Last March, the Center for Disaster Philanthropy (CDP), in collaboration with Candid, released a report looking at philanthropy’s pandemic-related giving across 2020. It concluded that foundations, corporations and high-net-worth donors allocated more than $20 billion globally for COVID response, easily eclipsing giving for other recent disasters, and encouraged funders to ramp up support to underserved communities disproportionately impacted by the crisis.
In late May, CDP and Candid published a new study (rolled out via a Zoom call you can watch here) looking at whether funders maintained robust COVID-related support throughout 2021.
Short answer: they didn’t. The study found that COVID funding by survey respondents declined by 31% from fiscal year 2020 to 2021. “As the report shows, the overwhelming desire to move on, to find solace in the immediate response being time-bound or addressed solely through the vaccine, is evident in the decreased funding prioritized for COVID-19,” wrote CDP President Patricia McIlreavy in the paper’s introduction.
It’s hard to dispute McIlreavy’s takeaway. Here at IP, we’ve noticed a drop in explicit COVID-related support across 2021 and early 2022, and I couldn’t help but notice that the words “COVID” and “pandemic” did not appear once on the Chronicle of Philanthropy’s analysis of top 50 givers of 2021. Mega-donors’ 2021 priorities had a distinct pre-pandemic vibe to them. Even IP’s annual end-of-year awards for 2021 felt, admittedly, a little sleepy compared the year prior.
But it isn’t all bad news. Among the 490 foundations that shared data with CDP and Candid for fiscal years 2020 and 2021, overall grantmaking actually increased in 2021 by 11%, not adjusted for inflation. That’s obviously an encouraging figure, although not a surprising one, since the S&P 500 recovered from its spring 2020 dip and proceeded to hit 70 all-time highs in 2021. Foundation leaders discovered that their 5% mandatory endowment payout amounted to a pretty nice pile of cash.
This finding also points to a silver lining embedded in the latest CDP/Candid report: The boost in overall grantmaking, coupled with the study’s intentionally open-ended methodology, suggests that while respondents may not be explicitly funding COVID-related programs — recall the emergency cash grants we saw circa March 2020 — they’re clearly addressing the challenges that the pandemic caused or exacerbated in areas like mental health, housing and education.
What counts as COVID-19 funding?
The report states that CDP and Candid did not create a “universal definition or criteria for COVID-19 funding.” Rather, the survey “allowed foundations to use their own criteria, with the analysis focusing on the relative change from year to year.” This reflects sector-wide challenges in consistent categorization and terminology, and while this approach is understandable, it does muddy the waters to some extent.
For example, one respondent, whose organization reported zero dollars in COVID-related grants, said, “We increased grants to many organizations providing direct services in areas of food access and medical care but did not make any COVID-restricted grants.” And yet, it’s obvious that the pandemic heightened communities’ food access and medical care needs, so one could sensibly argue that the foundation’s grantmaking was indeed COVID-related.
Conversely, another respondent reported that almost all of its grants were made “in recognition of the challenges posed by COVID-19 for nonprofit organizations.” While the respondent didn’t spell out the specific challenges, we can reasonably infer that they involved areas like food access, mental health services, medical care, and education.
I can think of other recent examples that, while not featured in the report, similarly blur the lines between COVID and non-COVID funding. In late March, the William Penn Foundation announced $4.6 million in grants to 22 Philadelphia organizations to implement free summer programming. While the funding wasn’t explicitly COVID-related, it was nonetheless “an extension of the support the foundation awarded in support of in-person and/or hybrid summer programs” during the height of the pandemic, according to the foundation.
Speaking on the Zoom call, Candid Director of Research Grace Sato, who helped to compile the report’s data, said that regardless of how one defines COVID funding, this kind of support still “went down,” which again comports with what we’ve seen anecdotally over the past 18 months. Sato noted that Candid is still in the process of compiling data for 2020 and 2021.
Revisiting flexible support
The other big question laid out in the report is the same one framed in the previous iteration — did funders’ pandemic-era pledge to embrace more streamlined application processes and flexible support materialize? Better yet, did these changes become a permanent component of funders’ grantmaking?
As far as the flexible support piece is concerned, CDP/Candid previously found that when MacKenzie Scott’s grantmaking was removed from the data set, 8% of dollars were characterized as unrestricted in 2020. That figure rose to 16% in 2021 if we again exclude Scott’s grantmaking. Of the funding types included in the data set, community foundations earmarked 49% of funding as “unrestricted,” followed by public charities (23%), corporations/corporate foundations/LLCs (15%), and independent foundations (11%).
The fact that funders doubled their flexible support is clearly good news. But I’d argue — and I suspect other nonprofit leaders would agree — that the 16% figure is still woefully insufficient.
