Each year, foundations around the globe spend more than $150 billion to support grantees working across a vast array of programmes and focus areas. However, the massive social and economic disruption surrounding the 2020 global pandemic has caused philanthropic foundations to re-direct funding for emergency response and post-COVID-19 recovery. Dalberg’s new study, with input from over 80 leading global foundation leaders representing six continents shows the dynamics of this change to the social sector funding scene.
Understanding these spending changes is important; since, as in Nigeria, social sectors across the globe have been pivotal in supporting public interventions to help manage the social and economic impact of COVID-19 through the provision of medical equipment and services, expansion of public awareness campaigns, and distribution of palliatives. Further, some foundations and philanthropists in Nigeria have come together to coordinate their COVID-19 initiatives to drive impact at scale in various states and segments.
The key insights from Dalberg’s study are discussed below.
Insight 1: Most foundations have increased or are considering increasing their share of endowments disbursed in 2020 due to COVID-19 — though the impact of these funding increases on net philanthropic giving is not yet clear.
Given the impact of the market on total endowment size, the net COVID-19 impact on foundation giving, while likely positive, is not yet clear. Foundations will allot, on average, approximately 20 percent of their 2020 budget to COVID-19 response (weighted by annual budget size). Some will disperse more: 40 percent of foundations will distribute more than a third of their 2020 budget on the response, and nearly a fifth of foundations will allot more than 50 percent of their annual budget to COVID-19 response and recovery. This translates to approximately $2bn of planned giving for COVID-19 from our survey respondents alone.
If these figures are extrapolated to draw in the broader philanthropic sector, this could mean up to $30bn for COVID-19 response in 2020 relative to the USD 3.5bn already committed by foundations (including family, independent, and corporate foundations) in the first few months of the crisis.
Insight 2: In the near-term, foundations are prioritising sectors and areas that can directly mitigate the impacts of COVID-19, most notably health and economic support and recovery. At times, this occurs at the expense of sectors and issues that are seen as less urgent or have longer-term impact horizons.
Respondents are designating approximately 50 percent of their 2020 COVID-19 spending towards health. Notably, a quarter of these foundations, who have committed to investing in health in 2020, did not previously have a health focus in grant-making.
Foundations are focusing health spending on issues such as testing, PPE, vaccine development, and contact tracing in the short-term. Conversely, foundations signalled concern about potential declines in funding for other areas such as climate change mitigation and adaptation, conservation and animal rights, education, arts and culture, energy access, and financial inclusion that could see near-term de-prioritization or redirection of funding.
Insight 3: In the long-term, foundations feel the need to “build back stronger” and address underlying issues of inequity and social injustice.
Survey respondents reported that they recognise the glaring inequalities that are brought to light, and worsened, by the pandemic. This realisation is coupled with an increased awareness of the fragility of core systems such as public health infrastructure and socio-economic safety nets. Foundation leaders emphasise the need to start building resilience in core systems and planning for future shocks as they move beyond direct COVID-19 mitigation in 2020 and 2021. How much of this awareness translates into action for dismantling inequity, however, remains to be seen.
Insight 4: Foundations are particularly worried about grantee “mass-extinctions” and are drastically changing grant requirements and operating procedures to ensure the survival of grant recipients.
Widespread failures and bankruptcies are anticipated for organisations including small, community-based organizations, arts and culture organizations, and small and growing businesses. Many foundations are rapidly renegotiating grant milestones, objectives, and timelines. They are also providing technical assistance and top-up funding for grantees to shift programming and undertake COVID-19-related interventions.
For new grants, the urgency of funding needs and operational challenges have led many foundations to streamline the process of grant selection, funding disbursal, and reducing timelines for grant approval. They have also simplified grant applications and relaxed due diligence criteria to push out funds faster.
Finding the balance between supporting existing grantees and conceptualising new programmes is an acute challenge for foundations, with many swinging to the extreme of stopping new grants. The ability to make decisions about where to focus and whom to support has also emerged as a critical pain-point for foundations.
Insight 5: These changes and the crisis, offer an opportunity for foundation leaders to reflect on longer-term strategic questions that will shape the future of the philanthropic sector.
Foundation leaders are embracing the crisis as an opportunity to reflect on questions regarding philanthropy that were already being raised prior to COVID-19 but have now taken on new urgency. These questions include:
- Should foundations step into areas that are typically the purview of governments (such as public health infrastructure and safety nets), given their ability to be nimbler?
- Should foundations take on more politically charged issues that tackle the structural causes of inequality and exclusion?
Dalberg is partnering with additional regional philanthropy platforms to extend the survey to several thousand additional philanthropic organisations (e.g. Africa Philanthropy Forum and the Council on Foundations). The findings will be released in the coming months through a variety of online webinars, written communications, and regional philanthropy convenings.