Philanthropy is about power as well as money. Who makes the decisions about where funding can have the most impact? In a conventional funding model, funders can often tightly restrict the areas they want to fund, meaning that charities are less able to be responsive to their beneficiaries and use their knowledge and experience to direct funding to where it is needed most in that moment. A growing movement in philanthropy is challenging existing power dynamics and looking at what happens when funders can trust the charities they support.
TCS recently helped to coordinate a roundtable for funders, philanthropists and their advisors on the topic of open and trusting philanthropy to explore these issues and discuss in practical terms how they relate to decisions that funders make every day. We heard from Dr Chris Mills of the Institute of Voluntary Action Research (IVAR), Lauren Gupta of the Helvellyn Foundation, and Kate McSweeny and Paul Newcombe of the Booth Centre.
Conventional funding models
Chris began by outlining some of the downsides to conventional top-down approaches to funding which typically involve project-based restricted funding, an unwillingness to fund overheads and onerous reporting requirements. This approach can inhibit creativity and responsiveness amongst charities and force them to be donor-led rather than beneficiary-led as they chase funding rather than respond to grassroots issues. Charities can also be left struggling to properly invest in essential organisational infrastructure – a concept otherwise known as the Nonprofit Starvation Cycle .
We know funders can be more flexible as seen in in the response to emergency situations such as the Grenfell Tower fire in 2017 and the COVID-19 pandemic in 2020 when funders were often able to drop their restrictions to allow charities to respond to the immediate and changing needs they faced. This leads to the question why can’t funders always take this approach?
What do open and trusting funders do?
IVAR’s Open and Trusting movement brings together funders working in an open and trusting way. Open and trusting funders have pledged to work on:-
- being honest and transparent in their communications with charities including explaining what they do and how they operate,
- simplifying and streamlining paperwork with less onerous applications and reporting,
- giving multi-year unrestricted funding, and
- fostering collaborative relationships between themselves and grantees.
Trusting philanthropy is sometimes mischaracterised as uncritical philanthropy. Open and trusting funders do still undertake due diligence and ask tough questions of charities. However, funders do this by building open and collaborative relationships from which they can learn more about the challenges facing grantees and support them or act as a critical friend where needed.
Open and trusting funding in practice
Lauren shared her experiences of putting open and trusting philanthropy into practice at the Helvellyn Foundation. Rather than a conventional paperwork-based application process, the Foundation proactively researches organisations working in the wildlife and conservation sector. Prospective grantees are also able to register their interest through the Foundation’s website but they only need to provide minimal information upfront with the trustees conducting research and due diligence themselves before contacting only the few organisations that they feel that they are likely to support. There is then a 45-60 minute phone call before a decision is made. This approach continues once grants have been made with no requirements for reporting other than the annual reports the charity already produces. Instead, there is an annual phone call to check that everything is on track.
The Foundation prefers to make multi-year unrestricted grants where possible. They offer support beyond finances, including using the skills of trustees to support recipients where needed. They are able to be flexible on timings to allow recipients to for example, make the most of match funding opportunities or to respond to a crisis event.
Lauren was very positive about this approach sharing the huge impact and benefits to the Foundation’s grantees. She also commented on the benefits of building relationships on both the Foundation and the charities it supports.
Kate and Paul echoed this positive experience of open and trusting funding from a recipient perspective at the Booth Centre. The centre is a hub which supports people impacted by poverty or homelessness living in Manchester which focuses on coproduction and empowering their beneficiaries responding to their needs as they arise. Multi-year unrestricted funding allows them to work flexibly when needed and also allows them to invest in staff and infrastructure rather than working with a patchwork of funding pots.
Discussion points
There then followed a wide ranging discussion with themes emerging around:-
- The importance of relationships in undertaking trust-based philanthropy, which is a benefit, although it also presents some challenges. Strong relationships can lead to a deeper understanding between funder and recipient. However relationships can break down if staff move on. If a funder lacks diverse personnel, it may be harder to build effective relationships with minority groups, thereby reinforcing systemic bias and power structures.
- Funders should clearly set expectations with the organisations they support. Charities currently operate in an environment whereby many funders do not fund in an open and trusting way. Charities may feel uncomfortable not sending a bespoke report to a funder, so funders may need to explain several times what their expectations are.
- There can also be benefits to restricted funding at times, for example allowing a charity to ring fence funding to allow an investment in organisational infrastructure. It is important to be flexible and to be led by the recipient where necessary.
- Not all funders are in a position to adopt all of the principles of open and trusting philanthropy. It may be easier for family foundations managing private wealth rather than for custodians of wealth acting in line with a historic charter or other governance requirements. Different people may also have different attitudes to risk – it may be that entrepreneurs and others used to working in highly relational ways are particularly inclined to take an open and trusting approach. But there is an opportunity for funders to consider modifying their approach, even in small ways, to enable the charities they support to achieve greater impact.
Ultimately the charitable sector is shaped by its funding. By taking a more open and trusting approach where possible funders can help to empower charities to have a greater impact and do more good for the communities they serve.
For further reading visit IVAR webpage on open and trusting grant-making :Open and Trusting Grant-making – Flexible Funders – IVAR UK. Click here for an overview of the differences between conventional and trust-based philanthropy. To read more about the Helvellyn Foundation and their work visit The Helvellyn Foundation. For more information about the Booth Centre and their work visit Booth Centre – Home.
