Trust-Based Philanthropy: A Primer for Donors
The institutional philanthropic world—think: private foundations—is in the process of reimagining some widely-accepted rules of charitable giving. Early in the pandemic, program officers, boards and executives began to institute simpler grant proposal and reporting requirements, cut back on grant restrictions, and in some cases, rethink the relationship between funders and recipients on an even deeper level.
Amplified by the pandemic and the fight for racial justice, the “rule changes” are the highest-profile examples of the trust-based philanthropy movement, an approach reimagining the nature of relationships between donors, the organizations they support, and the communities those organizations serve. It’s these relationships that are the core of trust-based philanthropy.
But the trust-based movement isn’t limited to large organizations like foundations. You, as a DAF donor, have an important role to play in making philanthropy more democratic, inclusive and ultimately, more effective. We’ve developed a short primer on the subject to introduce you to the most important concepts in trust-based philanthropy and the changing giving landscape.
What is Trust-Based Philanthropy?
Trust-based philanthropy is a charitable approach that reimagines the relationships between donors, nonprofits and communities to rebalance power and decision making. Trust-based philanthropy is not entirely new; it’s one outcome of years of debate within the world of philanthropy between donors, nonprofits, activists and academics. At its core, it is a partnership model between funders, nonprofit organizations, practitioners and communities that acknowledges the unique needs and capacities of all stakeholders.
The Trust-Based Philanthropy Project, a peer-to-peer funder initiative, describes trust-based philanthropy as “a set of values that help advance equity, shift power and build mutually accountable relationships.” Mutuality is key. The trust-based model shifts the donors’ position from patron to partner.
Here are a few other key principles that compose the trust-based approach:
Perhaps the most well-known and central practice within trust-based philanthropy is its emphasis on unrestricted, multi-year grantmaking. Philanthropic dollars without specific programmatic earmarks allow nonprofits to deploy funding where they best see fit. This is the “trust” part of the term.
For years, there has been hesitancy around funding nonprofit overhead like salaries, administrative and operational costs, and donors have long wanted to fund specific projects. What followed was an overcorrection as funders began to attach sometimes-onerous reporting and benchmarking guidelines to philanthropic dollars, or mandate that funding was dependent on the organization changing its programmatic approach.
But it has been unrestricted, general operating support that has made the crucial difference to so many nonprofits throughout the COVID-19 pandemic. Those dollars allowed them the flexibility to adapt, and to expand their programs and their reach.
At NPT, we were thrilled to see a significant majority (70% of our donors) choose to recommend unrestricted grants this past fiscal year. Individual donors at NPT are increasingly choosing to provide unrestricted gifts because they know this will provide their causes and organizations the flexibility they need to do their best work.
Transparency is another important value in trust-based philanthropy. Being forthcoming about your identity can help facilitate deeper donor-grantee relationships in the long term.
You are free to disclose as much or as little personal information in your grantmaking as you would like, but when recommending a grant from a DAF, consider including identifying information along with the grant letter. 97% of NPT’s donors chose to include identifying information in their grantmaking last year. Of course, anonymous grantmaking is always an option, and may still be the best choice based on your personal preferences and giving philosophy.
Trust-based philanthropy puts a premium on an informed, engaged donor. While there’s nothing wrong with giving to tried and true organizations, donors are increasingly seeking new causes through which they can have an impact. Donors are also giving throughout the year, not just at year-end. It can help to set quarterly giving goals in place of yearly ones, making giving a yearlong practice.
Donors can and should ask questions and do background research. Explore organizations that meet your giving priorities but aren’t yet well-known in your community. By funding smaller or early-stage organizations, you have the potential to have an outsized impact on their future. Remember too that support can always go beyond grantmaking. Use the power of your network to inform your peers about an organization’s work.
A New Way to Give
By putting trust in the people and organizations fulfilling meaningful missions, donors are giving nonprofits the ability to adapt to fast-changing circumstances. We frequently hear from grantee organizations who describe how freeing it is to have flexibility in applying the grants they receive. These organizations feel a great deal of responsibility to be good stewards of unrestricted funds and dedicate considerable planning for using these resources.
Trust is mutual; nonprofit organizations that receive flexible funding can earn and keep the trust of their donors by focusing on their missions. DAF donors have a tremendous opportunity to support that vision in their grantmaking and help shape the future of giving.
Andrea Rush is Senior Vice President of Philanthropic Solutions and has more than 20 years of experience providing philanthropic solutions and handling all aspects of specialized grantmaking services, including direct international grants and grant agreements. Ms. Rush is responsible for the oversight of NPT’s various philanthropic vehicles such as Supporting Organizations and Special Projects.
NPT does not provide legal or tax advice. This blog post is for informational purposes only and is not intended to be, and shall not be relied upon as, legal or tax advice. The applicability of information contained here may vary depending on individual circumstances.