BIPOC Organizations and the Hamster Wheel of Philanthropy

(Illustration by iStock/Alexandr Lukin)

Back in 2020, the newly formed Foundation for Black Communities (FFBC) in Canada put out a public call to funders across the country to support the building of the organization’s endowment. The request emerged from the publication of Unfunded: Black Communities Overlooked by Canadian Philanthropy, a report that articulated how Canadian philanthropy has “failed to support the needs of Black communities” and recommended the establishment of a Black-led and Black-serving philanthropic foundation in the country.

Rather than asking just for ongoing grants to support FFBC’s work, the foundation asked specifically for Canadian funders to provide endowment support from their corpuses proportionate to the percentage of the Black population of Canada (3.5 percent), so the assets would be held by Black communities themselves and they would have the ability to prioritize and allocate investments based on their understanding of their own communities’ needs.

Three years later, only two funders in Canada—the Laidlaw Foundation and the Inspirit Foundation—have answered FFBC’s call to transfer endowment funds (although numerous funders have provided other types of support, including Dragonfly Ventures, which doesn't maintain an endowment but transferred the equivalent of an entire annual disbursement of grants to FFBC).

The foundation remains hopeful that more funders will come on board in the months and years ahead. And recently, FFBC was awarded stewardship of a Black-Led Philanthropic Endowment Fund by the nation’s federal government. Although the endowment’s assets are not fully under the foundation’s control, the award represents an important vote of confidence in the organization.

Even as FFBC gains traction, there is still a question of why philanthropy’s response has been so limited. At least part of the answer lies in the transferring of power that underlies FFBC’s request. Their ask focuses distinctly on the creation of sustainable wealth under Black ownership—asking not just for grant dollars, but for funders to fully cede control over the assets to Black leaders. According to Andrew Chunilall, the president of Community Foundations of Canada, “Most funders are rooted in more traditional notions of charity, and they simply aren’t prepared to actually transfer control of assets in significant ways.”

In this regard, philanthropy may actually be mirroring the very inequalities in wealth that funders often seek to remedy. For instance, in the US the average small business loan for Black business owners is almost 50 percent less than the national average, and Black-led nonprofit organizations have 76 percent less unrestricted net assets compared to white-led organizations. Endowments of BIPOC¹-led organizations are nearly four times smaller than those of white-led organizations—for those that even have endowments. Rather than stepping in to change this, traditional philanthropic giving often appears to be perpetuating a racial asset gap.

General operating support, for example, provides critical and ongoing income for operating BIPOC-led organizations. But it doesn’t necessarily provide the type of compounding assets that build wealth over time and can counter the impact of systemic racism and generations of historical underinvestment in Black and Brown organizations and communities.

As Ed Smith-Lewis, Vice President of Strategic Partnerships at UNCF, explains, “More general operating support for Black-led organizations is great, but what we could really use is help getting off the hamster wheel, so we don’t need to ask for more funding next year too.”

For funders interested in doing this—really walking the talk of building up under-invested communities—it may be time to shift from a charity mindset to an asset building one.

What Asset Building Looks Like

An asset is typically defined as an owned or controlled resource with economic value that is expected to provide future benefit and advantage. The accumulation of assets over time gives groups the ability to build and sustain wealth, power, and influence—a way to provide a cushion when times are tough and to get off Smith-Lewis’s hamster wheel of dependence.

Tangible assets. For many funders, efforts to support asset building focus on tangible financial assets. Many are beginning to explore a range of different approaches for transferring capital that have a potential to create future value to under-invested communities: at the individual level, through efforts like direct cash assistance, baby bonds, and individual development accounts; at the household level, through approaches such as guaranteed income programs and mortgage support; and at the community level, through community-owned development projects and investment trusts. All these spaces represent exciting new areas for philanthropic investment.

But philanthropy is also uniquely positioned to remedy the racial asset gap at an organizational level. For many funders interested in supporting under-invested communities, this type of institutional support can take the form of flexible general operating support for BIPOC-led organizations. For example, the venture philanthropy group New Profit committed to significantly increase unrestricted, multi-year philanthropic capital for nonprofits run by leaders of color as part of their “Build” portfolio, and has increased the number of these leaders in the portfolio from 21 percent in 2017 to 82 percent as of June 2022.

This represents an important shift in philanthropic practice, there is also an opportunity to go further and provide assets that create additional, compounding financial value over time. This potential has spawned a renewed conversation about strategies that help transfer assets more directly to BIPOC-led organizations that show up on an organization’s balance sheets, such as endowment building and land and real estate transfers. A 2021 SSIR article by William Foster and Darren Isom, for example, eloquently highlighted the case for investing directly in endowment building for Black-led organizations.

A handful of funders are also looking beyond their grant funds to consider how they can align all their organizations’ resources in ways that build assets in under-invested communities. FFBC, for example, is aiming to have their endowment managed by Black fund managers and is devising strategies to ensure that endowment capital is used to invest in Black-benefiting enterprises. Options like this demonstrate the important opportunities that philanthropy has available to transform charitable dollars into vehicles for asset building in under-invested communities.

Intangible assets. Financial assets, however, aren’t the only sort of assets that compound over time. In fact, coupling tangible assets with investments in human, social, and political capital can pay additional dividends that produce future benefits and advantages for under-invested communities.

