Why We Need to Change Philanthropy

Have you ever taken a moment to reflect on where philanthropic foundation money comes from and where it goes?

Most foundations draw from investment portfolios that accrue billions from our extractive economy. For example, the Hewlett and Packard Foundations, both climate funders worth $8.6 billion and $6.9 billion respectively, have not divested from fossil fuels. Often, the funding taken out of the endowment and given to nonprofits is the minimum amount necessary to maintain the foundation’s philanthropic status — just 5 percent per year of the profit made on investment portfolios. This presents a powerful, systemic disincentive for shifts in power and wealth: Dismantling economic and racial injustice would uproot the mega-philanthropists’ dominant position on deciding how, when, and to whom funding is disseminated.

Billions have been spent (precisely $373 billion just in 2015), yet we haven’t seen systemic change in climate resilience, homelessness, access to affordable and nutritious food, and criminal justice reform, among countless other social issues. Foundation and government grants are the primary funding sources in the low-income communities most impacted by the growing effects of climate change. Yet these grants are ineffective because they are too few, too risk-adverse, and too focused on individual behavior or top-down policy changes, rather than the bottom-up movements that empower those on the front lines of social crises. Social justice philanthropy only makes up 12% of foundation funding.[1] Moreover, the people building social justice movements assert that they cannot do transformative organizing when they are shaping their messaging and tactics to attract funding from largely white, male-led foundations. [2]

Movement-building organizations lack funding — especially unrestricted funding — to do their work.The extractive economy has created haves and have-nots. Philanthropists (the haves) disperse a fraction of their endowment that will enable them to sustain their wealth. Ultimately, this is in the name of creating more funding for social good. Yet, it also further entrenches the power and stature of the haves. The Tipping Point Community is an excellent example of a model that spends down its capital each year to combat wealth accumulation. And the Chorus Foundation is pushing the status quo by spending down its endowment by 2023 to displace themselves from a position of power.

In our work at Blue Heart, conversations with dozens and dozens of grassroots leaders and their funders have led us down a well-trodden path with a question mark at the end of it: How do we redistribute wealth while also redistributing the decision-making power of who receive that wealth? Some philanthropists strongly believe that the decisions about where money flows, and how to measure impact, should remain in the hands of foundations. For them, the roles of “funder” and “doer” are necessarily siloed. Starting in the 1970s, a new model of philanthropy arose: the Funding Exchange Model or the activist-advised model. This model espoused the democratization of grant making, giving decision making power back to the community. Today there are many examples in the (muddled) middle where community members have a voice — or a vote — but still lack significant decision-making power (e.g., token patients that serve on the boards of healthcare institutions).

At Blue Heart, my co-founder and I do not come from the communities we seek to channel resources to. Thus, we are constantly striving towards more inclusive and democratized grant making. We have adopted a similar model to the Pollination Project, where our network of past partner organizations shape our funding choices. Instead of pre-determined impact metrics that we dream up by ourselves, we ask the organizations we fund to provide narratives and metrics of impacts on their terms. Over the next few years we will identify trends and patterns in these metrics and extrapolate a cross-cutting picture of impact our partner organizations have on building political power of low-income communities of color. Drawing from my experience building Blue Heart and talking with activists, philanthropists, and donors, there are a few broader changes to move philanthropy forward:

- Inclusive Decision Making. Foundation boards and leadership teams need more representation from low-income people of color. The markets that generated our billionaire philanthropic sector are those amplifying social disparities. Thus, those most impacted by these disparities must have decision-making power in how that funding is used.

- Democratized Met