In late 2020, there was much talk about how the world of philanthropy was being upended by the confluence of historic events, namely COVID-19 and the Black Lives Matter movement in the U.S. As early as March 2020, several U.S. foundations announced that they would ease virtually all restrictions to their grantmaking, acknowledging that their grantee partners would be facing dire circumstances as a result of the pandemic and would need as much flexibility as possible.
Nonprofit organizations all over were naturally surprised and appreciative. Not long after that, MacKenzie Scott made the first of several rounds of headline-grabbing donations and shared publicly her “conviction that people who have experience with inequities are the ones best equipped to design solutions.” Dozens of corporations and high-net-worth individuals (HNWIs) promptly increased their donations to Black-led, community-based organizations, as well as to community-based groups supporting historically excluded communities.
At the time, these developments — and the flurry of “reimagining philanthropy” commentaries they prompted — seemed to indicate a turning point. But did they? Did 2020 and 2021 truly represent a turning point in U.S. philanthropy? Have foundations consequently reformed their practices — and are they sustaining those changes?
Based on research commissioned by Spring Strategies in January 2022, this article identifies four emerging phenomena that resulted from what have been recognized as the dual crises of unaddressed systemic racism and a global pandemic.
In the wake of these crises, governments and foundations, largely European and North American, committed $40 billion to advance gender equality and approximately $100 billion to address climate change.1
The importance of these commitments is twofold. Firstly, they signal that a substantial conversation among governments and philanthropists is taking place. Secondly, a less obvious but still significant point: citizens can use these dollars to hold governments accountable. Nonprofits and individuals can wield influence in the press and the public to push governments to fulfill their commitments.
But do the pledges actually reflect an increase in money?
Although some may indeed be newly available funds brought into the fold, there is little clarity on how much of the total really is newly available money. For example, research by feminist groups shows that at least a portion of the funds pledged in 2021 during the Generation Equality Forum are in fact resources previously committed by governments and the private sector as part of the U.N.’s Sustainable Development Goals.
Systems-change approaches in U.S. philanthropy are certainly not new, but the extent to which both foundations and high-profile individuals with some of the largest fortunes worldwide are now embracing them is noteworthy.
For example, MacKenzie Scott made explicit her intent to help address entrenched inequality in giving grants to organizations that “[…] are addressing long-term systemic inequities that have been deepened by the crisis.”
The momentum achieved by the Black Lives Matter movement in 2020, along with the glaringly greater toll of COVID-19 exacted from historically excluded communities, prompted many in philanthropy to devise ways to stop grantmaking from perpetuating those inequities and instead help build more equitable systems.
Private individuals and independent foundations, joined by several corporate foundations across the U.S., announced that they would invest in racial equity and racial justice as well as increase support to communities that were disproportionately affected by COVID-19. Collaborative funds and initiatives by private foundations with a racial equity focus began sprouting up in the U.S., including initiatives by the William and Flora Hewlett Foundation, the Libra Foundation’s Democracy Frontlines Fund, the California Black Freedom Fund, and San Francisco Foundation’s initiative among others.
The pandemic catalyzed several collaborative funding initiatives, spearheaded by private foundations, with systems-change approaches. In the period between March 2020 and February 2022, several such collaborative funds emerged with resources from mostly Western European and U.S. foundations and some participation of HNWIs.
Some of the funds have a national focus, for example, the multi-donor Family and Workers Fund, launched during the first phase of the pandemic. Others operate globally, such as the Debt & Post-Covid Recovery Fund and Co-Impact’s Gender Fund (created with contributions from the Gates, Estée Lauder, and Rockefeller foundations in addition to Mackenzie Scott, Melinda French Gates, and Roshni Nadar Malhotra.
At the onset of COVID-19, 40 U.S. and European foundations made public their commitment to “support our nonprofit partners as well as the people and communities hit hardest by the impacts of COVID-19.”
The Council on Foundations’ (COF) March 2020 Pledge, with over 800 signatories from large U.S. philanthropies as well as national and community-based foundations in Africa, Latin America, Europe, and Asia, outlines the sector’s commitment to provide more unrestricted grants, ease reporting requirements, and increase the flexibility of grant funds and terms, in a collective effort to help civil society organizations adapt and respond to the crisis.
“By the end of 2020, […] a certain momentum was palpable. That moment marked what many of us in philanthropy interpreted as a potential turning point in the field.”
By the end of 2020, hundreds of philanthropy organizations had signed on to the Pledge, and a certain momentum was palpable. That moment marked what many of us in philanthropy interpreted as a potential turning point in the field.
