Shifting funding practices: “What if? Reimagining philanthropy”

05 April 2022

Shifting funding practices: “What if? Reimagining philanthropy”

Awareness about the significant impact of funding practices seems to have risen drastically since the pandemic. This was proved at the 3^rd edition of Philea’s “What if? Reimagining philanthropy” event series, an inclusive space for thought-provoking debates aimed at generating new possible routes for philanthropy.

The event, which took place on 22 March 2022 online, was dedicated to shifting funding practices and brought together more than 60 participants with a very wide breadth of perspectives – philanthropy practitioners and representatives of non-profits, policy and intergovernmental organisations.

Urgent challenges require new thinking

Prior to the event, the participants shared their views on the most urgent issues for collective action and the future trends that will impact the philanthropy sector. On one side of the coin, we are threatened by the looming challenges of authoritarianism, climate crisis, backsliding in democracy, nationalism, great power conflicts, growing inequality, wealth accumulation, disinformation, and polarisation of our society. On the other side, participants expected to see the diversification of philanthropic actors and instruments, cross-sector thinking and action, collaboration, diversity, equity and inclusion.

The challenges are immense, but so are the solutions. This was reiterated at the event by Delphine Moralis, incoming CEO, Philea, who outlined three key moments that have largely defined the last two years: the Covid-19 pandemic, the climate crisis and war in Ukraine. During this time, philanthropy learned how to fund faster and be more flexible. While we realise that the new normal is one of consecutive, interconnected and increasingly overlapping crises, philanthropy should continue to improve its ability to collaborate, act with more agility and trust, and balance the constant competition among priorities.

Now more than ever, funders should take a moment to reflect on whether their current funding practices are fit for purpose and provide the real support that local communities and civil society organisations need to address the challenges of today and tomorrow.

Why shift funding practices?

Lauren Bradford, Founding Partner, Radical Flexibility Fund, created a sense of urgency around the need for foundations to “fund radically”. Significant financial losses from the pandemic can be seen in large increases in the debt burden of low-income countries and declining foreign direct investment rates in more vulnerable economies. At the same time, total global wealth rose to an unprecedented 431 trillion dollars in 2021 – which means that financial resources, available to philanthropists and the private sector, are already out there to create a virtuous circle of success, sustainability, impact and equality.

The intertwined and complex nature of current crises makes it harder for philanthropy to spur change by only funding a succession of separate development projects. Traditional grantmaking implies allocation of funds which are usually provided on short-term horizons and in a way that creates dependency as opposed to financial freedom. To evolve with the needs of society, philanthropy must look at shifting its funding practices and focusing its efforts on community-generated priorities.

Why would we need and want to shift funding practices? Lauren argues there are two main reasons for this. First, donors could be far more effective at improving human lives everywhere, achieving greater impact and getting more value for money. Second, there is a need to break the paradox of philanthropy and the donor-industrial complex down and rebuild it in a way that is appropriate in the current modern era, not the era of 70 years ago.

Philanthropy is uniquely positioned: It is capable of taking risks and can act catalytically. However, “grants are not our only funding tools, and although they should continue to undergo improvement in their structure and use, we must invest in and scale new and better financial tools”. Radical Flexibility Fund came up with a list of 26 financial instruments that philanthropy could consider – funding social enterprises, cash transfers, concessional loans, outcomes funds, and many others.

Lauren invites foundations and philanthropists to reflect on their current approaches and explore how they can become a more supportive partner.

Questions to consider:

Why does your organisation use grants as the primary mode of financial support to your partners?
What percentage of funding that you provide is allocated to general operating support? What percentage is allocated through restricted project funding? Does this meet the need of your grantees?
Do you know what financial tools are available beyond grants and how to use them?
Are there any strategic, legal or financial obstacles to using other financial tools to support grantees? Can these be overcome?

Financing general operating support can still be a game-changer

A set of questions and interventions followed to challenge Lauren’s remarks. Carola Carazzone, Secretary General, Assifero and Vice-President, Philea, argued that while radical forms of funding should be explored, not all funders in Europe would become system-change funders. However, an ambition that could be embedded in the funding practice of every funder is to increase core support in grantmaking.

