With trust-based philanthropy, donors 'don’t need to have the answer'

Instead of allowing potentially large sums of philanthropic dollars to sit on the sidelines while they try to get their strategies “right,” funders should lean on the expertise of on-the-ground nonprofit leaders and trust that they know best how to address issues affecting local communities, The Bridgespan Group’s Nidhi Sahni told Devex. Despite an “enormous” increase in wealth over the past two years, giving hasn’t kept up, Sahni told an audience at the Devex World conference Tuesday. U.S. billionaires’ wealth has jumped by over 60% since the COVID-19 outbreak started, while giving has only risen by 5%, according to comments last year by Sahni, who leads the U.S. branch of the influential nonprofit advisory company. Bridgespan works with philanthropists who want to invest in “long-term transformative change,” said Sahni, whose clients have included The Rockefeller Foundation, the Ford Foundation, and Azim Premji Philanthropic Initiatives. One thing that seems to be holding them back is “this idea that they want to really understand problems and spend time getting it right because [of] this fear of getting it wrong,” she said. Rather than wait, Sahni suggested that these donors turn to trust-based philanthropy — an approach that sees funders provide largely unrestricted grants to nonprofits with the expectation that they will know best how to spend the money. It is a contrast to traditional philanthropy, in which grantees are often forced to comply with sometimes lengthy reporting requirements. Trust-based philanthropy says “that actually you don’t need to have the answer,” Sahni said. “And in fact for some problems you cannot have the answer because you do not have the lived experience. You have not been in the context. You have not faced the oppression.” Trust-based philanthropy is not a new model. However, its adoption in recent years by high-profile donors like billionaire MacKenzie Scott has put a spotlight on the approach. Scott, who is also a client of Bridgespan, has given away around $12 billion in unrestricted grants to many grassroots, women-led, and other nonprofits in recent years. Sahni said that trust-based philanthropy helps philanthropists move away from the idea that they can create change by funding a “narrow” program at a nonprofit without considering the organization’s additional operational and staffing costs. As with private sector groups, nonprofits require funding to keep their leaders, recruit the best talent, and have the infrastructure needed to scale up, she said. That is where unrestricted and multiyear funding can be helpful and complement traditional philanthropy, she added. More than 800 institutional and individual funders removed restrictions from their grants during the COVID-19 pandemic because of the urgency of the issues affecting people, and that is a change that Bridgespan hopes will stay, Sahni said. The emergence of collaborative funds —in which high net worth individuals can band together and aggregate their capital — has also been “exciting” and useful for those people who do not want to create large foundations, she said. Sahni has worked with donor collaboratives such as The Audacious Project and Co-Impact, a project that recently announced the launch of a $1 billion gender equality fund backed by Scott and other high-profile women philanthropists, including Melinda French Gates, Tsitsi Masiyiwa, and Roshni Nadar Malhotra. “What collaborative funds can allow philanthropists to do is to transfer that trust and decision-making, cede that power to funds who’ve actually spent years developing the capabilities, developing the relationships to be able to do trust-based philanthropy from there on out,” Sahni said. It is also important that philanthropists not limit the size of their gifts due to an assumption that community-based nonprofits won’t have the capacity to absorb large amounts, she said. “Absorptive capacity is a donor problem, not a nonprofit problem” because there is a lot of room for funders to give more, she said. For example, Bridgespan has recently published research suggesting that feminist movements, which currently receive just a small slice of global philanthropic funding, by 2026 could absorb $6 billion more than they get now. “There is [an] enormous amount of work to be done,” Sahni said. “We are living in a world with compounding crises. And we have to trust people on the front lines to do what needs to be done for this work, and we need people working at the grassroots that are closest enough to the problem and understand it.”