What got us here won’t get us there: The case for disruptive philanthropy
Alix Lebec ; Rafia Qureshi
December 12, 2022
A recent study by the Center for Effective Philanthropy debunked widespread concerns surrounding the volume and speed of MacKenzie Scott’s charitable donations in 2020 and 2021.
The study found that the premature criticism—that other donors would pull back their support or that small groups wouldn’t be able to handle the gifts—was largely unfounded. To the contrary, the majority of grantees surveyed reported that they were using the influx of funds to improve their organizations’ financial stability and that current funders (both institutional and individual) had not altered their support as a result of Scott’s donations.
In what must be the decisive decade on climate change solutions and closing the gap on gender, racial, and economic inequality, we need philanthropy to act with urgency, flexibility, and disruption, at scale—just as Scott is demonstrating. Philanthropy must rise to this moment and create the transformational change that is deeply needed to close the $5 trillion annual funding gap to achieve the United Nations Sustainable Development Goals (SDGs), address the dire findings in the latest Intergovernmental Panel on Climate Change (IPCC) report, and lift 700 million people out of extreme poverty. The longer we wait, the greater the costs and complexity of resolving today’s global systemic challenges.
So what does disruptive and catalytic philanthropy look like? And what will it take to get there?
1. Reexamine and rebuild existing power structures through philanthropy.
At its core, transformational, catalytic philanthropy is anchored around intention, flexibility, redistribution of power, and the unlocking of more capital for sustainable solutions. This also includes meeting local demand for social change and ensuring that local stakeholders have the capital and tools they need to pave the way for sustainable change. On a practical level, this includes multiyear unrestricted funding, an appetite for risk and funding approaches that can bring additional types of financing to the table (such as impact investment capital), streamlined applications and reporting, and a commitment to building relationships based on transparency, dialogue, and mutual learning. By giving social entrepreneurs, nonprofits, and the communities they serve the ability to plan and grow and the flexibility to respond and innovate around emergent needs, philanthropy can help foster a healthier and more resilient social sector. This is exactly what Scott is doing, and this is what it will take to shift power and resources back to communities most affected by inequality.
We see this clearly with the climate crisis, which is hitting the most vulnerable communities the hardest. Though least responsible for emissions, developing countries will likely bear between 75 percent to 80 percent of the cost of climate change. As we fall further behind in the race to net zero, climate funding must center the voices, perspectives, and needs of those most impacted—and it must do it now.
2. Transformational philanthropy goes hand-in-hand with diverse leadership.
Investing in leaders who reflect the communities served and bringing perspectives to the table that are rooted in life experiences—experiences similar to those of the people they seek to help—can help philanthropists more effectively advance the common good. Philanthropy—or any capital tool for that matter—cannot evolve and become a force for good if we do not change our mindset and approach. And that evolution starts with shifts in intention and in who is driving decisions. Philanthropy has the unique ability to take risks in ways that no other form of financing can to attract more capital that builds long-term prosperity and sustainability. It’s critical to have diverse decision makers shaping this trajectory and seeding transformational impact.
Moreover, we already know that more diverse perspectives lead to better outcomes. A study by McKinsey found that companies that actively spearhead diversity and inclusion strategies are 35 percent more likely to achieve above-average returns, and 83 percent more likely to be able to recruit millennials, the custodians of the future.
Yet, an annual survey by the Council on Foundations found that in the U.S., people of color comprised only 14 percent of foundation CEOs and presidents. And while women comprise 77 percent of all full-time foundation staff, they are significantly underrepresented (62 percent) at the CEO/president level. In Europe, out of the 10 wealthiest philanthropic institutions, only two are currently led by a woman CEO, and only four have a woman chair of trustees. We have to do better if we want to create real systems change.
3. Shift away from a risk-averse mindset and toward catalytic, flexible philanthropy.
While there is a place for traditional philanthropy, especially as it relates to disaster relief and recovery, philanthropy alone cannot scale and solve today’s massive challenges such as poverty and climate change. However, if done right, it can bring billions of dollars in private and public capital to solutions best positioned to help achieve the SDGs—by providing first-loss guarantees, seed funding, technical assistance funding, and unrestricted funding. That is why philanthropic bets should leverage today’s available capital resources, which carry enough weight to really address global inequality. By taking a first-loss position, for instance, philanthropy can de-risk investments and mobilize follow-on capital in order to truly build the momentum required to meet our global, systemic challenges of today.
Philanthropy today—and, indeed, in the future—needs to take on a long-term view with a catalytic and flexible approach. By not embracing the full power of philanthropic capital, many philanthropists are missing a monumental opportunity to make real change happen at scale. The good news is that sitting alongside traditional philanthropic structures is a new wave of social entrepreneurs, women and millennials, and venture philanthropists and impact investors who are disrupting this sector and creating long-lasting and impactful change. This is catalytic philanthropy and, ultimately, where the greatest return on investment lies.
This type of philanthropy can harness political and market forces to get critical innovations and solutions to the people who need them most. This is how the IKEA Foundation helps organizations accelerate their efforts in combating climate change while enabling families to create sustainable livelihoods. It’s what allows Acumen to take big bets on underfinanced social enterprises which are scaling business models that prioritize people and planet alongside long-term profits. It unlocked billions of dollars for sustainable water and sanitation solutions through Water.org’s work and led to the creation of global impact investment manager, WaterEquity. And it’s how Root Capital finds and invests in promising agricultural businesses (many of which are led by women) in overlooked parts of the world, helping them become investment-ready and gain access to financing.
In summary, we already have an array of capital tools that we can use creatively to reach those living in extreme poverty, create markets that ensure affordable goods and services reach consumers from all walks of life, fuel women-led and gender-inclusive businesses that are often undervalued and underfunded, and meet an annual $4.35 trillion budget for climate finance by 2030. This is where the philanthropic sector can step up, amplify impact, and show their grantees and partners that they are truly walking the walk. It will take self-reflection and disruptive change—including giving in far greater percentages, placing more diverse people in decision-making roles, and taking much bigger bets.
Alix Lebec is the founder and CEO of Lebec Consulting, a women-owned and led company working across philanthropy, impact investing, and ESG to help clients achieve their greatest social impact. Rafia Qureshi serves as Lebec Consulting’s chief strategy officer in Europe and brings more than 17 years as a multilingual, multi-sector leader in philanthropy and impact investment.
