Emirates Foundation CEO blogs on venture philanthropy in development

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How is philanthropy changing?

Emirates Foundation CEO Clare Woodcraft-Scott has blogged for the Global Partnership on the gradual but important paradigm shift in her organisation and others.

Woodcraft, who oversaw her foundation’s transition from grant-making to venture philanthropy, describes “new structural trends, a new appreciation of learning through failure and a healthy opening up to the idea of collaboration” in her article now published on http://devcooperation.org.

In light of her observation of “the difficulty of creating sustainable social value through short-term interventions”, she describes philanthropy’s shift from a ‘spray and pray’ approach of multiple short-term grants toward long-term social investments and increasing focus on specific issues.

The Emirates Foundation is a case in point – moving from a large portfolio on many themes to targeting youth development.

“At Emirates Foundation we publicly acknowledge that the sheer size and diversity of our earlier portfolio was significantly diluting our impact and ability to create sustainable outcomes. With our new operational Venture Philanthropy model, where we focus on only one area, we are already seeing a difference in terms of measurable outputs – over 40,000 youth in the UAE have been impacted by our programmes,” she writes.

While calling for use of new financial instruments, such as Social Impact Bonds, Woodcraft also stresses the importance of accountability and transparency in foundations’ work for more effective development co-operation as lying “at the heart of this new sectoral change.”

Business principles such as efficiency, accountability and value creation with the traditional focus of social organisations is key to this kind of venture philanthropy – Woodcraft writes. Tracking outputs and outcomes rather than inputs can also encourage foundations to create more and better value. It is an approach that resonates strongly with the Global Partnership principles of focus on results, transparency and accountability.

How can this new philanthropic paradigm help in the achievement of the Millennium Development Goals and the Sustainable Development Goals that are to follow them in 2015?

Read more at http://devcooperation.org.

Philanthropy and development – A new paradigm?  

Philanthropy is changing. Not in any radical or revolutionary way, but slowly, oil-tanker style. It is moving at a slow but steady pace, creating new structural trends, a new appreciation of learning through failure and a healthy opening up to the idea of collaboration. Some might call it a paradigm shift.

Previously, foundations generally implemented time-bound, short-term projects, limited to a 12, 18 or 24 month timeframe, but today’s philanthropists are thinking much more systemically. The lexicon is changing as talk of long-term social investment programmes and inter-generational change gains traction. The difficulty of creating sustainable social value through short-term interventions is being recognised.

Where once foundations took a ‘spray and pray’ or ‘scatter-gun’ approach disbursing multiple short-term grants to multiple third parties in multiple different sectors, today they increasingly focus. Historically, when the remit of foundations grew, too often it diluted their impact. Today, foundations are much more targeted and in some cases focusing on just a single issue with a view to eradicating it permanently, rather than simply mitigating it temporarily.

Our model at Emirates Foundation is a case in point. From working with multiple different categories of beneficiaries and multiple themes with a large grant making portfolio, we now work on only one area – youth development. Moreover, rather than issue hundreds of grants each year to multiple third parties, we now run and manage our own programmes in-house.

While grant making is still the norm, new financial instruments and new operational models are emerging. Social impact bonds are being watched closely by governments, social investors and even conventional ones. These performance-based investments pay out when successful social outcomes result in public sector savings. They are driving a new way of thinking about how social finance should be structured.

Emirates2jpgWith our new operational Venture Philanthropy model, where we focus on only one area, we are already seeing a difference in terms of measurable outputs – over 40,000 youth in the UAE have been impacted by our programmes.

While often rightly reiterating the criticality of grants, foundations are now also looking at loan guarantees, debt and equity. As the world’s ‘wicked problems’ persist in their intractability, new financial instruments are needed to help scale up solutions. Community-specific innovation is not enough. The world needs large-scale initiatives to address large-scale problems. Extreme poverty still affects over one billion people on the planet despite over ten years of Millennium Development Goals (MDGs).

Measurement is also coming to the fore. In the past, foundations tended to track inputs – the number of grants processed, the number of projects completed and the total spend. Today, they increasingly look at outputs and outcomes. What was the real impact of their efforts and did it last? Impact investors go further, demanding a tangible social (and often financial) return on their investments, forcing philanthropists to focus on real value creation rather than simply delivery and execution.

New entrepreneurial ways of thinking are giving rise to new mechanisms of delivery with social enterprises at the fore. This hybrid model combines business principles such as efficiency, accountability and value creation with the traditional focus of social organisations. Social enterprise is also capturing the imagination of younger philanthropists disillusioned with the pure profit mantra of big business but convinced that philanthropy should be more results-driven and more transparent.

