web of mutuality, how can we better support leaders on the ground, connect across countries and continents, and rebuild multilaterally?” In the world to come, he succinctly expresses our collective task (with philanthropy’s help): “We must reform systems and structures, while we reimagine what’s possible with our partners around the world, heeding their best ideas. Relief, recovery, reform, reimagination – this remains the path to better days.” The last twelve months have shown us the truth of this.
The WHO Foundation and the Solidarity Response Fund
One year ago, in March 2020, WHO created the COVID-19 Solidarity Response Fund to respond to the unprecedented show of support by individuals and companies to help WHO in the fight against COVID-19. Powered by the WHO Foundation, an independent grantmaking foundation launched in 2020, the Solidarity Response Fund is an innovative platform to enable private companies, individuals and other organizations to contribute directly to global efforts to prevent, detect, and respond to COVID-19 around the world. Canadian foundations can legally grant to the Solidarity Response Fund through the KBF Canada Foundation. The Fund has raised and disbursed more than US $242 Million from over 661,000 donors. The work in 2021 builds on the progress achieved in 2020 and continues to support the response in countries towards suppressing transmission, reducing exposure, countering misinformation and disinformation, protecting the vulnerable, reducing mortality and morbidity rates and increasing equitable access to diagnostics and vaccines for all. Donors can now access and enrich global health in a way that was never possible before.