(Illustration by Stuart McReath)
The original purpose of philanthropy can be traced back to a question posed by Scottish-American industrialist Andrew Carnegie in his 1889 article “The Gospel of Wealth”:
“What is the proper mode of administering wealth after the laws upon which civilization is founded have thrown it into the hands of the few?”
Carnegie saw that surplus and unequal wealth was an undeniable outcome of capitalism. In the absence of a superior alternative economic system, he promoted a mode of redistribution to serve as “the true antidote for the temporary unequal distribution of wealth.” Although contested at the time, Carnegie suggested “there is but one right mode of using enormous fortunes—namely, that the possessors from time to time during their own lives should administer them so as to promote the permanent good of the communities from which they have been gathered.” Through this message, modern-day philanthropy was born.
While much has changed since Carnegie’s time, the question he posed remains as relevant today as ever. At the heart of foundation organizational models, and even more so in community foundations, is the idea that aggregating the wealth of a few into the reliable and stable hands of a public charitable foundation will best serve the interests of the community. The aggregation creates a significant scale through which philanthropists can provide valuable influence and resources in addressing community needs over the long term.
But there is a growing existential crisis amidst numerous converging and intersecting trends affecting every aspect of our daily lives, including the world of philanthropy. People feel the pressure of what some are beginning to call the global polycrisis, which includes (1) economic inequality, (2) economic insecurity, (3) mass migration, (4) climate crisis, and (5) threats to our current systems and norms. Every aspect of the polycrisis has been caused by economic, political, and social systems that are strained and unfit for our communities in the modern era. Foundations have a long history of addressing community needs. However, the moment calls upon us to explore how we leverage our own capital to address these systemic challenges in ways that go beyond grantmaking and facilitating our own capital growth. In the Canadian context, a handful of recent examples are underscoring this point, from large capital transfers supporting the creation of identity-based philanthropic institutions, notably the Indigenous Peoples Resilience Fund and the Foundations for Black Communities, to one of Canada’s leading private foundations, the Ivey Foundation, announcing the wind-down and disbursement of its entire endowment to support Canada’s transition to a net-zero economy.
Serving the Many
As economic inequality and insecurity accelerate, public foundations continue to aggregate and accumulate wealth, attracting some skepticism and attention to our role in the economic system. Some are asking the question, “How can large philanthropic foundations continue to amass record endowments as more and more people are falling into the cracks of over-stressed systems?” As Carnegie contended, the “common good” is best served when “the surplus wealth of a few will become, in the best sense, the property of the many.” Philanthropy is being tasked to confront our own relationships and how we are influenced and governed. We may have the capital on our balance sheets, but how much agency should we have in deploying that very capital? Each philanthropic institution must examine themselves to truly understand if we are serving the “many.” Acting as intermediaries between the few and the many has been our necessary function in the transfer of resources in the economic system. It is a role we must constantly evaluate and center in our decisions.
As an example, with the proliferation of donor-advised funds it is worth asking ourselves if we are serving the interests of the few or the many. During the pandemic, community foundations moved record amounts of granting dollars to sustain and shore up the capacity of many community-based organizations to ensure that much-needed services continued and that our most vulnerable were cared for. This involved the rapid distribution of funding with much less onerous application and reporting guidelines alongside multi-year commitments. The response serves as a remarkable example of the fluidity and adaptability of community foundations and their leadership. However, we cannot underestimate the pervasive nature of the pandemic and how it facilitated a common understanding of the urgent priorities in the moment, including the need to act. In the absence of a pandemic, the inherent challenges of managing hundreds or thousands of donor-advised funds can create barriers that hinder the movement of resources toward urgent priorities.
Community foundations often compel and move donors in a direction that is consistent with the highest community needs. However, as the scale of donors and relationships grows over time, the task becomes more challenging. Donor-advised funds present structural and relational considerations that make optimizing the idea of “public good” in the way Carnegie would have envisioned challenging. Donors are well-intended and altruistic. At the same time, they are influential and powerful and often have their own ambitions that may not always be aligned with community priorities. The capacity and expertise to align donor intent with the highest needs in the community is an evolving field in community philanthropy. The challenge is relational and the obstacle is time because it involves the development of trust between donors and staff. Given the magnitude and scale of the polycrisis and its adverse impacts on community, time is scarce and redesigning the philanthropic enterprise to ensure it meets the urgency of the moment is imperative. As fund agreements are the building blocks of influence and power, those that situate and influence community knowledge and lived experience while maintaining donor confidence and trust will create more optimization in the funding system.
The Discomfort
This touches on another challenge the field faces: Philanthropy has been slow to build relationships with Indigenous, Black, and racialized communities. There are two barriers to building these meaningful relationships; the first is representation. Philanthropic leadership and governance should reflect the diversity of the communities we serve and engage with equity-deserving communities in their work. The second barrier is one of mindsets. Philanthropy must sit in uncomfortable spaces to have conversations about inequality, racial justice, and the state of our climate. Our desire to maintain neutrality with respect to the aforementioned creates an impediment to maintaining our original purpose of effectively distributing wealth. Discomfort cannot prevent us from addressing the issues that matter most to communities, especially when those communities are experiencing the effects of the polycrisis.
Philanthropic Paradox
The impact of the polycrisis is also playing out in boardrooms and executive teams, and amongst donors, networks, memberships, and movements. We are all living with the reality that our institutions have thrived and grown in the current system, and now we are being asked to change the very system that has enabled our own sustainability, influence, and power. In particular, the values through which we invest our capital remain largely unaligned with the values we use to grant. There are many new investing and advisory firms in Canada to assist philanthropic enterprises with mission alignment. However, the adoption of mission-aligned investing has been slow.
The adoption of mission-aligned investing has been hampered by a business model that fosters contradictory thinking within the model itself. Our endowments, which we view as growth capital, are separate and exclusive from our granting, which alternatively we view as our impact or purpose capital. Our business model can result in more harm to communities if our ambition for positive investment returns is pursued with a blind eye to their societal or environmental impact. Hence the case for mission alignment is obvious. Our communities require us to stretch existing mental models and go further by aligning our capital, recognizing this is not a business-as-usual-moment.
Bold and ambitious goals like increased granting to meet the urgency of the moment, accompanied by transferring capital within new partnering and fund agreements, allow us to tackle root causes with robust, long-term, cross-sector partnerships. In addition to granting, activating more of our endowed assets through mission alignment in the coming years will bring much-needed capital to resource-hungry charitable and social enterprise sectors that are facilitating the creative solutions we so desperately need. Lastly, a rethink of governance and staffing teams with regard to the above goals and their program shifts to ensure we have the continuity and ambition to meet the urgency of the moment.
Meeting the Moment
Given the magnitude and scope of the polycrisis and the outlook for many young people in Canada and globally, it is time we make these shifts to meet the moment. Perpetual capital is key to ensuring community resilience to weather storms such as pandemic lockdowns or urgent climate emergencies, but the need to do more to help future generations succeed is front and center.
The first sentence of “The Gospel of Wealth” is, “The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in a harmonious relationship.” The problem articulated in 1889 remains our central problem today. If philanthropy is to remain a centerpiece of the solution for the next hundred years, it will need to start thinking and acting in ways that reckon with its original intent, as well as the tensions of its origins.
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Read more stories by Andrew Chunilall.