Giving that packs a punch: best practice in philanthropy today
A review of philanthropic activity commissioned by the AMP Foundation has revealed Australian funders could do more to adopt best practice approaches.
A recent review of the key trends and best practice in philanthropic giving and social investment has found that globally philanthropy is evolving from a traditional approach of offering multiple, small grants to support individual programs to a more engaged and thoughtful approach by the most strategic funders.
Conducted by SVA Consulting on behalf of AMP Foundation, the research published in Key Trends and Best Practice in Philanthropy: An AMP Foundation and SVA perspective reviewed philanthropic organisations predominantly in the US, UK and Australia. It indicates that the evolution of philanthropy is occurring in Australia but currently to a lesser extent than overseas.
If we as Australia’s funders are to maximise the impact of our giving in order to address Australia’s most complex social issues, we need to adopt more of the best practice approaches and support others to do the same.
This article will outline:
- What has driven this change
- What best practice strategic philanthropy currently looks like and
- What is needed to accelerate adoption of best practice approaches in Australia.
Drivers of the evolution to strategic philanthropy
In recent years, the more thoughtful philanthropic entities have realised that small grants, the lack of evidence-based decision-making, and limited measurement and evaluation of outcomes have constrained the depth and sustainability of their social impact.
As a result, these organisations have sought a deeper level of engagement with causes they want to support, and a more sophisticated understanding of pressing social issues and what is required to solve them.
The report found that the key drivers of this shift from traditional philanthropy to more engaged and strategic philanthropy have been:
- A belief that becoming more focused on a single issue or set of issues will achieve greater impact
- A desire to leverage existing resources more, and work with other funders, to solve systemic social issues
- An understanding of the importance of ensuring greater sustainability among social purpose organisations and the social purpose sector in general
- A recognition of the importance of measuring social outcomes to drive decision-making.
For corporates in particular, there are two other key drivers:
- Increased employee expectations of their involvement in corporate social investment
- Recognition of the value of aligning social activities with corporate purpose and values.
In Australia, mirroring the situation in the UK, we are also seeing two other drivers of change:
- A constrained funding environment within government, fostering alternative funding models
- The move to person-centric approaches where an individual’s needs are the focus of support, leading to funding for wrap-around services.
Internationally the evolution is being driven by non-corporate organisations, however in Australia it is being led by both corporate and non-corporate entities reflecting the leading role in social investment played by many corporates in this country.
What best practice strategic philanthropy looks like
The research emphasised that the new philanthropic giving embodies a more strategic approach which uses new thinking and tools to drive social investment. The features of the different models are highlighted in Table 1.
|Decision areas||Traditional philanthropy||Strategic philanthropy|
There are seven key elements of strategic philanthropy:
1. Greater application of business practices and principles to social investment activities
Increasingly best practice corporate and non-corporate philanthropic organisations are:
- Investing strategically based on a clear theory of change
- Measuring and evaluating outcomes and funding based on outcomes
- Investing for the long term rather than funding the next new thing.
For example, the Singapore-based Lien Foundation commissioned The Economist Intelligence Unit to conduct a survey ranking 40 countries on their provision of end-of-life care to inform their activities in this area, which was then shared broadly as the ‘Quality of Death’ index.
2. Increased focus on capacity building of social purpose organisations
Over the last decade, leading strategic philanthropic entities around the world have adopted capacity building of individual social purpose organisations and the social purpose sector in general in a bid to ensure more sustainable change and impact.
For example, after years of functioning much like a traditional grant-making foundation in 2009 The Salesforce.com Foundation began selling the company’s software to social purpose and higher education customers at a discount.
3. Greater focus on systemic issues and change, as opposed to solving a part of one problem, including implementation of place-based solutions.
Investors are looking to address the root causes of social problems rather than the symptoms. This involves a shift from funding one organisation in isolation to supporting complementary initiatives that target a range of complex, systemic issues occurring for a particular population group, possibly in a particular geographic location.
In Australia, a number of resources companies are leading this trend. For example, Woodside has launched the Woodside Development Fund, a collective impact initiative that brings together different organisations and programs focusing on improving early childhood development over 10 years and seeks to demonstrate its impact through shared measurement and evaluation.
4. Support for more collaboration in the sector between non-government funders, government and social purpose organisations
Collaboration in philanthropy, which can range from sharing information about best practice to co-funding, is emerging as an increasingly popular way of being more effective with philanthropic giving as well as scaling up activities. Although there is widespread recognition of the need for increased collaboration, due to the challenge of managing different agendas and ensuring mutual benefits for all involved it is not as common as some of the other trends. Where instances of collaboration have been realised, it is commonly with the support of third party experts who provide assistance in the design and delivery of initiatives.
