Last May, I spoke with social sector strategist Meg Massey, who, along with Village Capital Director of Communications Ben Wrobel, wrote “Letting Go: How Philanthropists and Impact Investors Can Do More Good By Giving Up Control.”
Our conversation turned to a Center for Disaster Philanthropy (CDP) and Candid report showing that funders’ unrestricted and racial justice giving across 2020 didn’t match their rhetoric from early on. Massey wasn’t surprised. Fundamental change in the world of institutional philanthropy is “like trying to turn the Titanic around,” she said.
Massey’s words reverberated in my mind as I combed through two new studies evaluating how philanthropy’s grantmaking practices have changed in recent years, amid the COVID pandemic and surging demands for racial justice.
This first, courtesy of the Philanthropic Initiative for Racial Equity (PRE), is called “Mismatched: Philanthropy’s Response to the Call for Racial Justice.” Its preliminary analysis of Candid data across 2020 found that foundation and corporate support for racial justice and equity was substantially lower than figures cited by other sources, despite a considerable bump for organizations serving Black communities.
The second study, “Foundations Respond to Crisis: Lasting Change?” from the Center for Effective Philanthropy (CEP), explores whether foundations plan to make permanent 2020-era grantmaking innovations such as more unrestricted funding and sustained support for nonprofits most affected by systemic inequities. By showing that 97% of foundations surveyed said they’ve sustained at least some 2020-era grantmaking changes into 2021, the CEP report strikes a more bullish tone than “Mismatched.”
But as we’ll see, both studies indicated that many nonprofit leaders serving communities of color have found the speed and scale of the progress underwhelming, with longstanding grantmaking practices proving difficult to change.
Key takeaways from “Mismatched”
PRE’s report provides a comprehensive assessment of racial equity and racial justice funding from 2015–2018 and a preliminary analysis for 2020 based on data collected by Candid thus far, which includes data from private foundations, grantmaking intermediaries, and corporations.
“Racial equity” funding focuses on “the prevention of harm and the redistribution of benefits within existing systems.” Meanwhile, “racial justice” funding considers “power-building and transformative goals, explicitly seeking to generate enough power among disenfranchised people to change the fundamental rules of society.”
Racial equity funding increased from $4.03 billion in 2015 to $5.15 billion in 2018, with the largest share of support earmarked for education. During this same period, racial justice funding jumped from $0.47 billion to $0.93 billion. More than half of racial justice funding in that window supported human rights. Only 1.3% of racial equity funding and 9.1% of racial justice funding supported grassroots organizing.
The authors’ preliminary 2020 evaluation identified $3.4 billion in funding for racial equity work, including $1 billion for racial justice work, for a total of $4.4 billion. “While this number is likely to grow as more funders report their 2020 grantmaking,” they wrote, the $3.4 billion is “dramatically lower” than 2020 estimates for racial justice and equity funding cited by McKinsey & Co. ($200 billion) and Bridgespan and PolicyLink ($11.9 billion).
Authors attribute the discrepancies to the fact that these estimates often included “incomplete data, double-counting, and the inclusion of commitments for broad, multiyear initiatives and internal corporate spending.”
However, the report states that racial equity funding specifically focused on Black communities increased nearly 50%, from approximately $800 million annually between 2015–2018 to an estimated $1.2 billion in 2020. Support for racial justice funding focused on Black communities also increased from a $91 million average for 2015–2018 to $164 million in 2020.
However, its authors identified a set of “mismatches” between what the movement for racial justice is calling for and what funders are supporting. The most glaring is the fact “funding for racial equity and racial justice remains a small portion of overall foundation funding—not commensurate with the scale of racial disparities or the demands of racial justice movements.”
Key findings from “Foundations Respond to Crisis: Lasting Change?”
The authors of the CEP report provided a more upbeat assessment. “Although many questions remain,” they wrote, “our data point to a level of change in foundation practice that we have not seen in the last two decades we have been conducting research about philanthropy.”
More than 80% of funding leaders plan to make permanent 2020-era changes like modifying grant applications and/or grantee selection processes to better reach underserved communities. In addition, more than 80% of respondents said they “have been doing more to incorporate racial equity into their internal practices” such as rolling out formal staff training.
