The rise of collaborative giving

This article was originally published on the Financial Times website.

The world today seems more complex and challenging than ever before. The decade-long period of prosperity that produced a boom in billionaires has given way to inflation, market instability and geopolitical tensions marked by armed conflict, while the economies of many developing countries have deteriorated since the Covid-19 pandemic, which saw the number of people living in extreme poverty jump by 70mn to more than 700mn, according to the World Bank.

For the many high-net-worth individuals (HNWIs), foundations and family offices (private wealth-management advisory firms serving ultra-high-net-worth individuals) that want to support a more equitable world for future generations, all this begs a fundamental question: what is the best way of ensuring that philanthropic efforts are as effective as possible at a time when they are most needed?

The answer to that question is collaborative giving, a philanthropic approach that brings givers together and directs their combined resources to communities and organizations that are accelerating progress on complex issues, from eradicating tropical diseases and childhood poverty to advancing gender equality.

“The power of collaboratives lies in their ability to bring donors with a shared interest together so they can make bigger bets, invest in bolder solutions and connect with the experts who know how to make lasting change on some of the toughest challenges our society faces,” says Jennifer Alcorn, Deputy Director, Philanthropic Partnerships at the Bill & Melinda Gates Foundation. ;

Tapping into existing structures

Collaboratives are one of the fastest-growing drivers of philanthropy today, attracting HNWIs to high-impact investing as a way to change the world. Collaboratives have already channeled more than $20bn to social causes, with some distributing upwards of $50mn a year to non-profit grantees – a show of their potential to do much more. Most are based in the US and Europe but their popularity is spreading to India, China, parts of Africa and beyond.

One clear advantage of collaboratives is that they leverage existing organizational structures and expertise, offering both HNWIs with years of philanthropic experience and everyday donors a way to diversify their giving portfolios and a more efficient method of increasing impact.

The public charity Gates Philanthropy Partners, for example, accepts funding from donors of all levels of wealth and aligns that funding with the expert-backed grants of the Gates Foundation. The foundation’s expertise and operations provide assurance to donors that their funds are spent well and in the areas of greatest need.

For HNWIs, donating through these collaboratives reduces administrative costs and ensures that they do not have to reinvent the wheel each time they want to contribute to a cause. This is a particularly important point for those new to philanthropy.

“Many wealthy individuals and families have become philanthropists without setting up foundations that have large staffs,” a recent report by The Bridgespan Group, a global nonprofit that advises and collaborates with social-change leaders, points out. “Philanthropic giving through collaboratives already primed for grant-making enables this lean approach.”

Collaboratives are powerful vehicles when it comes to humanity’s most-pressing issues, which donors are increasingly focused on largely thanks to the UN’s Sustainable Development Goals (SDGs). Zero Hunger and Climate Action, to name just two SDGs, are too big and complex for HNWIs or organizations to tackle alone. Pooling funds through collaboration helps improve outcomes while providing a transparent channel through which to contribute to global themes.

Improved transparency and reporting

Inevitably, tackling big themes involves donating to projects where it can be difficult to monitor management and outcomes. Collaborative giving can provide greater peace of mind that funds are being directed toward their intended use. It can also give donors much better reporting, monitoring and evaluation thanks to its characteristic transparency.

For grantees, meanwhile, collaboratives offer greater efficiency by reducing the need to report results individually to multiple funders, which takes time and eats into limited resources.

Alcorn says there is another reason for giving through collaboratives – the ability to share and learn. “Collaboratives can unlock knowledge, skills and relationships that help focus donors’ attentions on impactful organizations and causes that more traditional, go-it-alone philanthropic approaches sometimes overlook,” she says. “They offer donors and grantees the opportunity to join a community of shared learning and action that is not always present elsewhere in the sector.”             

The result is a powerful and agile mechanism for giving that provides a new way to help solve age-old problems.

This content was paid for and produced by the Bill & Melinda Gates Foundation in partnership with the Commercial Department of the Financial Times.