Remember, calls for more flexible support percolated throughout the sector long before the pandemic struck. Nonprofit leaders lamented the need to chase dollars for funder-defined priorities at the expense of more urgent needs, or core expenses excluded from grant agreements. To many reform-minded thinkers, restricted support is a stark manifestation of the power imbalance that has long existed between funder and grantee.
When the pandemic hit, the chorus calling for more general support grew into a roar. In March 2020, Edward W. Hazen Foundation CEO Lori Bezahler penned a guest post on IP explaining how philanthropy could effectively respond to the pandemic. Action item No. 1? “Convert funding to unrestricted general operating support.” That same month, hundreds of funders pledged to “make new grants as unrestricted as possible, so nonprofit partners have maximum flexibility to respond to this crisis.”
Writing in IP four months later, in the aftermath of George Floyd’s murder, Libra Foundation Executive Director Crystal Hayling encouraged funding leaders focused on advancing racial justice to provide flexible support to organizations serving communities of color. “We give them [Libra’s grantees] unrestricted dollars because we believe they know their communities best,” Hayling said.
So why is it that over two years later, 89% of independent foundation respondents to the CDP/Candid survey still classify their grantmaking as restricted support?
Explaining the disconnect
Project-based support allows funding leaders to advance the grantmaker’s priority areas, measure discrete project-related outcomes, and attach the foundation’s name to collaboratively developed projects. But if you get leaders to speak candidly (pun intended), I suspect some of them will express concern that by embracing flexible support, they’ll put their program managers out of business since they won’t be managing resource-intensive, in-house initiatives.
“What are funders here for if they aren’t here to make decisions about funding or strategy?” said Hannah Patterson, quoted in Ben Wrobel and Meg Massey’s book “Letting Go: How Philanthropists and Impact Investors Can Do More Good By Giving Up Control.” “Is our role null and void? This self-preservation is an obvious and fair enough reaction — we want to cling on to our jobs.”
But funders that embrace trust-based philanthropic practices won’t necessarily innovate themselves out of existence. By the end of 2020, the Ford Foundation had classified 83% of its grants as “general/core support,” up from 36% in 2015. Four months later, it committed a second round of $1 billion in flexible, multiyear support through its Building Institutions and Networks Initiative (BUILD).
I spoke with the program’s director Kathy Reich last April, and she told me that her team extended BUILD after determining that 85% of grantees that received flexible support in the first round were significantly stronger as a result. “To go back on the program now would be a tremendous mistake,” Reich said. “So we didn’t. We’re moving forward.”
And yet, many funders are moving backward, at least relative to 2020. Back in March, a Center for Effective Philanthropy report revealed that among the 61% of respondents whose foundations provided more unrestricted support during the pandemic, 10% said they’d cease providing such support after the pandemic receded, while 25% were undecided. In other words, 35% of those who tried it were not sold.
So why the resistance? Probably some combination of reasons. There are some valid arguments for project support and strategic philanthropy, in which program teams fund with targeted outcomes in mind. For a lot of philanthropists and their staffs, there’s a level of control, and a sense of knowing what’s best, that is extremely difficult to dislodge. And, as Patterson suggests, some leaders could feel they might potentially undermine their own careers, regardless of what nonprofits would prefer.
A case of déjà vu
The CDP/Candid report’s big-picture takeaway is that funders need to regain their 2020-era footing because the pandemic is far from over. But for leaders to increase COVID-related support, they’d need to either divert cash from other pressing causes, or in the case of foundations, increase their 5% minimum annual endowment payout.
The CDP and Candid report didn’t mention or endorse this latter tactic, and it’s easy to see why. Few foundations publicly upped their payouts in the early days of the pandemic or when the market reached historic heights across 2021. With some economists predicting a recession, and worse yet, a “lost decade” for stocks, we shouldn’t expect foundations to go above and beyond the 5% threshold anytime soon. High-net-worth donors whose wealth is tied up in stocks will be equally skittish to unload significant shares during a prolonged economic downturn.
More broadly, the report implores funders to provide “additional financial and technical support” to organizations addressing the needs of BIPOC individuals, embrace flexible funding and trust-based philanthropy, reduce the paperwork burden, and fund grassroots organizations. If these action items sound familiar, it’s because they were CPD and Candid’s recommendations from last year’s report.
Even so, the report’s authors stuck with a just-the-facts approach and refrained from overt editorial commentary. They didn’t criticize funders’ unwillingness to pivot to flexible support en masse and took a clear-headed tone when looking into the future, noting that it “remains to be seen” if funders’ pandemic-era operational changes “will take more permanent hold.” That said, there are hints of frustration that come through in the report’s introduction. “It’s time,” the authors wrote, as if straining to be as diplomatic as possible, “the sector took CDP’s recommendations to heart.”