Some funders skeptical of MacKenzie Scott's philanthropic giving style

Nearly four years into her massive giving spree, MacKenzie Scott’s fellow philanthropists say they worry that nonprofits, particularly grassroots organizations, won’t be able to handle her unusually large grants — often in the multimillions. Some funders are worried about sustainability and that Scott grantees could fall off a “financial cliff” once Scott’s major funding boost runs out, said Ellie Buteau, director of research projects at the Center for Effective Philanthropy, a nonprofit that provides philanthropy research and advisory services to donors. However, those concerns haven’t yet been born out in data tracking the impact of Scott’s giving. Instead, many Scott grantees said her gifts improved their financial stability, according to a CEP report released Tuesday. “For the most part what we heard was ‘No,’ they were not concerned about that because they planned for use of the money in ways that would help them avoid that and that they’ve got plans in place for fundraising to help them avoid it,” Buteau, who is also the lead writer of the report, told Devex. Scott is considered one of the most generous individual donors in the world. She has a net worth of more than $34 billion and has vowed to give the bulk away in her lifetime. So far, she has donated more than $14 billion in unrestricted grants to more than 1,600 organizations, mostly since 2020. Her giving has generally been applauded within philanthropy circles. CEP is conducting a three-year study of Scott’s giving. It released its first report last year, which found Scott’s grants had been “profoundly positive” for nonprofits. More than 90% of grantees CEP spoke to for last year’s report said they were using the money to improve their organization’s financial stability by creating financial reserves, endowments, funds for “special opportunities,” or for fundraising. In this year’s study, Scott grantees similarly highlighted the overwhelmingly beneficial effects that Scott’s donation had on them. For this second report, CEP spoke to 632 nonprofit organizations based in the United States that received gifts from Scott and interviewed 40 nonprofit leaders, 24 of whom were also interviewed for the first report. CEP also is among Scott’s grantees but said that it did not use any of that funding to conduct the report. Inspiration and skepticism Unlike the previous report, this year’s study includes interviews with leaders and staff at 37 private foundations, community foundations, and United Ways, an international network of fundraising nonprofits that is based in the United States. This group is referred to as the “funders.” This group was included to learn more about how peer donors viewed Scott’s philanthropic approach. More than 80% of these funders praised Scott’s unique approach to philanthropy, which up until recently has largely relied on her working with a team of advisers at her Lost Horse LLC family office and the Bridgespan Group to identify grant recipients. Prior to last year, Scott didn’t share much information about her process. She launched Yield Giving, a website detailing her philanthropic work, last December in response to criticism about her lack of transparency. A $250 million Yield Giving open call for U.S.-based organizations also was announced earlier this year. “Scott very much gave the sector an example of what it looks like to give a big gift and get out of the way,” one funder told CEP. “That’s incredibly inspiring, and I’m grateful that she has done that work.” Other funders also praised her for bringing more attention to the model of trust-based, unrestricted funding that allows nonprofits to decide how to spend grant money. But at the same time, funders raised concerns about the potential for her approach to backfire. Many funders focused on the types of nonprofits that they felt would be incapable of handling a large, unrestricted gift — specifically nonprofits that were smaller, newer or grassroots. They noted that leaders of grassroots organizations were typically chosen based on their lived experiences rather than their management skills. And some worried that younger or less experienced nonprofit leaders wouldn’t be capable of spending the funding effectively. Others also expressed concerns that nonprofits that received large, unrestricted funds might begin “resting on their laurels” and lose their “hustle.” They also were skeptical of the lack of reporting and accountability requirements for Scott grantees, among other things. Critical feedback from funders about Scott’s style of giving large sums of money without any restrictions comes amid growing concerns among philanthropy experts about declining or stagnating giving from wealthy donors and foundations. The path forward Scott has shown no signs of backing off from her philanthropic approach, though she has made adjustments over the course of the past three years. In addition to setting up a website and launching an open call for applications, her grants, while still massive, have shrunk since 2020. Her median grant size for 2022 was $5 million compared to $9 million in 2020, the CEP data showed. But that reduction seemed to correlate with the size of the organizations to which Scott gave, Buteau said. “We did find that the grants were smaller but also that the organizations’ sizes that she gave to were somewhat smaller, as well,” she said. “She’s giving to somewhat smaller organizations than she had been giving to but still much larger than the typical nonprofit,” she added. Nonprofit organizations that received a grant from Scott in 2022 included the Washington, D.C.-based Fund for Global Human Rights, which received $10 million, and Habitat for Humanity International, which received $25 million. The next report will include information about subsequent grantees as well as funder responses, CEP said. That third report will presumably be the final installment of the series unless the center secures additional funding for research on Scott grantees, said Elisha Smith Arrillaga, CEP’s vice president and manager of its research team. It would be preferable to extend the research out to allow more time to fully see the impacts of Scott’s giving and whether other funders adopt her practices, she said. “It’s still early days. She just started this kind of giving,” Smith Arrillaga said. “We know that she still has a lot left to give if she stays true to the pledge that she’s made.” “And I would argue that it will take time for funders who were operating in a very constrained way to change their practices,” she added.