Carola reminded participants of the 2009 Stanford Social Innovation Review article by Ann Goggins Gregory and Don Howard on the “Nonprofit Starvation Cycle”: a vicious cycle of funders’ unrealistic expectations of the cost of general operating support for non-profits, non-profits conforming to these expectations, and, as a result, spending little or reporting less on overhead. Though the movement for flexibility is growing among funders (186 European foundations pledged more flexible funding practice during the pandemic), the mind-set that non-profits are expected to do more with less is still very common in the sector.

Systemic funding for systemic change, and how to create change from within

Karin Haselböck, Head of Strategic Planning, Ashoka Europe, invited participants to look at shifting funding practices as an important element of creating systemic change. Referring to Ashoka’s report “Embracing Complexity. Towards a Shared Understanding of Funding Systems Change”, Karin asserted that systemic funding requires looking at the different actors in the system and exploring what kind of mind-set shift and role shift we need. Funders should not only fund systemic initiatives, but they should also fund systemically, which includes shifting power dynamics to grantees. Grantees should be invited to join foundations’ boards and advisory bodies and share the decision-making power with the foundation members.

“Create change from within”, said Karin, as it always starts from within. The imbalance of relationships between grantgivers and grantseekers is a hard one to overcome. However, Karin encouraged participants to become the persons that bring this change to their organisations. This is also the case for the leaders of foundations – they themselves need to represent systemic leadership.

Collective sense-making: Numerous questions still to be addressed

With what sometimes might look like circular conversations, collective sense-making allows us to open the doors and embrace the varied perspectives of those committed to shifting the status quo. Inspired and challenged by the speakers’ interventions, participants moved to smaller rooms to explore the questions around funding practices that triggered them the most:

>What does it take to shift cultural behaviour on funding practices? Participants of the breakout discussion, facilitated by Delphine Moralis, concluded that foundations’ leadership should be coaxed to try out new things; a trusting space needs to be created for grantees and boards to come together; and we should cultivate the ability to use external shocks to manifest the need for change.

>Why is philanthropy still so white? This discussion, moderated by Lauren Bradford, explored how the question embraced the wider topic of the lack of diversity in philanthropy, including ableism, sexism, and other forms of discrimination. Bringing diverse people into foundation’s boards and including them in decision-making processes will not only help legitimise foundations within societies, but also will increase foundations’ positive impact.

>Why don’t we change? This deep dive circle, led by Ruth Williams, Secretary General, Austrian Foundations Association, surfaced frustration about having the seemingly same conversation for the last 30 years, as well as frustration about the accumulation of power. However, the change has been seen. More funders are taking their responsibilities seriously and putting greater emphasis on equity and flexibility. Societal transformation can be enabled by convening a large-scale alliance, and philanthropy support organisations can galvanise this effort.

>How to involve non-profits in the funding process? This question was at the core of the discussion in the breakout room facilitated by Martin Modlinger, former board member, EDGE Funders, and aimed at changing the perspective – talking not only about foundations and how they should change their internal practices but also about the civil society space. The problem, however, is that non-profits do not have the capacities to be part of shifting funding practice conversations. This would require a cultural shift within foundations and the willingness to shift the power – reflecting on who is in the room and who takes part in the conversations. Investments are needed in the capacities of non-profits but also of foundations. Due to burdensome application procedures and reporting requirements, many non-profits – but also foundations – are at the limits, focusing on red tape rather than on the real work they need to deliver to enable social transformation and change.

A hunger to continue the conversation

Even when the event was officially closed, more than half of the participants stayed in the meeting. The open mic provoked a further round of informal exchange on how non-profits can be efficiently involved in the funding process; why the language matters when we talk about the relationship between funders and grantees; and how burdensome application procedures and reporting requirements still create unnecessary red tape for non-profits. The question of diversity also came up in the post-event conversation, leading to reflection on who participates in these “What if?” events and how to ensure more balance and involvement of people of different backgrounds and perspectives. What was clear is that there is a strong commitment to ensure that a 30-year-long conversation should end with bold action, and that we should continue enquiring “What If?” in order to reimagine philanthropy.

Shifting funding practices: “What if? Reimagining philanthropy”

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