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 Metrics. Better frameworks are needed for incorporating community-driven metrics into grant decision-making, or alternatively, shifting expectations around how those metrics are judged by donors and foundations. Traditional metrics embed the preferences of those highest in the philanthropic hierarchy, rather than the goals of those attempting to innovate and disrupt how social movements are created and sustained.

- Sustained Funding. Grassroots organizations need unrestricted, long-term investment so they can invest in systemic, programmatic work. One-off grants perpetuate nonprofits catering to the philanthropic “fads” of donor interests, rather than giving them the freedom to experiment and invest in visionary programs that prioritize meeting the needs of their community rather than the donors. For example, the International Development Exchange provides 10–15 year grants to grassroots partners.

- Investments in the Grassroots. There is a chronic lack of funding for grassroots organizing. Individual investors and investment firms are willing to pour millions into ‘risky’ startups, yet individual donors and foundations are highly risk-adverse and often only give to large, older nonprofits.[3]What if we added ‘return on innovation’ to our analysis of ‘return on social good’, and what if foundations and individual donors were willing to take on as much ‘risk’ on creating social good as Silicon Valley investors take on private enterprise?


As an individual donor, I challenge you to shift your understanding of what your ‘return on investment’ requires. Next time you give to a local nonprofit, consider looking at indicators beyond the number of acres protected or the number of jobs directly created, but rather whether and how the programmatic work of these organizations is resourcing their constituencies to claim political power, economic self-determination, and cultural celebration. Rather than just looking at how a single dollar converts to meals served, consider the impact of an organization on community, particularly the communities that are now more threatened under an incoming Trump administration.

Philanthropy is a slow-moving sector, yet the problems it seeks to solve are the most pressing and significant that exist: climate change, racial inequality, immigration reform, criminal justice, and homelessness, to name just a few. To build institutions, services, and movements that can address these challenges, we must transform how we move our money in response. We must demand decisions accountable to those most affected by environmental degradation and systemic injustice; we must strive for a more inclusive understanding of what social change might look like; and we must take the ‘risk’ of investing bold, sustained funding towards those with audacious vision.

[1] The Foundation Center. 2009. Social Justice Grantmaking II. Ed. Steven Lawrence. http://foundationcenter.org/gainknowledge/research/pdf/socialjustice2009_highlights.pdf

[2] Williams, Steve. 2015. Organizing Transformation. Rosa Luxemburg Stiftung; 76% of foundation staff are white and foundation trustees are 62% male: Council on Foundations. 2011. Grantmakers Salary and Benefits Report; 12% of foundation funding in 2009 went to minority-led organizations: Greenlining Institute. 2009. Funding the New Majority.

[3] In addition, the barrier of entry for small, grassroots organizations to build relationships with traditional philanthropists is quite high. Organizations might not have the connections, similar politics, or the fundraising capacity to engage. The Akonadi Foundation is shifting that paradigm. Rather than forcing applicants through traditional grant writing processes, they use intake calls to screen grantees that might not have traditional grantwriting skills or use fundraising metrics.

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