Last month, we delved into "strategic philanthropy," where funds are allocated based on predefined goals and monitored outcomes. However, the philanthropic sector has recently undergone a transformative shift with the emergence of trust-based philanthropy. This innovative approach redefines the traditional donor-recipient relationship, placing a strong emphasis on mutual respect, transparency, and long-term collaboration. In a world grappling with complex challenges, trust-based philanthropy presents a more dynamic, equitable, and impactful framework for addressing societal needs. Interestingly, these two philanthropic philosophies may share more common ground than initially apparent. As Faella and Robertson (2024) note, "[u]nrestricted support for organizations is strategic because the need to pivot is the norm rather than the exception."

Understanding Trust-Based Philanthropy

[N]onprofits’ missions are undermined when they spend most of their time meeting funders’ demands. (Salehi, 2024)

The shift toward a more trust-based approach to philanthropy began in earnest in 2020, driven by the COVID-19 pandemic, political upheaval in the United States, and global movements for racial justice. Trust-based philanthropy fundamentally transforms the power dynamics between funders and grantees, as traditional philanthropy often involves rigorous grant applications, detailed reporting requirements, and substantial donor oversight, creating a transactional relationship that can stifle innovation and responsiveness. (Salehi, 2024)

In contrast, trust-based philanthropy operates on the belief that those closest to the issues are best equipped to address them. This approach shifts the focus from control and compliance to partnership and empowerment. Funders provide multi-year, unrestricted funding, allowing grantees the flexibility to allocate resources as needed and adapt to unforeseen challenges. This fosters a sense of shared purpose and collective responsibility, driving more meaningful and sustainable change. (Faella & Robertson, 2024)

By empowering nonprofit leaders with discretion and the ability to pivot when circumstances change, trust-based philanthropy allows funders to gain a deeper understanding of organizational challenges and respond effectively. (Faella & Robertson, 2024)

To further articulate this concept, the Philanthropy.Insight Project identifies three distinct areas where trust needs to be cultivated in order for this approach to work: trust within philanthropic organizations, trust between actors in the philanthropic ecosystem, and trust in relation to the public and private sectors, especially amidst increasing public scrutiny. (Alter, Strachwitz, & Unger, 2022)

Key Principles of Trust-Based Philanthropy (Trust-Based Philanthropy Project, 2020)

1. Multi-Year, Unrestricted Funding: By providing long-term, flexible support, funders enable grantees to plan strategically, innovate, and adapt to changing circumstances without the constant pressure of securing the next grant.
2. Do the Homework: Instead of the nonprofits submitting proposals, it is the funders responsibility to get to know prospective grantees and the issues in their funding landscape, saving nonprofits time in the early stages of the vetting process.
3. Streamlined Paperwork: Reducing the administrative burden associated with grant applications and reporting allows grantees to focus more on their mission-driven work rather than bureaucratic tasks.
4. Transparent & Open Communication: Regular, honest dialogue between funders and grantees builds trust and understanding, facilitating a more collaborative relationship.
5. Soliciting & Acting on Feedback: Encouraging feedback from grantees and actively responding to their needs ensures that funders remain responsive and supportive partners.
6. Supporting Beyond the Check: Providing additional resources, such as capacity-building, technical assistance, and networking opportunities, helps grantees strengthen their organizational infrastructure and effectiveness.

Benefits of Trust-Based Philanthropy (Community Foundations of Canada, 2021)

Trust-based philanthropy not only benefits grantees but also enhances the overall impact of philanthropic efforts. By granting organizations the freedom to use funds where they are most needed, this approach promotes innovation and agility. Organizations can respond more effectively to emergent issues, pivot strategies when necessary, and invest in long-term solutions.

For funders, trust-based philanthropy offers a more engaged and rewarding giving experience. It cultivates deeper relationships with grantees, leading to a better understanding of the challenges and opportunities within the communities they support. This, in turn, can inform more strategic and impactful funding decisions.

Moreover, the collaborative nature of trust-based philanthropy often leads to the emergence of new insights and approaches. By valuing the expertise and perspectives of grantees, funders can learn from those on the front lines, leading to more informed and effective philanthropic practices.

Challenges & Considerations (Alter, Strachwitz, & Unger, 2022)

While the principles of trust-based philanthropy are compelling, implementing this approach is not without challenges. Funders may struggle with relinquishing control and shifting long-standing practices. Additionally, building trust takes time and requires a genuine commitment to open, transparent relationships.

Grantees, on the other hand, must adapt to a new level of accountability that comes with increased autonomy. This includes demonstrating impact in ways that align with their organizational goals while still meeting funders' expectations.

To overcome these challenges, both funders and grantees must embrace a mindset of continuous learning and improvement. Regularly assessing and refining their approach to trust-based philanthropy ensures that it remains responsive to the evolving needs of the communities they serve.

The Future of Philanthropy

As the world faces pressing issues such as climate change, social injustice, and global health crises, the demand for innovative and effective philanthropic strategies has never been more evident. Trust-based philanthropy offers a promising approach, emphasizing collaboration and mutual respect to drive lasting change.

This model empowers grantees to lead with vision and creativity, shifting from a transactional to a transformational model of giving. Such a shift has the potential to unlock new solutions and contribute to a more equitable and just world.

Trust-based philanthropy represents a necessary evolution in charitable giving. It challenges traditional power dynamics, fosters deeper partnerships, and leads to more impactful and sustainable outcomes.

Bibliography

Alter, R., Strachwitz, R. G., & Unger, T. (2022). Trust in Philanthropy: A Report on the Philanthropy.Insight Project 2018-2021 (Opusculum Nr. 161 February 2022). MAECENATA.

Community Foundations of Canada. (2021). Fact Sheet: Trust Based Philanthropy

Faella, S., & Robertson, R. (2024). The Strategic Value of Trust-Based Philanthropy. Stanford Social Innovation Review. Retrieved from https://ssir.org/articles/entry/trust-based-philanthropy-strategic#

Salehi, S., (2024). The Rise of Trust-Based Philanthropy. Stanford Social Innovation Review. Retrieved from https://ssir.org/articles/entry/trust-based-philanthropy-rise

Trust-Based Philanthropy Project. (2020). Trust-Based Philanthropy. Retrieved from https://www.trustbasedphilanthropy.org/