Arquivo da tag: trust based philanthropy

Philanthropic Funds: Definitions, types and how to differentiate them

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*By Letícia dos Santos, project analyst at IDIS

The effort to create a more culturally, socially, and institutionally favorable and fertile environment for philanthropy involves creating structures and mechanisms that can channel philanthropic capital, answering to the motivations and objectives of social investors, while strengthening causes and organizations of public interest.

This is the case of philanthropic funds, instruments created for raising and distributing resources which have increasingly become an alternative for companies, civil society and public institutions that seek to act quickly and robustly to minimize damage in emergency situations, unite efforts and enable social agendas, or ensure the sustainability of institutions and causes in a long-lasting way.

Philanthropic funds are created to receive donations, which may come from different sources and which are destined to provide sustainability to causes or to specific organizations. The basic foundation of philanthropic funds is to, on one hand, ensure reliability in the management and resource allocation process and, on the other hand, create, strengthen or diversify the source of resources for socio-environmental ends. Despite this general basis, they can take on different shapes and functions depending on its goals, which may hinder the understanding of what is a philanthropic fund and its different types.

In this article, we propose the classification of philanthropic funds based on their timeframe, dividing them into three types: temporary funds, permanent or continuous funds and endowment funds.

 

Temporary funds

 

In general, temporary funds are created to respond to urgent socio-environmental situations. They are designed to act during a determined time frame, aim to answer emergency demands and normally operate as wide fundraising mechanisms as a way to provide an immediate and significant response. The creators of these types of funds don’t always have a direct connection with the supported cause or institution but possess strong leadership and great mobilization capacity. 

Examples of temporary funds are those created during the COVID-19 pandemic, such as the Health Emergency Fund. Created by IDIS, Movimento Bem Maior and BSocial, in 2020, the initiative aimed to strengthen the public health sector’s ability to fight the coronavirus. In seven months, the fund raised BRL 40,4 million (equivalent to about USD 8 million in that year) which were designated to the purchasing of hospital equipment, Personal Protective Equipment (PPE) for health professionals, medications and COVID-19 tests. (To know more, check out the Health Emergency Fund report and how to create an Emergency Fund, available only in Portuguese). 

Temporary funds have also been used to minimize negative impacts caused by climate emergencies. The examples include funds created to support and reconstruct the communities impacted by the floods that hit Rio Grande do Sul – a Brazilian state – in May of 2024, leaving 497 municipalities impacted and 150,000 people displaced. One of them, called RegeneraRS, created by Instituto Helda Gerdau in partnership with Din4mo Lab, despite its temporary nature, aims to support the development of long-term solutions to strengthen the local communities. 

Another example is Together for Health, an initiative of the National Bank for Economic and Social Development (BNDES), managed by IDIS, with the prospect of raising and distributing BRL 200 million until 2026 (approximately, USD$ 32,9 million). The fund acts to expand access to healthcare in the north and northeast regions of Brazil through notices and structured promotion. To that end, it operates through a matchfunding system, in which for every BRL donated by a supporter, BNDES will donate another BRL to the fund.

 

Permanent or continuous funds

 

The second type of funds are the permanent ones which aim to enable and strengthen a cause or institution continuously. Creators of these types of funds are usually closer related or aligned with the cause in question. Although these causes may be just as complex as those that are supported by temporary funds, they are seen as less urgent. Examples include matters such as equity or equality, democracy and environmental preservation. 

These funds are instrumental in mobilizing a large number of grantmakers or organizations (them being formally recognized legally or not, such as social movements) around the promotion of causes. When it comes to permanent funds, ELAS+, Agbara Fund and Pacto pela Democracia are examples of those funds created by civil society initiatives and which are dedicated to social justice. 

As for corporate social investment initiatives, the Fundo de Investimento Social Privado pelo Fim das Violências Contra Mulheres e Meninas from Avon Institute in collaboration with Accor, represents the transition from a fund initially conceived as a temporary one during the COVID-19 pandemic – when domestic violence against girls and women increased – and which became permanent afterward. It became a strategic instrument for the Institute due to its promotion of the defense of women’s fundamental rights. 

