Over the years the philanthropy sector has grown globally and, along with it, a whole industry of donor foundations together with their board members, CEOs and staff, financial advisers, strategy consultants, monitoring and evaluation specialists, and various other service providers.

At the same time there have been various trends in grantmaking that often relate to changes in society. These trends are often developed in the US and then influence global philanthropy.

As a result, we see a great deal of jargon that is associated with these trends and is often meaningless to those outside of the philanthropy discourse. In the past few years we have dealt with strategic philanthropy; venture philanthropy; impact investing; donor-advised funds; impact-driven philanthropy; philanthro-capitalism; social entrepreneurship; and now trust-based philanthropy.

Philanthropy is further complicated with extraordinary expectations related to philanthropic return on investment and how it is measured. I recall the CEO of a prominent foundation quietly asking the question: “What about old-fashioned philanthropy?”

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What is of interest now are some of the ideas that have emerged from specific individual philanthropists who have explored how they wish to participate in giving. One of the key breakthroughs was the concept of Giving While Living that was popularised by Chuck Feeney, the person behind what was originally an anonymous foundation that eventually came out of the shadows as The Atlantic Philanthropies.

Feeney was the founder of Duty Free Shoppers, the world’s largest duty-free retail chain, but despite his incredible wealth he lived an extremely modest life and from early on had transferred most of his fortune to his philanthropic foundation. He eventually gave an instruction to the board of Atlantic that all the funds in the endowment should be spent during this lifetime.

Atlantic, which invested millions of dollars in South African civil society organisations, officially closed in about 2016, although there are still legacy projects in existence. The concept of Giving While Living took hold and there are now increasing numbers of “spend-down” foundations where the principal donors want to see the funds spent more quickly within specific timeframes.

It may surprise many that ensuring a spend-down is not an easy task and that giving away money responsibly, but with a deadline, can become a nightmare. However, this concept shifted the notion that endowments established in perpetuity were the best way to serve society and provided an alternative. The question is, therefore, shouldn’t money be spent now to avoid problems in future?

An idea that was ahead of its time was articulated by John Rendel, director of grants at the Peter Cundill Foundation in Bermuda in 2018. Rather than the complicated grantmaking processes that were fashionable at the time, where grant recipients were expected to jump through hoops separating their overheads from their programmes, Rendel called for unrestricted funding to organisations. He believed that restricted grants undermined the very social outcomes philanthropists were hoping would result from their funding, and in addition restricted grants created inefficiencies in partner organisations as they limited the use of the funds and they often could not use them to cover their overheads.  

Understanding that most civil society organisations had a number of different donors with competing demands, Rendel pointed out that unrestricted grants would enable organisations to get on with their work and to respond to our fast-changing world more effectively. He correctly believed that unrestricted funding, which was more flexible, would enhance an organisation’s impact and effectiveness and allow for innovation.

He pointed out that “it’s about total impact, not our impact as a funder. So who cares if our money ends up in a reserve or funding the CEO’s salary, as long as we feel the organisation is working to prudently maximise the long-run impact of every dollar received.”

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The Peter Cundill Foundation’s website indicates that funding partnerships consist of three-year unrestricted grants, renewable year on year, dependent on partners “making sufficient progress against their own organisational milestones.” Their aim is “to ensure our partners have the long-term, flexible finance they need to achieve great things. Unrestricted funding requires a good deal of trust, but we believe that if a philanthropy doesn’t trust a charity, it shouldn’t trust a project run by that charity either.”

Rendel was certainly ahead of his time and two years later Covid-19 arrived and every philanthropic donor was faced with the question of how to respond to the organisations they funded. Globally, thousands of funders unrestricted their grants to enable their partners to act in the best interests of society in a crisis.

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Inherent in this decision was the issue of trust. Restricted grants had always been in some way a vote of no confidence in an organisation in that money was ring-fenced only for an element of their work, rather than the cause or the organisation as a whole. There was an unwritten suspicion that money could go astray if it was used for overheads, for example. In addition, the power in the partnership always stayed with the donor who controlled the funds.

Competing for funds

Rendel has promoted unrestricted grantmaking in the philanthropy sector and one of his reasons for supporting this had special resonance for me, namely that it encouraged “charities to compete for funds on strategy, leadership, governance and impact per dollar received, rather than on their ability to dream up the most fundable projects in an inefficient race to the bottom”.

Then along came another disrupter, MacKenzie Scott (formerly Bezos), who in 2022 was worth $33.4-billion thanks to her stake in Amazon which was founded by her ex-husband. She donated $5.8-billion in 2020 and $2.7-billion in 2021. She took a proactive role in selecting the organisations she supported, many of which had no idea that they would be the recipients of her funding.

Her advisers were asked to identify “organisations with strong leadership teams and results, with special attention to those operating in communities facing high projected food insecurity, high measure of racial inequity, high local poverty rates, and low access to philanthropic capital”.

The funding is unrestricted and is focused on the organisations, not the donor, as she believes that frontline organisations themselves will know how to put the funds to good use and deploy them appropriately, even including infrastructure and overheads. The reporting requirements are simple – usually an annual high-level impact report and no further requests for funding.

What is of interest is that Scott has not established a philanthropic foundation with the associated board and staff complement. The required research into potential recipients of funding is done by a well-known consulting company, Bridgespan, and it undertakes the due diligence investigations. She does not accept unsolicited proposals from organisations.

In South Africa, the Charlize Theron Africa Outreach Project has decided to focus on trust-based philanthropy and therefore looks for long-term partnerships. It supports “transformative, locally led change by partnering with community-based organisations that support young people, their sexual and reproductive health and rights, and gender-based violence prevention”.

The project provides “flexible, multiyear grants to community-based and community-engaged organisations that support local solutions”. Besides the funding, the project helps with advocacy by connecting “community voices with decision-makers, funders and policymakers” thereby amplifying the voices of their grantees and community-based organisations.

This practice is contrary to many foundations that focus on annual grants that are limited in scope and which require ongoing annual future requests, leading to uncertainty and the inability to plan forward.

For those individuals out there seeking to make a difference in society, the message is that this need not be complicated. By making direct donations without a charitable trust or foundation, donors can qualify for tax benefits.

However, for a donor seeking a longer-term legacy, a structured foundation will continue beyond their lifetime and could include ongoing family involvement through future generations. This is your journey and how people choose to implement their personal philanthropy is up to each individual. DM