Where once money was a key component, philanthropists now look to combine financial resources with technical ones. Many foundations are now very ‘hands-on’ in terms of delivery and much less comfortable with a transactional ‘cheque-writing’ model. Traditional dependence on single donors is being replaced by a drive for financial viability as a critical component of achieving long-term sustainable results.

Where previously foundations may have kept their internal learning a closely guarded secret, today they are more inclined to share knowledge and insights. Logical frameworks and ongoing comprehensive evaluation are now seen as critical tools of improving internal learning and performance management. Foundations once averse to sharing ‘failure’ are now embracing it as a means of building capacity and credibility among investors, as a sign of track record and experience.

These trends have not yet been institutionalised across the sector but are more and more prevalent in its literature, networks and events. Emirates Foundation’s annual philanthropy summit was dedicated entirely to this topic last year, themed ‘Philanthropy in Transition’. The OECD-hosted foundation network, NetFWD recently published a report reiterating these points. Entitled Venture Philanthropy In Development: Dynamics, Challenges And Lessons In The Search For Greater Impact,the report documents the transition of four global foundations (Rockefeller, Shell, Lundin and Emirates) from traditional philanthropy to Venture Philanthropy (also known as Strategic, Catalytic, or Enterprise-based Philanthropy). All four changed their business model with a view to deploying philanthropic capital more efficiently and creating more measureable social value.

Not all are convinced of the new direction. Some traditionalists still challenge the idea of applying business acumen to creating social value. Even Boards are sometimes averse to applying the same principles of effectiveness and efficiency to a foundation that they would to a commercial entity. Such reticence continues to stymie the performance of the sector, allowing foundations to continue to report input rather than output and to gloss over things that didn’t work. However, the tide is turning as more and more philanthropists look for new models and new ways of delivering more impact and recognise that learning through failure is a powerful tool for driving greater accountability.

At Emirates Foundation we publicly acknowledge that the sheer size and diversity of our earlier portfolio was significantly diluting our impact and ability to create sustainable outcomes. With our new operational Venture Philanthropy model, where we focus on only one area, we are already seeing a difference in terms of measurable outputs – over 40,000 youth in the UAE have been impacted by our programmes.

Accountability and transparency lie at the heart of this new sectoral change. A step-change in both is moving philanthropy very much in line with global trends and the global demands of a twenty-first century where connectivity and a digital revolution kill opacity. It could also render the social impact of philanthropy much greater and more sustainable. Ultimately, foundations have a significant and growing potential to make a very strong contribution to some of the world’s most pressing social challenges. The sheer size of the philanthropic capital market means it can’t be ignored. With a new philanthropic paradigm that embraces efficiency and openness, perhaps emulated to some extent by the formal development sector itself, the MDGs and their reinvention, the Sustainable Development Goals that will replace them in 2015, might seem much easier to achieve.


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Clare Woodcraft-Scott is CEO of Emirates Foundation and oversaw its transition from grant-making to venture philanthropy. She has 20 years’ experience in sustainable socio-economic development as a practitioner, journalist and corporate executive. She was formerly Deputy Director of Shell Foundation which invests in social enterprises and earlier ran Shell’s social investment portfolio in the Middle East and North Africa. She previously headed Visa International’s public affairs in emerging markets and worked in Palestine for various development agencies.

 

Images used courtesy of the Emirates Foundation.

Foundations and the Global Partnership — part and yet ‘apart’

Last month in Mexico City, I joined more than 1,500 representatives of governments, multilateral agencies, civil society organisations, private sector companies and a few philanthropic foundations at the anxiously anticipated first high-level meeting of the Global Partnership for Effective Development Co-operation.

The partnership aims to bring state and non-state actors together to eradicate poverty through better co-operation. In development shorthand, its provenance comes via commitments made in Paris, Accra and most recently the aid effectiveness high watermark in Busan, South Korea in 2011.

Early aspirations for the Mexico meeting concentrated on pushing the partnership out of Busan’s long shadow and into the post-2015 spotlight — offering a confident aid effectiveness model with real political momentum for the new development world order.

Though this initial ambition seemed to temper in the weeks and days leading up to the Global Partnership conference itself — indeed, save for a Ban Ki-moon cameo, Mexico City felt more “conference” than “summit” — there were moments of clarity and optimism about exactly what added value the Global Partnership brings to the global development dialogue.

A seat at the table

I would wager that a mutual ambivalence left the philanthropic community unnoticeably absent in Busan three years ago.