Not only in temporary but also permanent funds, the resources that compose them are totally distributed to their own philanthropic purposes. This occurs through a continuous flow of financial and programmatic management, with the aim of ensuring the total allocation of the funds raised.

 

Endowment funds 

 

Endowment funds are destined to promote long-term financial sustainability for causes and institutions supported. Unlike temporary and permanent philanthropic funds, its operations are not supported by the use of the funds raised, but instead by the management of these resources to generate earnings which will then be put towards the philanthropic activities of the fund. The goal is to ensure the preservation of the retained wealth to allow periodic withdrawals to support the public interest causes or institutions. 

In Brazil, this mechanism gained strength especially since 2019, with the enactment of the Endowment Fund Law (Law 13,800/2019), which, as well as creating an institutional and safe environment for its operation, brought visibility for the matter and its importance. In addition, the law also regulated the partnership between the endowment managing organizations and the supported institutions who may be private or public entities. 

Major Brazilian endowment funds were founded before the creation of the law, such as the ones from Bradesco Foundation and Fundação Maria Cecilia Souto Vidigal. These funds, created with the goal of building the private social investor’s legacy, are more than 50 years old. 

Among other reasons to create an endowment fund are also the promotion of more independence and operational stability for organizations in the long-term, which is the case with the Promoting Philanthropy Endowment, created by IDIS to expand the impact of strategic philanthropy and so, promoting more positive social transformations. 

When it comes to public institutions, many of the biggest state and federal Brazilian universities have been building their own endowment funds with the goal to promote even greater academic excellence through university extension projects, support for students sustainability in classes and other initiatives, such as the USP Endowment Fund. 

Although philanthropic endowment funds can be divided into different types, in reality, many organizations use a combination of permanent and long-lasting funds for their projects and operations, meanwhile, temporary funds can, eventually, transform into permanent or long-lasting ones. 

Therefore, the first thing to be determined when structuring a fund is its purpose: what is the goal for the mobilized resources? From this definition, one is able to outline the possible management and allocation of these resources to achieve the established philanthropic goal, comprehending the origins of those resources and the stakeholders involved in this arrangement.

Listening and collaboration: creating systemic changes

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By Joana Noffs, project analyst at IDIS

Life stories and experiences trace paths that can help us face complex collective challenges. When it comes to philanthropy, one of the knots faced is the concentration of the resources and the power of decision making in the hands of few. What can we do so that more voices are heard? Should the ones who donate talk about the practice of philanthropy?

These where some of the questions that interlaced the session ‘In conversation with…’ at the Brazilian Philanthropy Forum 2024. Paula Fabiani, CEO of IDIS, invited three women whose philanthropic practices have standout in terms of innovation and collaboration to share a little bit about their paths: Cristiane Sultani, founder of Beja Institute; Ticiana Rolim, founder of Somos Um; and Marlene Engelhorn cofounder of Taxmenow, a movement that advocates for the taxation of large fortunes, who participated through video.

The conversation began with Marlene’s deposition, which brought some provocations that helped shape the debate. A multimillion-dollar heiress, the young Austrian chose to donate the biggest part of the money she received in the “birth lottery”. The decision came after she questioned herself how she could redistribute her wealth, once her country does not tax inheritances – what, according to her, would be the democratic and transparent way of proceeding. The solution she found was to create a council with the participation of 50 people, chosen randomly at first, and then by representative criteria, who were responsible to collectively allocate 25 million euros to chosen causes.

 

See Marlene’s entire deposition

 

In her speech, Marlene highlighted the need for long-term changes so that the people being currently supported by the donations can stop depending on the power and wealth holders to establish a collective decision process to allocate the resources.

“Ask the people that are affected by the decision that I take, to be the ones to take the decision. (…) We don’t have to remain classical philanthropists. We can redistribute power, we can step back as wealth holders, learn to listen and become one of many, such as it should be in a democracy”, she states.