Soon after COVID-19 hit, foundations were quick to react and found ways to increase support to grantee partners. With its newly issued social bond in the U.S. taxable bond market, Ford Foundation showed it was possible to dramatically increase its level of donations without diminishing its endowment, reportedly doubling its annual grantmaking to over $1.1 billion in 2020 and 2021.
The Doris Duke, MacArthur, W.K. Kellogg, and Andrew W. Mellon foundations followed suit and issued similar bonds which enabled them to increase their grantmaking budgets. Acquiring debt is not unprecedented for foundations, though borrowing such a large amount during an economic crisis to boost the grantmaking budget is unprecedented.
While the effects of the recent crash of the cryptocurrency market are still playing out, donors did use crypto as a new vehicle for giving during the pandemic. By some accounts, the 2021 value of total cryptocurrency donations was estimated at $300 million. As individuals’ level of comfort with investing in these assets expands — and as the market potentially recovers — the popularity of cryptocurrency donations is bound to increase.
Critics counter, however, that the majority of nonprofit organizations may not be in a position to capitalize on this trend. For one thing, cryptocurrency markets are not as developed in most countries and, more importantly, the anonymity of crypto donations through blockchain technology puts organizations at greater risk of becoming unsuspecting participants in the laundering of illegally obtained assets.
In the Global South, the funding landscape registered some changes that resembled trends in the U.S. and Western Europe, but others were marginal or went largely undocumented. There are no databases on philanthropic activity in either Southeast Asia or Latin America, nor do the databases that aggregate U.S. private giving provide disaggregated data on global grantmaking (that is, funds that go to organizations based in the Global South).
“In the Global South, the funding landscape registered some changes that resembled trends in the U.S. and Western Europe, but others were marginal or went largely undocumented.”
But through the data available and interviews with practitioners, it was possible to identify that these trends have had a very limited impact, both in terms of U.S. foundation practice in international grantmaking and in terms of U.S. foundations inspiring new thinking on the part of foundations in other nations.
The answer is, largely, no.
Two data points illustrate this assertion. First, we are witnessing fading support within foundations for greater provision of unrestricted support. Making “new grants as unrestricted as possible” was a top commitment of the 2020 philanthropy Pledge (finally reflecting a long-standing request from nonprofit organizations as one of the essential tools for helping build organizations’ resilience and adaptability to change).
Second, data from a survey conducted by the Center for Effective Philanthropy (CEP) in 2021 shows that “a little more than 60 percent of foundation leaders reported that their foundation is providing a higher percentage of unrestricted grant dollars compared to pre-pandemic giving levels.”
But the actual numbers behind the cited percentage are not encouraging. Of the 900 surveys that CEP sent out, only 284 were answered (this number represents less than one-third of the number of the 2020 philanthropy Pledge signatories). Of the 60% cited in the above quote, 65% reported that their institutions are planning to continue this new, higher level in the future. In real terms, this means that only 35% intend to continue their commitment to higher unrestricted support, which hardly suggests a sweeping change.
Additionally, of the 284 respondents, only 77 foundations (27%) reported providing more multi-year grants to support grantees during the pandemic. Of the 77 foundations,68% answered they would definitely continue to provide more multi-year support going forward. In real terms, that is 52 out of the 284 funders represented in the survey.
Faced with lackluster proof of foundations’ commitment to sustaining changes in practice, nonprofit leaders are concerned that “the rubber band [would] snap back now that Covid is starting to recede.” In the CEP report Foundations Respond to Crisis: Lasting Change?, the authors conclude that “it is clear from the data we gathered… that foundations have indeed continued to change many practices and that they plan to continue most of these changes in a post-pandemic future.” I would counter that the jury is still out, but looking at two of the most crucial indicators, the evidence available so far tells a quite different story.
“In retrospect, COF’s March 2020 Pledge was a declaration of good intentions — the real changes seen in the sector since then do not match all the fireworks.”
In retrospect, COF’s March 2020 Pledge was a declaration of good intentions — the real changes seen in the sector since then do not match all the fireworks. Today, evidence that the changes heralded in 2020 remain is unfortunately scarce. It is quite possible that, in a few years, studies will be published showing that there were some enduring changes, but for now, the optimism elicited by initial announcements is unfounded.
It would be misleading to assert that the changes we saw in 2020 and 2021 were merely an 18-month blip from a handful of private funders. But it would also be misleading to argue that foundations truly took these dual crises as opportunities to reform their practices long-term.
Writing this, I realized rather quickly that I was writing a cautionary tale about enthusiasm over announced changes in philanthropy.
1 No definitive 2021 estimate of total contributions to climate change mitigation and adaptation was available at the time of this writing. The $100 billion figure is the annual target established by State parties and the U.N. Convention on Climate Change. During the November 2021 Climate Change Conference (COP 26), it became clear that the $100 billion climate finance target for 2020 was missed.