Mexico City, however, was different. With the help of netFWD — a membership network of foundations housed by the Organisation for Economic Co-operation and Development — in navigating the layers of multilateral development bureaucracy, foundations were invited onto the Global Partnership Steering Committee and given a literal seat at the table. Indeed, Stars Foundation was the first philanthropic organisation to fill the seat.

But the gospel of aid processes like this one — transparency, accountability and alignment — is unfamiliar to most foundations. Indeed, we are a bafflingly heterogeneous sector, eschewing standardisation and fiercely guarding our independence.

Such characteristics of modern philanthropy raised questions about whether or not foundations could ever play a meaningful role in the choreographed, norm-based development co-operation the Global Partnership aims to roll out. Then again, similar tensions produced much sharper edges in the move to endorse the private sector’s role in the Global Partnership’s co-operation experiment.

And whereas Mexico failed to clarify any definitive standards for private sector to engage in aid, foundations themselves offered up a set of guidelines that would encourage them to comply with more traditional development principles.

Introducing guidelines

Presented as a framework for more strategic foundation involvement in international development processes — particularly in our interactions with governments — the Guidelines for Effective Philanthropic Engagement were developed under the leadership of netFWD, with support from Worldwide Initiatives for Grantmaker Support — known as WINGS, the European Foundation Centre, the U.N. Development Programme, the Rockefeller Foundation and colleagues at Stars.

Offering a way for philanthropy to engage in greater dialogue, reduce opacity of organisation’s activities, share lessons and partner more effectively, the guidelines target the government-foundation relationship because we recognise that state actors set the policy environment we and our partners operate in, and because they remain best placed to ensure long-term sustainability and scale of the impact of our efforts.

The guidelines were introduced in a dedicated focus session on the first day of the Mexico forum, where my peers on the panel reflected on both the substance of the document and the symbolism of foundations being brought into the fold.

Overwhelmingly, they saw the guidelines as the right “mood music” to bring together foundations and governments to foster mutual understanding and — most importantly — to focus on comparative advantages.

CrookquoteCo-operation is not easy — especially among unfamiliar partners — and transaction costs are high. But this kind of multi-stakeholder approach is the only chance we have to meet the next set of global development targets.

 

Complementarity, complexity

The privileges enjoyed by philanthropic organisations are many — there is less handwringing over financial concerns, we are meant to have a larger appetite for risk, are capable of longer-term as well as swifter interventions, are allowed to reinvent ourselves almost at a whim and to “fail” in the name of experimentation, learning and innovation.

But in order to actually accelerate development practice, foundations must strategically leverage these assets while allowing partners — civil society organisations, government actors and even the private sector — to leverage theirs.

This will be a challenge. Co-operation is not easy — especially among unfamiliar partners — and transaction costs are high. But this kind of multi-stakeholder approach is the only chance we have to meet the next set of global development targets.

The guidelines may fall short in some places — the language has been criticised for being at once too vague for some and too prescriptive for others — but their very existence echoes a critical insight of the entire Global Partnership project itself: We can do more if we do more together.

Building bridges

The spirit and way in which foundations have entered this arena is a model for how the Global Partnership’s multiple stakeholders should engage with each other moving forward.

Foundations recognise their differences — with each other, with other development actors — but have chosen to focus on what we have in common, using the guidelines to reflect on our collective practice and identify the most salient areas in which we can modify behavior to fit into the wider development ecosystem.

Those signing up to the partnership must now embrace the common agenda rather than retreating to more parochial ones.

Of course, this is easier said than done. The asymmetry in power dynamics at the forum was palpable — technical discussions from the podium inevitably giving way to discussions of politics and power from the floor, with foundations sitting, rather uncomfortably at times, in the middle.

Steering the ship

The guidelines will now focus on specific country pilots. We expect the first to take place in Mexico, a fitting move with Mexico as one of the three new Global Partnership co-chairs. We urge the steering committee to do the same by employing a bit of nominative determinism to start steering the partnership toward the tangible.

There is strength in the Global Partnership’s diversity, but  and I know this sounds rich coming from the “new kids on the block”  inclusivity isn’t about the process or how the seats are arranged at the table. It’s about the outcome.

The real test of the Global Partnership will be whether we can truly measure collective good out of the country-level experiments that are now expected to take shape.


DavidCrookBioDavid Crook is development director at the Stars Foundation in London. With 20 years experience in the nonprofit sector, Crook is one of the principle architects of the Guidelines for Effective Philanthropic Engagement, and recently brought together several top foundations to pilot an advocacy campaign in support of effective local CSOs.