In a statistic that mirrored findings from “Mismatched,” approximately 40% of responding foundations reported having increased the percentage of grant dollars to organizations serving Black communities, while about 25% reported the same for organizations serving Latino communities. Fewer foundations reported funding increases to organizations serving Asian Americans, Middle Eastern and North African, Native American, and Native Hawaiian or Pacific Islander communities. But respondents said the increased funding is here to stay.
“Virtually no survey respondents said that, post-pandemic, their foundations will decrease funding to organizations serving any of the communities most affected by the pandemic,” the authors wrote.
The CEP report also includes testimonials from nonprofit leaders praising foundation responses to the events of 2020. That said, about one-third of leaders reported “experiencing a gap between foundation rhetoric and actual efforts.” Much of the discrepancy has to do with how grants are still being made.
The state of general operating support
It’s been said countless times, but it’s worth repeating: General operating support should be a non-negotiable component of foundations’ anti-racist grantmaking. It’s the ultimate expression of a foundation relinquishing power and deferring to nonprofit leaders who know how best to serve their communities. It’s also critical during a crisis like the COVID-19 pandemic.
While the tumultuous events of 2020 compelled leaders to double down on their requests for flexible support, the prognosis still remains mixed. The report from the CDP and Candid that Massey and I discussed last May found that when MacKenzie Scott’s support was removed from the data set, only 9% of grantmakers’ 2020 COVID-related support was classified as “flexible.” On the other hand, anecdotal evidence gleaned across the spring and summer of 2021 suggested that some funders did, in fact, ramp up general operating support as part of their racial equity grantmaking.
Data from the recent PRE and CEP reports reveal a similarly mixed report card. “Mismatched” found that the percentage of racial equity funding devoted to general operating support inched upward from 22% in 2018 to an estimated 24% in 2020. But the percentage of racial justice funding earmarked as general operating support dropped from 39% in 2017 to 29% in 2020. Meanwhile, the CEP report found that 95% of responding foundations provided unrestricted giving. However, only 38% of respondents earmarked at least half of grant dollars toward general operating support.
You might expect that foundation leaders who increased general operating support would keep it in place after seeing how it benefited organizations. And yet, among the 61% of respondents in the CEP report whose foundations are providing more unrestricted support over pre-pandemic levels, 10% said they’d cease providing such support after the pandemic receded, while 25% were undecided.
And in what may be the most unsettling finding of them all, of the mere 27% of foundations providing even more critical multiyear general support, 31% were undecided about continuing to provide it once the pandemic recedes.
These data points imply that at least some foundation leaders who ramped up general operating support—multiyear or otherwise—concluded that either it didn’t have the desired impact, or it did have an impact, but they preferred to revert to the pre-2020 status quo anyway. Both scenarios are troubling.
The authors provided a more diplomatic take, noting that about a quarter of foundation leaders said they were trying to “‘find the right balance’ between being more responsive to and flexible with grantees still needing to ‘gauge outcomes,’ ‘account for all funds,’ and, for some community foundations,’ ‘report back to our donors.’”
The authors cited one respondent who characterized progress on the general operating support issue as “little baby steps.” Or, if you prefer, trying to turn around the Titanic.
Key recommendations
Both reports provide a menu of to-do items for foundations looking to bolster their racial equity and justice grantmaking.
The recommendations from “Mismatched” include devoting and sustaining more resources to racial equity and racial justice, including general operating support, and engaging communities of color and movements in strategy and funding decisions. The authors also encouraged grantmakers, philanthropy-serving organizations, and research institutions to adopt and disseminate clear definitions of racial equity and racial justice grants.
Similarly, the authors of CEP’s “Foundations Respond to Crisis: Lasting Change?” advise funding leaders to build new relationships with communities that are under-represented in the foundation’s portfolio and collect “nuanced demographic data” to fully understand the communities they serve and their own workforce. Funders should also deepen training experiences and address board diversity since “continued focus on board diversity seems to be a key factor in supporting flexible grantmaking practices as well as many other best practices in philanthropy.”
While the overall tone of the CEP report is one of cautious optimism, its authors also acknowledge that progress is in the eye of the beholder. Some readers, they wrote, may interpret the findings “as indicative of unprecedented change,” while others “may interpret them as painting a picture of an insufficient response, arguing that while processes and even funding may have shifted, the changes don’t go deep enough.”