For example, US-based Edna McConnell Foundation (EMCF) partners with other funders and a social purpose advisory organisation to transform the life trajectories of vulnerable and economically disadvantaged youth. Through this approach, since 2007 EMCF has leveraged over US$113 million of its own resources to help 16 grantees in that space to secure almost US$252 million in growth capital from philanthropic co-investors and US$30 million from a US Government fund.
5. Increased integration and alignment of social activities with corporate business, including Shared Value
Increasingly corporates are integrating and aligning their social activities and corporate affairs for the benefit of both internal and external stakeholders and are achieving targeted, commercial outcomes including increased brand promotion, staff retention and customer loyalty alongside social outcomes.
This approach, which adopts the lens of Shared Value, considers how businesses can create competitive advantage and deliver better returns to shareholders through actions that also deliver a social or environmental benefit. Global proponents of this approach include Nestlé, Unilever, Wholefoods and Southwest Airlines. In Australia, Shared Value has been adopted by corporates such as NAB, Westpac Group, Lion, WorleyParsons and The GPT Group.
6. The growth of Impact Investing, including social impact bonds
Impact investing, when an investor places capital in enterprises that generate social or environmental benefits as well as expected financial returns (ranging from highly concessional to above market), is attracting strong interest from a range of corporate and non-corporate philanthropic organisations. There are also more intermediary organisations (such as SVA) managing more social impact funds on behalf of investors.
In Australia, Westpac Foundation and the Commonwealth Bank invested in The Benevolent Society’s $10m Social Benefit Bond to reduce the number of children in out of home care in NSW in 2013.
7. Greater transparency and openness, particularly online.
Globally, a shift in societal expectations and technological advancements have pushed philanthropy towards greater transparency and openness, predominantly online. While some Australia entities share information about both technical aspects of their giving (e.g. financial reports and investment policies) and their vision and impact, this is not widespread.
A reflection of this shift was the establishment of US-based Glass Pockets by the Foundation Center in 2010 to champion transparency in philanthropy in a digital era. Glasspockets provides data, resources, examples and action steps for foundations to apply greater transparency within their organisation. It aims to provide a road map to guide internal discussions about what level of transparency makes sense for a foundation, and a platform for foundations to share their profiles and demonstrate their commitment to greater transparency.
Australia: how to accelerate adoption of best practice
It is promising to see that some Australian philanthropic organisations are beginning to exhibit elements of best practice even if not yet to the extent of overseas. Leading philanthropists and social investors are becoming more strategic in their giving and many corporates are increasingly aligning their social activities with their corporate purpose and providing opportunities for meaningful employee engagement as a core part of their giving approach.
However, the report’s review of over 15 of the largest philanthropic organisations in Australia by size of giving revealed we are not seeing enough evidence of best practice. This has implications for the social purpose sector:
- Learnings are not identified and shared between funders.
- The reporting burden of social purpose organisations to funders remains high, diverting efforts from their core business.
- Due to a lack of co-funding, social purpose organisations have to go to multiple funders for funding across their life cycle and may struggle to get funding, preventing replication and ultimately scaling of operations.
- The sustainability of social purpose organisations continues to be challenged as funding for core operations is limited.
For our giving to be more effective, there are three things we need to focus on going forward:
- Greater transparency and openness: Being clear about what we stand for, sharing our learnings, being appropriately open about how we fund, what we fund, how much we fund and what it costs us
- Collaboration: Working more together as funders through co-venturing, sharing knowledge, sharing measurement and evaluation frameworks and working together to support grantees; this is a particular challenge for corporates and requires a new way of thinking which involves leaving their ‘logos and egos’ at the door so that they are not duplicating effort and leaving gaps
- Deeper understanding of our own theory of change: We need a better understanding of the key drivers of the issues we want to tackle by developing a theory of change that links the issues we want to address, our approach and the activities we are funding, and the outcomes and impact we seek to have.
By focusing on these approaches, we can strike the balance between funding to achieve generational change (which requires patience) and ensuring that Australians currently experiencing disadvantage do not have to wait any longer than necessary to benefit from change.
To support this, we also need to keep backing proven models, rather than being drawn to the latest unproven program.
All of this is likely to involve building deeper relationships, trusting other organisations more and taking calculated risks. While these things are difficult to achieve, as we are seeing overseas – the results are well worth that effort.
 SVA Consulting interviews with global and Australian social impact advisers.
 Jacobson. J, Has Venture Philanthropy Passed Its Peak? Blog, Stanford Social Innovation Review (SSIR)
 Beato. G, Growth Force, SSIR
 Brest. P, Born. K, When Can Impact Investing Create Real Impact? SSIR
 Glass Pockets