Reinforcing the importance of acting collectively and hearing different actors, Cristiane Sultani talked about how, in her philanthropic path, meeting, listening and collaborating with people were the key aspects that transformed her journey in the field. Since she founded Beja Institute, in 2021, she has tried ‘to philanthrope’, as she likes to say, in a strategic and collaborative way, although she recognizes that she is not always able to do so. The hearing of the sector’s demands, researching global philanthropic tendencies and inspirational success stories helped her along her own process. “I chose to to help the philanthropic sector through a mindset change”, she says.

Cristiane also uses her time, influence and abilities to support advocacy actions that favor the regulations for philanthropy in Brazil, as well as supporting causes such as racial and climatic justice. She states that the process of hearing throughout the articulation with different actors is a key element for the development of trust.

For Ticiana, the transition from a position at the family business to philanthropy was marked by a constant inconformity with social inequalities and the place she occupied. “I made myself this brave question: what is my role in the world? What can I do with these privileges? How will I be an instrument? How can I use this to serve society?”. Influenced by economist and Nobel Peace Prize winner, Muhammad Yunus, she chose social business as the way to fight against poverty, creating Somos Um, an impact business coordinator. This choice also considered the potential of countless existing projects, with a focus on collaboration.

“Nothing about us without us”. This is a motto used by the movements fighting for the rights of people with disabilities, which Ticiana uses to illustrate the importance of including those affected by decisions in the co-creation of solutions and joint action, also aiming to scale its impact. “From this place of privilege, we sometimes arrive in vulnerable territories or in some project full of certainties. And today I say that is arrogant and ignorant on our part.”

Another challenge that Ticiana, from Ceará – a northeast Brazilian state – set to herself was, on one hand, to bring the northeast of Brazil to the center of the philanthropic debate and, on the other hand, to bring the debate about systemic philanthropy to the northeast of Brazil.

 

“I understood that I can be a bridge, inspiring people in the northeast, where inequality levels are very high, and they many are not questioning it. They are doing charity work, which is important, is urgent, is necessary, but will not solve the social problem because it does not bring social justice, and then we preserve this place of power, which is not ideal, that we want to change and let people free, with the power of choosing for themselves”.

 

Ticiana cofounded Zunne, which drives social impact businesses in the North and Northeast, in partnership with TRÊ and Yunus Social Business Brazil.

 

Watch the entire session 

 

 

In addition to being essential to listen to those affected by the decisions, discussing philanthropy in an open and accessible way was also considered a crucial aspect. Ticiana highlights her role in inspiring and mobilizing people by sharing her experiences and initiatives. Cristiane emphasized the importance of openly discussing issues such as racial equity, promoting transparent narratives to engage more people in the causes she embraces. Marlene, assertive in her positions, is one of the figures who brings to light in public debate criticisms of distributive models that exacerbate and sustain wealth inequalities, as well as environmental, gender and racial inequalities. The stories of the three philanthropists highlight the need for cocreation, participation, and collaboration to produce lasting changes.

 

Photos by: André Porto and Caio Graça/IDIS.

Responsibility and Trust: Get to Know Trust-Based Philanthropy

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By Aline Herrera, Letícia dos Santos, and Luiza Helena, members of the consultancy team at IDIS

Brazilian social investors who primarily focus on financing projects and initiatives of third parties represent less than 25% among institutes, foundations, and companies, according to the latest GIFE Census. Among social investors considered as hybrids – that is, those who both execute and finance projects (41% of the survey sample), the majority – about 55% – have a profile more oriented towards project execution than financing.

The volume of resources transferred to third parties in 2022 accounted for 37% of the total private social investment volume, equivalent to R$1.8 billion. More than half of these resources were received by civil society organizations (CSOs), chosen mainly for their reliability, transparency, and expertise in their areas of operation. When reporting the difficulties in investing in CSOs, social investors point to challenges in monitoring and evaluating initiatives, as well as the fragility in management or low capacity of CSOs seeking support.

