Five Trends in Philanthropic Capital
Our field is of course focused first and foremost on impact. That’s the reason we get up and do the work we do every day. But for me, the trends to watch this year are all related to capital—and specifically, how the sector can put more of it to work better, faster, and cheaper.
Here’s what we see rising in 2017.
1. The Rise of Philanthropic Intermediaries — Many funders are now using intermediaries and fiscal sponsors to pool funds with other donors. This lets them collaborate across sectors to get new projects off the ground without the capital-intensive burden of establishing new nonprofit entities from scratch. Intermediaries seed catalytic ideas and provide an important “test-and-learn” alternative to traditional capital deployment. Through the strategic use of intermediaries, funders are incubating and accelerating new networks, approaches, and organizations, and are aligning their strategies and grant-making initiatives.
2. Coordinated Capital — To accomplish the systemic changes many grantmakers seek, they now know they have to work together. More donors than ever are not only collaborating by sharing ideas and aligning their strategies, they are actually pooling funds to streamline due diligence, grants management, monitoring, evaluation, and learning. We now host multi-donor funds focused on reducing gun violence, promoting basic scientific research, helping students succeed in the classroom, making housing more affordable, and more. Done well, such pooled funds have the potential to dramatically increase impact at scale.
3. Policy & Advocacy Capital — Funders increasingly recognize that advocacy and philanthropy are complementary activities that can catalyze movement-level change. For example, we’ve recently helped clients engage by funding awareness programs that yielded positive outcomes on ballot measures in key states. Going forward, donors who choose to do so may have an even greater role to play in supporting advocacy and policy efforts. We expect they will do so using a more complete toolkit and deeper understanding of what’s possible in the policy and advocacy arena, recognizing that capital invested in creating better public policy often produces huge impact returns.
4. Risk Capital — Philanthropy is all about taking risks and putting capital at risk, but no industry standard exists for assessing, measuring, managing, and mitigating impact risk in our sector. Recent research shows that three in four funders don’t ask about risks during the RFP process and nonprofits don’t feel comfortable raising risks. If we truly believe we are being catalytic, we need to reframe our position and look at our grantmaking from the perspective of risk.
5. Flexible Capital — As impact investing becomes more mainstream, we increasingly have the privilege of helping clients deploy financial capital for impact in creative ways. One group of funders recently collaborated to aggregate and mobilize a significant pool of capital in the form of recoverable grants and loans. They used it to fund the growth of companies and nonprofits that use technology-enabled solutions to help low-income adults overcome barriers to education. In effect, these funders are helping to invent a marketplace that generates positive social returns alongside financial ones.