Many in the asset-building space have highlighted the tremendous impact of investing in BIPOC leaders themselves, which helps drive the work of their organizations, but can also have a larger, multiplicative community impact as these leaders work with and move to other organizations in the sector. This is about skill building and technical training, as well as other types of critical assistance. New Profit’s model, for example, includes assigning a “Deal Partner” for each of their grantees who serves as an advisor to the organization. The Deal Partner not only oversees the unrestricted grant, but also serves as a board member for the organization, provides leadership coaching and strategic advice, and facilitates connections across the New Profit network.

Funders can also provide strategic capacity-building support for BIPOC-led organizations, from help with governance and revenue models to organizational design, succession planning, and fundraising. Other foundations are providing practical expertise and assistance, such as loaned capacity around investing, accounting, and other critical capabilities.  And social capital—in the form of access to networks and influence—can also be critical to asset building for under-invested communities. This can take the form of building a stronger ecosystem of meaningful relationships between BIPOC leaders and donors, foundations, politicians, and other individuals.    

Investing in political assets in under-invested communities can also pay significant dividends over time. Because many of the issues that BIPOC-led organizations are committed to remedying are systemic and generational challenges, political will and policy change represent critical tools for sustainable impact. By supporting activities like community organizing, advocacy, coalition building, and voter mobilization, funders can have a significant influence on current policies and legislation to support their goals in under-invested communities.

Making the Shift Toward Asset Building

No matter what tools a funder decides to use to go beyond charity and traditional grantmaking, building assets in under-invested communities requires funders to shift existing philanthropic orthodoxies. Through our research and conversations, we’ve identified four key actions that can help an organization shift to an asset-building mindset:

1. Recognize that the systems that created philanthropy negatively impact BIPOC communities and that there is a need for repair. As an economic system, capitalism has enabled the accumulation of wealth that allows philanthropy to exist, but it has also had disproportionate negative impacts on under-invested communities and other disadvantaged groups. Understanding that these two truths exist together—at both the staff and board level—is essential to fully embracing the value of and need to address the racial asset gap.
2. Get proximate. In order to ground their strategies closer to the people they serve, some funders have begun to try to create ongoing mechanisms for community members to share their perspectives, priorities, and challenges. But it also may be the case that the single most important step a funder can make in supporting under-invested communities is investing in the diversity of its own staff, board, and leadership. It’s not a coincidence that the first two foundations that transferred assets to the Foundation for Black Communities have people of color as leaders and have significant diversity in their boards. As Jehad Aliweiwi, the CEO of the Laidlaw Foundation explains, “There have to be people of color in leadership roles on the inside. There can’t be proxies for community voices. There can be allies, advocates, and cheerleaders, but there can't be proxies.”
3. Get comfortable with transferring and sharing power. Funders may not yet be ready to fully cede control over their assets to others. But for those who are seeking to support under-invested communities, there are still a range of ways to begin sharing power with BIPOC leaders and BIPOC-led organizations, such as long-term general operating support and participatory grantmaking. NewSchools Venture Fund, for example, has long provided general operating support to their grantees. And as part of a larger strategy to further bring grantee perspectives into their work, they piloted an approach to shift power over grantmaking decisions to a council of parents, students, educators and innovators of color. Frances Messano, CEO of NewSchools, emphasized that the pilot demonstrated the importance of a deeper mindset shift, as funders have a valuable role to play as “facilitators of impact” by convening leaders, providing support and training, and creating the space for community-led solutions.
4. Consider giving more. According to John Esterle, the co-CEO of the Whitman Institute, “We had organizations we had been supporting for years, and there was a concern that shifting specifically to funding BIPOC-led organizations would mean we had to leave our old partners behind. Spending down allowed us to do both—to have a both/and mindset, rather than an either/or one.” For the Whitman Institute, the decision to spend down opened opportunities to innovate and spend in ways that they hadn’t before. However, spending down isn’t the only option for adopting the “both/and” mindset. Interested funders can start by seeding small endowments as a way of putting themselves in relationship with BIPOC-led organizations, by temporarily increasing payout in times of great need, or by providing matching support to facilitate endowment building. 

A Natural Next Step

Many funders have already made enormous strides in their commitments to advancing racial equity, offering more unrestricted funding, and promoting a more participatory, trust-based approach with grantees and partners. The Canadian government funds given through the FFBC, for example, mark an enormous investment in the foundation and the community. But it doesn’t in itself fundamentally change the calculus of long-term assets available to the FFBC.

Our research suggests that acting in true alignment and solidarity with BIPOC communities requires more: that funders begin to fundamentally shift the way they think about and use their resources, power, and privilege.

The Inspirit and Laidlaw foundations—the first two funders that responded to FFBC’s call—felt it was simply “natural” to choose to transfer assets to support the endowment of the foundation. By doing so, they’re ensuring that BIPOC communities (and the institutions that serve them) not only have more capital to meet their immediate needs but that they also have ownership over the compounding assets necessary to build generational resources and prosperity.

For funders interested in creating this type of impact, the transition from a focus on providing income to building assets may be a natural next step. And many practitioners have emphasized that this shift doesn’t actually have to be complicated at all. As Gabrielle Uballez of the Asset Funders Network explained, “Asset building actually boils down to a really simple call to action: give people of color money and trust them.”

It’s time for more funders to consider following that call.

Read more stories by Grace Azenabor, Mariam Mansury, Jasmine Arai & Gabriel Kasper.