On the other hand, the Peripheries and Philanthropy research: The barriers to accessing resources in Brazil, available in portuguese, conducted by the PIPA Institute in partnership with the Nu Institute, shows that 95% of respondents, responsible for implementing socio-environmental initiatives in the periphery, reported difficulties in accessing financing. These obstacles imposed on civil society organizations lead us to the following question: how can private social investment go further in addressing social inequalities?

One of the answers already on the radar of those considering the limits and advancements in the philanthropy field is simple: trust. In the text ‘Deepening the conversation about the importance of trust’, activist Joana Mortari indicates that there is recognition within the sector of the need to develop trust; however, it is necessary to move on to the next step, to develop the exercise of trust.

Thus, this text brings reflections on the role of private social investors, especially as grantmakers – that is, those who provide resources to third parties – in this path of more innovative and horizontal relationships, based on the principles of Trust-Based Philanthropy.

The Context of Trust-Based Philanthropy

 

“We believe that teams with frontline experience of challenges will know best how to put the money to good use”.

Mackenzie Scott

The highlighted excerpt is taken from a reflection by philanthropist Mackenzie Scott, following yet another of her billion-dollar donations. The American, who owns 4% of Amazon’s shares, is known for making substantial and unrestricted donations to nonprofit organizations around the world, totaling over $16.5 billion.

This model of donation began to strengthen in 2020, during the pandemic, for emergency relief funds aimed at supporting victims and extended to civil society organizations that work for communities, which historically face more difficulties in accessing financial resources.

The pandemic laid bare (not only for Mackenzie Scott) the need for philanthropic action worldwide, especially in the face of the numerous scenarios of calamity and social urgencies triggered by the spread of Covid-19. The scenario catalyzed the discussion of the need for simplified donation to gain even more strength, seeking to redesign the relationships and bonds between organizations and investors.

According to the Trust-Based Philanthropy: Self-Reflection Tool proposed by GIFE, the adoption of Trust-Based Philanthropy values ​​starts with an internal analysis around four central points: the investor’s organizational culture, their decision-making processes, the structures through which they operate, and, finally, their practices. Therefore, we will discuss paths to begin this journey towards trust.

 

How Trust-Based Philanthropy Can Change the Game

To change the rules of the game and make philanthropy a more democratic and inviting action, Trust-Based Philanthropy redefines positions, bringing greater parity between the roles of the actors involved in the fight for social equity.

The most widespread practices of this grantmaking modality consist of promoting a ‘trust-based donation’ (not tied to specific projects), unrestricted (without budget allocation restrictions), and multi-year. At the grassroots level, practicing philanthropy based on trust requires an exercise of active listening to the needs of the beneficiaries. Values ​​such as flexibility and transparency are essential to ensure that demands and limitations are understood from both sides of the relationship. Here, it also involves building closer and more humanized relationships between donor and beneficiary, simplifying workflows and starting from the premise of Trust-Based Philanthropy that there should be a shift in the relationship with the funder, moving from a position of ‘boss’ to being a partner. Thus, a good alternative involves creating feedback mechanisms, as 67% of donation-receiving organizations report that even if this practice occurs, it is not institutionalized.

Another possible action is not restricting the donated resource. It is common for the transfer of resources to be strictly directed towards costs directly related to the project, without considering the sustainability and structuring of the organization that executes it. In this sense, thinking about a free and unrestricted donation ensures autonomy for organizations to manage their resources based on what they identify as most critical, taking into account their survival, project expansion, and scalability. Here, it is also the responsibility of donors to proactively understand the organization’s priorities and possible additional support opportunities.

Also for this purpose, a good practice is the promotion of technical training, provided voluntarily and free of charge, for supported organizations, guiding them on tools that can assist in project management and continuity, such as Theory of Change and indicators. Also, according to the Peripheries and Philanthropy research by the PIPA Initiative, 95% of social organizations in peripheral territories indicated that they would like to receive training on financial and project management and believe that training impacts their ability to raise financial resources.

 

What are the challenges for this practice?

