Funders have been pushed over the past year to make big changes to how they approach their work. They’ve been called on to provide long-term flexible funding, to shift power, to trust and listen to nonprofits, to increase payout, to fund more organizations led by people of color, and to center racial equity and racial justice in their work. These calls are hardly new, but they have become much more prominent and urgent in the past 12 months.

So, what’s actually changing in foundations’ work? For months now, this has been the question for my colleagues and me on CEP’s research team.

Some of the findings in our recent series of reports, Foundations Respond to Crisis, suggest that foundations — institutions often perceived as notoriously process-heavy and resistant to change — have indeed been making significant changes to their work. Leaders reported that the COVID-19 pandemic, the ensuing economic downturn, and the movement for racial justice have catalyzed change and forced them to reconsider how they conduct their work. As one leader said, “This has been a wake-up moment for philanthropy.”

Among the encouraging themes our research revealed:

  1. Foundation leaders said they changed their practices to be more flexible and responsive to nonprofits. Almost all said they are loosening grant restrictions, providing more unrestricted funding, and reducing what they ask of grantees. As one leader pointedly put it, “We treat our processes like they came down from the mountain with Moses, like they’re embedded on tablets…This moment has called those processes into question.”
  2. Among those that had decided at the time we conducted our survey, most foundation leaders said their organizations increased their giving in 2020. “The organizations we partner with need more. Foundations have been able to recover from past recessions. But some communities have not,” noted one leader in explaining the decision to increase payout. It’s important to note, however, that these increases are rather modest; 41% of those who increased their 2020 giving did so by 10% or less relative to what had previously been budgeted.
  3. Most foundation leaders reported responding to the systemic inequities exacerbated by the pandemic and making new or increased efforts to support those most affected — particularly Black, Latino, and low-income communities. Importantly, they also said they are giving a higher percentage of grant dollars to organizations led by communities most affected, particularly those led by individuals from Black, Latino, and lower-income communities.
  4. Most foundation leaders described a shift in recognizing the roles that race and racism play in their work. And even as most reported making changes that incorporate racial equity into their grantmaking or programmatic strategies, almost all identified that they need to be doing better and will be focusing more on racial equity moving forward.
  5. Many foundation leaders we interviewed highlighted that important funder practices have gained newfound importance, such as listening to grantees and communities, engaging in systems change and policy advocacy, collaborating with funders and other organizations, building trusting funder-grantee relationships, and being more tuned into funder power dynamics.

Read the full article about real change for philanthropy by Naomi Orensten at The Center for Effective Philanthropy.