Emerging Trends In Giving: Trust-Based Philanthropy And Donor Collaborative Funds

Fundraising

Created By: Amanda K. Nelson
October 19, 2021

Over the past 30 years, Orr Group has continuously experienced changes in the philanthropic landscape. We work to anticipate emerging trends and try to break down differences between new buzz words and actual practices. Nonprofits and donors are likely hearing more about “strategic philanthropy” and from our work, especially within the past year, this is trending into two specific fast-growing areas: trust-based philanthropy and donor collaborative funds.

WHAT IS TRUST-BASED PHILANTHROPY

This is the broadest term for what is, at heart, about reallocating power through philanthropic investment. The word “power” is referenced quite a bit when thinking about the stated goals of trust-based philanthropy – shifting power to grantees, back to local communities, and redistributing power systematically, organizationally, and interpersonally. This highest form of strategic philanthropy is in service of creating a healthier and more equitable nonprofit sector.

Organizations like The Trust-Based Philanthropy Project are working to embody these funding principles and have developed their collaborative platform in response to grantee feedback around burdensome reporting. Similarly, another core aspect of trust-based philanthropy is centered around authentically engaging the local community. The Stanford Social Innovation Review articulates the urgent need for this funding practice: “to realize the deep systemic change that America is demanding, philanthropy must reorganize to build and demonstrate a trust-based culture, invest in community leadership capacity-building, and open up decision-making and information-sharing structures.”

BEST PRACTICES IN TRUST-BASED PHILANTHROPY

It’s one thing to understand and appreciate this funding approach conceptually, but another thing to live it. We’ve seen funders using key tactics that put these philanthropic principles into practice, including:

Giving unrestricted funds
Investing in capacity building
Requiring limited reporting
Including community members in decision making, and
Working openly and transparently.

TRUST-BASED PHILANTHROPY IN ACTION

Recently, the highest impact example of trust-based philanthropy can be seen through MacKenzie Scott’s $4,158,500,000 in gifts to 384 organizations across all 50 states, Puerto Rico, and Washington D.C. You can read her full perspective in 384 Ways to Help where she shares that “we do this research and deeper diligence not only to identify organizations with high potential for impact but also to pave the way for unsolicited and unexpected gifts given with full trust and no strings attached.” Many of her gifts were unsolicited, and total higher than the organization’s entire operating budget. This giving is transformative and is laying the groundwork for other philanthropists to embrace the trust-based funding model. As fundraisers, this is exciting – we know and have experienced this type of giving empower nonprofit organizations to invest in their growth, new initiatives and attract additional new funding opportunities.

For funders or institutions thinking about their own grantmaking approach, The Trust-Based Philanthropy Project has developed a Self Reflection Tool to help assess the organizational alignment of practice, leadership, culture, and values with trust-based philanthropy.

A COLLABORATIVE APPROACH TO FUNDING

Another growing practice in strategic philanthropy is donor collaborative funds, or “pooled funding”. Pooled funding takes the trust-based model from an individual strategy to a collaborative practice. These models (seen below) can create greater funding opportunities and greater impact, and present across a spectrum of commitment and structure with other funders.

The Philanthropic Initiative outlines the applications of each of these models, ranging from The Neighborhood Funders Group where funders have agreed to explore particular issues and problems together, to The Environmental Funders Network where each donor participates in a collective fund administered by a third party.

THE BENEFITS OF COLLABORATIVE FUNDING

There are distinct advantages to participating in collaborative funding opportunities. Key areas include:

Leveraging smaller donations for larger single gifts
Engaging a donor community with similar giving priorities
Differentiated grant-making strategies
Broader marketing opportunities around critical issues, and
Shared risk with partners.

THE CHALLENGES OF COLLABORATIVE FUNDING

This model isn’t for everyone, but neither is it exclusively binding. Donors can participate in collaboratives and continue to focus on their individual giving strategies as well. The challenges with this model stem from the ability to make individual decisions, and these typically revolve around:

Needing to invest more time in the grantmaking process
Making compromises with other donors, and
Level of authority and influence in grantee choices.

HOW TO FIND DONOR COLLABORATIVE OPPORTUNITIES

The best way to find opportunities is through current donors or board members, who may already be involved with donor collaboratives. As a donor, talk to other donors in your network who are passionate about similar missions to learn more about their potential involvement or interest in collaboratives. A few great organizations include:

Aside from engaging your network, there are also great resources you can explore, including The Council on Foundations and strategic partners like Arabella Advisors.

As nonprofit partners and development professionals, trust-based philanthropy is an exciting value proposition. As more philanthropists make choices to give collaboratively and address power redistribution across the sector, new challenges will certainly emerge. As long as we are all working towards the same goals, this is certainly an amazing time to be working on these challenges together.