Examining the trend of trust-based philanthropy

There’s been a lot of talk recently about a nonprofit grantmaking trend that emphasizes greater collaboration, transparency, and flexibility between donors and grantees. Trust-based philanthropy gained traction in 2020 when foundations had to adapt to the rapidly changing needs of their grantees due to the COVID-19 pandemic and an increased national focus on supporting marginalized communities. MacKenzie Scott's Yield Giving is a well-known example of this model, making headlines for providing large-scale unrestricted grants to hundreds of nonprofits using a streamlined application process. Above all, trust-based philanthropy prioritizes the needs and expertise of grantees.

Understanding trust-based philanthropy: unrestricted grants

One key principle of trust-based philanthropy is unrestricted grants (often multi-year), which enable nonprofits to allocate funds according to their most urgent needs rather than being tied to specific projects. According to a report published by the Center for Effective Philanthropy, 57% of foundations increased their unrestricted support during the pandemic. Cause IQ set out to see if we could spot this trend in the data.

The analysis below is based on e-filed Form 990-PF data between 2018 and 2022. We examined the grantmaking activity for 50 private foundations with assets above $100 million, looking for those with grant descriptions containing the keywords “unrestricted” or “general support”.

As you can see above, about half of the foundations from our group of 50 made unrestricted / general support grants each year. Interestingly, this didn't change much from 2018 and 2022.

However, the number of unrestricted grants made increased steadily each year, with a significant jump from 2,283 in 2020 to 3,253 in 2021, and further to 3,990 in 2022. This could mean that while not all private foundations have jumped on this trend, those that have continue to expand their participation with more unrestricted grants given out each year.

Other aspects of trust-based philanthropy

There are a few other important aims of trust-based philanthropy that separate it from the traditional grantmaking process:

• Streamlined paperwork: Reducing the administrative burden on grantees by simplifying application and reporting processes.
• Transparent communication: Fostering open, honest, and transparent communication between funders and grantees. This helps build a relationship based on trust and mutual understanding.
• Responsiveness: Being flexible and responsive to the changing needs of grantees, and adapting funding strategies to better support their work as circumstances evolve.
• Equity and Inclusion: Prioritizing funding for organizations led by and serving marginalized communities.

Challenges and considerations

While the benefits are clear, there are challenges associated with trust-based philanthropy. Funders must be willing to give up some control and adopt more of a partnership mindset. There are also concerns about accountability, although foundations are implementing transparency measures to build trust with grantees.

Conclusion

The trend towards more flexible, unrestricted, and trust-based funding does appear to be reshaping the nonprofit sector, with more of these grants being awarded each year. By providing organizations with autonomy and fostering relationships based on mutual respect, foundations have the potential to create more impactful change for nonprofits and the communities they support. For both nonprofits seeking grants and foundations themselves, this is a trend worth watching.