Philanthropic capital has been a major source of income for nonprofits, a driver of social progress, and a necessary means of relief during times of crisis. This has been the case for centuries. The term itself means “love of humanity” and has come to encompass giving in all its forms, whether that means time, talent, treasures (i.e., financial resources), or ties (connections) to make the world a better place.

While well-intentioned, however, philanthropic giving has had its negative effects. As the Center for Strategic Philanthropy outlined in Solving the Philanthropist’s Dilemma in 2021, philanthropy is not without its unintended consequences. Over time, it has become increasingly clear that by propping up solutions that treat symptoms, philanthropy overall has overlooked or maybe even ignored opportunities to focus on addressing root causes and instead, perpetuated flawed systems.

The push to apply business principles to giving placed too much burden on the nonprofit sector and too much power in the hands of the donor.  In other words, by setting top-down strategies and rigid success metrics, restricting funding, and requiring cumbersome reporting, we’ve likely limited philanthropy’s potential, rather than improved its efficacy.

The COVID-19 pandemic has prompted a much-needed correction, with more and more funders working to break the restricted funding habit, change funding strategies, and take time to understand challenges before imposing solutions.

Knowing what we know now, there is much that can be done to ensure giving is effective, and that communities are partners in strategic philanthropy. Many funders have started to chart a course that other donors can learn from, and follow.

  • Blue Meridian Partners – Funded by prominent institutional and individual donors, Blue Meridian provides planning and long-term technical assistance grants that allow organizations to scale their evidence-based programs. Intermediaries such as Blue Meridian offer the infrastructure for centralized and robust due diligence, which in turn, mobilize more philanthropic capital to support effective interventions.
  • The Milken-Motsepe Innovation Prize Program, administered by the Center for Strategic Philanthropy in partnership with the Motsepe Foundation, seeks to generate technological solutions that accelerate progress towards the UN Sustainable Development Goals (SDGs), particularly in Africa. Well-designed prize competitions identify the problems but not solutions, thus creating the conditions for dreamers and builders to contribute their ideas and plans to transform the status quo. In this way, prize philanthropy elevates the leaders and perspectives of those on the ground, and moves agency beyond the prize sponsor, especially since most competition winners are selected via an independent panel of experts.
  • Marguerite Casey Foundation – This institutional foundation makes impact investments and unrestricted  grant funding to support locally based community organizing efforts with the intention of sustainably shifting power imbalances for the long term. Reimagining grant making by putting trust in people and organizations close to the problem has been one of the most effective strategies for achieving long-term change. The Foundation’s investments in grassroots movements and their leaders serve to lay the foundation for systemic social and economic change by focusing on root causes, rather than the symptoms of a problem.
  • Schmidt Futures – A philanthropic arm of Eric and Wendy Schmidt, this organization invests in and mobilizes undiscovered talent to thoughtfully harness technology to address problems across science and society. Supporting capacity-building is often overlooked by funders, so Schmidt Futures’ emphasis in this area is particularly strategic, and necessary.
  • Ford Foundation – Rooted in an equity focus, the Ford Foundation is committed to partnering with grantees and engaging in trust-based philanthropy to support, learn, and share methods that reduce inequality. It is not often that an established institutional foundation reimagines its entire operational framework – particularly with such transparency. The rest of the sector is benefiting from the organization’s process and published insights.

Strategic philanthropy can unleash innovative work, empower leaders and communities, and allow social change to flourish. As we embark on a new year, we must let the old ways of giving go, and instead embrace the positive aspects of strategic philanthropy that have emerged.