Philanthropy Trend Watch: A Few Ways the Sector Is Changing for the Better — and the Worse

Is the philanthropic sector heading in a good direction? It’s complicated. While there’s a lot to like about how grantmakers are approaching their work today, the past several years have also given us trends and developments that don’t bode so well for philanthropy’s long-term future.

In the spirit of year-end reflection, here are three things we like about how philanthropic giving has changed over the past several years, and three things we aren’t so sure about. I say past several years because while 2022 has seen no shortage of developments in the philanthrosphere, many of these trends have been in play for at least the past two or three years, if not longer.

Although I’ve sorted this very much non-exhaustive list into positives and negatives, there’s a lot of overlap and many gray areas here. For instance, new forms of billionaire giving have done a lot of good in many cases, while funder collaboration via intermediaries doesn’t necessarily deserve universal applause. That’s part of what makes a field like philanthropy so interesting — there’s ample room for interpretation.

Changes we like

More attention to racial equity and justice

While movement leaders rightly point out time and again that philanthropy is dragging its feet in the fight against structural racism, there has been a gradual upswell in explicitly anti-racist funding, and a surge of funding couched in equity-oriented terms. Indeed, overtures to racial equity are near-ubiquitous in the grantmaking of most major foundations working on social issues today, let alone liberal stalwarts like Ford or Kellogg.

When you think about it, it’s kind of improbable that a sector long dominated by old, white money should now so thoroughly adopt the language of racial equity. That’s a testament, in part, to the nonprofit and philanthropic workforce, many representatives of which have championed the cause of anti-racism among their bosses and boards.

Still, as we’ve long maintained, there’s a difference between talk and action. Philanthropy’s willingness to back up talk of equity and justice with actual funding has been tested in the two-plus years since George Floyd’s murder. And as our recent deep-dive investigation found, there are bright spots as well as plenty of ways philanthropy is still dropping the ball.

Growing popularity of general support

Just like calls for more racially just grantmaking, the argument for unrestricted general support goes back a long way — and likewise, for a long time, only a handful of grantmakers adopted the practice wholeheartedly. It feels safe to say that something has shifted over the past few years. While restricted project grants are still very much the norm, the COVID era saw many funders make a point of loosening those restrictions.

What began as a way to speed emergency funding to at-risk communities quickly became a best practice, and one intertwined with calls for more equitable support for smaller nonprofits led by women and people of color. MacKenzie Scott’s grand entry onto the scene further cemented that perception. For several years running, the nation’s most celebrated philanthropist has also been a general support philanthropist. And last week, she unveiled her latest: a much-anticipated website with a searchable grants database. She also now has a name for the project — “Yield Giving,” which she attributes to “a belief in adding value by giving up control.”

Of course, though it’s still a long way off, a possible philanthrosphere dominated by general support raises major questions about the function of foundation staff, for instance, or the expanding role that donor-advised funds play. After all, as DAF boosters often point out, general support is already the norm for DAF giving.

More collaboration

More funders are working together these days, in more places. That includes collaborative funds, where multiple funders join forces to pursue a unified grantmaking project, as well as a growing array of affinity groups, philanthropy-serving organizations and intermediaries. Then there’s cross-sector collaboration, which could take the form of public-private partnerships or even venture funding in social enterprises.

In addition to its capacity to move more money and speed the giving process, philanthropic collaboration can engender greater risk-taking — something that’s often in short supply. When funders join forces, there’s less chance a particular funder will be called out if something goes wrong. Collaborative funding has thus been an entry point for new racial justice movement funders, for example, or for gun violence prevention.

While they may or may not involve actual collaborative funding, funder affinity groups and intermediaries have also been growing in number and importance. As fiscal sponsors and hotspots for donor organizing, these groups can both engage new donors and cultivate collaborative funding projects, growing the giving ecosystem.

Changes we don’t like

COVID didn’t prompt the changes many hoped it would

Almost three years ago — and mere months before the first COVID lockdowns began — Inside Philanthropy Editor David Callahan penned a piece with some top-level predictions for philanthropy in the 2020s. He ended on a prescient note: “A major crisis will catalyze dramatic change in philanthropy,” and cited a global pandemic as one possible example.

Well, did COVID catalyze dramatic positive changes in philanthropy? On one hand, you could chalk up the three positive changes above, at least in part, to a philanthrosphere undergoing pandemic-era convulsions. General support and collaborative funding both got a significant boost during the pandemic, and many have argued that the racial reckoning of summer 2020 took on the contours it did because of COVID’s effects on the body politic.

Still, as early as spring of 2021, we were reporting on the lackluster elements of philanthropy’s COVID response. In the realm of public health, it’s very unclear whether philanthropy has helped set the nation — let alone the world — on a path to successfully combat future pandemics. And more broadly, vast and lasting upswings in giving by wealthy foundations and individuals have not materialized. What increases we did see tracked with a COVID-era stock market boom that has now evaporated: hardly a revolution in philanthropic practice.

Billionaire giving grows more predominant

Across almost every issue area we write about, the power of mega-rich donors is growing while the relative heft of small donors — and long-established foundations — is shrinking. This is no surprise, and seems inevitable given the long-term trend toward wealth inequality in the U.S. It’s also a net negative in terms of democratic society and governance. When individuals wield this much power in the public square, the rest of us are left with diminished autonomy, having less of a say in matters that impact us all greatly.

As these modern-day Rockefellers and Carnegies proliferate, big chunks of the philanthropic world will likely come to reflect their interests and beliefs. Judging from the example many prominent billionaires (and former billionaires) have set recently, there isn’t much there to celebrate.

More philanthropy is regulated less

It’s been over a half-century since the last major update to the laws governing philanthropic grantmaking. The Tax Reform Act of 1969 set in place most of the key regulations on private foundations that we now take for granted — rules like the 5% annual minimum income distribution, restrictions on electoral giving, and the 20% maximum stake foundations can own in a business.

The obvious problem is that much of what we now consider “philanthropy” takes place entirely outside that framework. Donors are moving money (or not moving it) through DAFs, for instance, to which those rules don’t apply. They’re also migrating to alternative giving vehicles like LLCs and engaging in high-powered, often opaque giving that blurs the lines between philanthropy and politics.

These innovations aren’t always a bad thing. But over the past several years, it’s become increasingly clear that the under-regulated frontiers of philanthropy are set to grow much quicker than the staid old world of the foundation. At some point — maybe soon — the sector will have to face the fact that it’s living in the Wild West.

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