As pointed out by the Charities Aid Foundation in the World Giving Index 2023, strengthening a robust philanthropic ecosystem requires not only the adoption of good practices by governments and international funders but also ongoing work by civil society organizations regarding their governance and transparency to gain full public trust.

At this point, it is evident how the practice of trust-based philanthropy works in a two-way street, where both funders and organizations need to trust each other, as well as listen to the people and communities impacted. It is also essential for this practice that the donation-receiving organization is willing to share key information about its strategy and actions, thus ensuring horizontal and co-construction between the involved parties, both in receiving and transferring resources.

For many social investors, investing in organizations with their projects is still seen as a risk, whether due to lack of transparency or unfamiliarity with the trust-based methodology. In this sense, the growth of the practice is exponential: the more it is executed and publicized, the more widely diffused the methodology becomes, and the greater the tendency for adoption. Causes originating from social movements that already advocate for representation and equity are opening up frontiers in this modality, giving voice to marginalized groups and investing in funds with co-creation-based practices and trust-based practices, such as the Feminist Fos Fund (dedicated to gender issues) and The Black Fund (focused on racial issues).

 

Case Study: Chamex Institute and Transforming Territories

Although the grant call modality might not be the most suitable for these principles, organizations that want to start in this area, or those with lower institutional capacity to promote these systemic changes, can also join this movement through simpler actions in their existing resource allocation processes.

IDIS encourages its partners and clients to practice principles of trust-based philanthropy within their grantmaking practices. One of the funders that works with our consultancy team, the Chamex Institute, has been evolving each year in its approach to funded organizations. Since the first edition of the Citizenship Education Grant Call, the Institute values an open and direct relationship with its beneficiaries.

In addition to financial support, the five organizations awarded the grant call also undergo a Theory of Change workshop and indicator construction with IDIS’s expert team, ensuring that project monitoring is of quality, as well as strengthening its permanence and replicability. Last year, the 3rd Edition of the Citizenship Education Grant Call opened up space for up to 50% of the allocated resource to be used for personnel expenses (internal or outsourced) and up to 10% for administrative expenses (such as water, electricity, rent, and others), maintaining the guideline for this year’s edition.

As an additional action, finalist and awarded organizations are invited to join the Projects Portal, a showcase-style initiative designed to attract partners and publicize the social work developed.

Taking a step further, the Transforming Territories (TT) program, by IDIS in partnership with the Charles Stewart Mott Foundation, aims to support Community Foundations and Institutes (CFIs). These organizations work on strengthening a specific territory as bridges between local social organizations and initiatives, donors, civil society, and the government. In the Community Philanthropy modality, CFIs analyze the territory in which they are inserted comprehensively, having complete autonomy to allocate resources according to the needs and priorities of the region. Thus, financial transfers and technical support are directed more effectively towards local strengthening.

The great strength of the TT lies in its foundational values, which serve as pillars for trust-based philanthropy. Advocating for community protagonism, democratic values, transparency, sustainable practices, and networked actions promotes active engagement of local communities as drivers of regional development. This stimulates participatory processes, freedom of expression, and respect for diversity through collaborative initiatives aimed at raising awareness and caring for natural resources. All of this is complemented by an emphasis on transparent communication, encouraging the sharing of information and data dissemination.

This management model, combined with unrestricted and multi-year donations, establishes a relationship of trust between the donor (companies and partners supporting the TT) and the directly impacted organizations (CFIs). It is based on the principle that the action of CFIs can have a greater impact on the territory than verticalized direct donations. Additionally, the funding plays a role in strengthening the institutional development of CFIs, promoting these organizations in the Brazilian territory not only through financial resources but also through training and technical assistance.

Donations can be made by companies and philanthropists, adopting organizations or territories within the program. If you are interested, visit the website or contact IDIS.

 

The Change We Hope For

IDIS has been delving into these new philanthropy trends. The latest edition of Perspectives for Philanthropy in Brazil highlighted that support for the institutional strengthening of civil society organizations, from the standpoint of governance and transparency, can generate catalyzing changes towards higher levels of trust, in a virtuous circle.

Explore more case studies and get in touch to build these paths together.