November 2020; Center for Effective Philanthropy
The first of a three-part report published today by the Center for Effective Philanthropy (CEP) explores the degree of change foundations enacted in response to the confluence of the COVID-19 pandemic, the economic downturn, and the accelerated movement for racial justice. Among the promising findings: more than three-quarters of surveyed foundations are making new efforts to invest in organizations serving communities of color.
The calls for foundations to respond with urgent adaptation to the confluence of crises impacting communities across the country have been loud and pointed. NPQ has been part of a chorus—comprising foundations themselves, foundation-serving organizations, and civil society leaders and organizations generally—that has called on foundations to spend more and operate differently to better finance the services and activism needed to move our democracy through this perilous period.
Now, the first report in what will be a three-part series called Foundations Respond to Crisis: A Moment of Transformation? by a team at the Center for Effective Philanthropy (CEP) gives us some hard numbers about how foundations have in fact responded. CEP’s approach to this research, which was conducted via survey and in-depth interviews with foundation leaders over July and August, centers to a large extent upon what has come, in philanthropic circles, to be called The Pledge. This set of eight commitments for foundation practice in response to COVID-19 includes things like loosening restrictions on current grants and communicating proactively with grantees. It was published on the Council on Foundation’s website in March and has since garnered 785 organizational signatures. CEP set out to find out how pervasive those practices had really become, as well as whether foundations had increased their payouts—as CEP and so many of us had implored.
Among the most frequent changes foundation leaders made as a result of the pandemic, the researchers found, were loosening or eliminating grant restrictions, reducing what is asked of grantees, and making new grants as unrestricted as possible. And just as nonprofits have had to move quickly and not let the perfect be the enemy of the good amidst these crises, foundations leaders reported a newfound agility: “We learned an enormous amount about how fast we can pivot, change, take risks, and innovate when we need to,” an interviewee explained.
The researchers also found significant shifts with respect to investing in disproportionately impacted communities and addressing racial inequity. Two findings stand out in this regard:
- Three-quarters of foundations surveyed are making new efforts to support organizations serving communities of color.
- Compared to pre-pandemic practices, more than half of foundations surveyed are giving a higher percentage of grant dollars to organizations created and led by the communities most affected, including Black, Latinx, and lower-income communities.
The question of payout is among the most controversial, of course. It goes right to the dual jugulars of foundation purpose and presumed perpetuity. As Vu Le argued in a March blog: “You think that you are being prudent, saving up so that when society needs the funding the most, it is there. But the reality is that your prudence has perpetuated so many of the problems you are saving up to solve, creating a self-fulfilling prophecy.”
So, what did the CEP research find regarding payout? Seventy-two percent of surveyed foundations said that they had or will increase grantmaking in 2020 beyond what they had originally budgeted for this year. In most cases, the increase is relatively small—certainly not the doubled payout that many in the sector wanted to see. Among foundations that will increase their grantmaking this year, 41 percent will do so by 10 percent or less.
We recently argued that nonprofits have to be honest about their “pre-existing conditions”—the weaknesses and vulnerabilities that pre-date the crises of 2020. Philanthropy is, of course, no different. The practices encouraged in the Pledge have been called for by nonprofit and civil society leaders forever. As the CEP report’s title properly suggests, the question is whether we really are in a period of long overdue transformation in philanthropy.
Stay tuned for coverage of the next two reports in this three-part series from CEP.—Jeanne Bell