Davos 2020: High-level meeting on the Role of Philanthropy in Emerging Economies

22 January 2020

This is a summary of the outcomes of a high-level breakfast meeting held on 22 January 2020 as part of the World Economic Forum’s Annual Meeting in Davos, Switzerland. The meeting brought together a diverse mix of philanthropy practitioners, government officials, business leaders and academic experts to discuss the potential contribution that effective emerging market philanthropy could play in delivering on the UN’s Sustainable Development Goals (SDGs). The rapid rise in philanthropy from these markets, the forthcoming $4 trillion intergenerational wealth transfer expected in the next decade and the $2.5 trillion annual SDG funding gap, provided important context for the discussion.

The meeting was co-hosted by Professor Stephen Toope, Vice Chancellor of the University of Cambridge, and Mr Badr Jafar, CEO of Crescent Enterprises.

The discussion leaders at the event comprised H.E. Sheikha Bodour Bint Sultan bin Muhammad Al Qasimi, Founder and Chair, Kalimat Foundation for Children’s Empowerment; H.E. Thani Ahmed Alzeyoudi, UAE Minister of Climate Change and Environment; H.E. Dr. Rania Al-Mashat, Egyptian Minister of International Cooperation; David Miliband, CEO, International Rescue Committee; Peter Maurer, President of the International Committee of the Red Cross; Sara Pantuliano, CEO, Overseas Development Institute; and, Olivia Leland, Founder and CEO, Co-Impact.

Over $1 trillion of dollars of philanthropic capital – private capital for public good – is deployed every year which represents more than triple the annual global development and humanitarian aid budgets combined. The USA alone witnessed over $430bn in private philanthropy last year and closer to home, we see up to $1 trillion in Islamic giving annually. As philanthropy becomes more strategic and works on systems change – as opposed to symptomatic reliever – and as the concept of blended finance goes mainstream, there is a huge opportunity for capital from government and businesses to coming forces with capital from foundations and philanthropists to jointly address the $2.5 trillion annual SDG funding gap.

Mr Badr Jafar, Founding Patron of the Centre for Strategic Philanthropy

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While the participants covered a wide range of topics related to the growth of philanthropy and the prospect of deploying it more strategically and efficiently, there was also a particular focus on the importance of the need for research and education. This dovetailed with the announcement by Mr Jafar in his opening remarks of the establishment of a new Centre for Strategic Philanthropy to be hosted at the University of Cambridge Judge Business School in the UK. The following is a summary of the main points discussion and conclusions reached during the session:

1. More evidence-based approaches are needed

Despite a growing appetite for measuring impact, many philanthropists acknowledge that not enough data underpins their work and that too much philanthropy is still not based on research. This reveals a need for greater alignment between the research output of academia and the strategic priorities of philanthropists in order to create and scale evidence-based programmes. Too often philanthropists are not aware of existing research that could support their work or of how to access academic research when it does exist. This hampers the adoption of evidence-based approaches. There is therefore a powerful opportunity for academics and practitioners to work together to build a data cohort that can help inform methodologies, improve efficiency and effectiveness and encourage greater collaboration in what is a highly heterogeneous sector. Big data can help to enable this process along with the adoption of more scientific tools for measuring impact such as Social Return on Investment (SROI) and Randomised Control Trials (RCTs). More focused philanthropy can also help ensure that philanthropy targets the neediest (and often most complex/fragile) communities with the most effective interventions.

Too much philanthropic capital is well-intentioned but poorly deployed. This is partly due to a lack of evidence about how best to create sustainable measurable social value at scale and partly due to a lack of professional training therein. The Centre for Strategic Philanthropy is an excellent opportunity to address these issues and provide a data based approach to improving the impact of philanthropy notably from emerging markets. This new money can learn from the mistakes of the past, experiment with new innovative models and work collaboratively to avoid duplication and accelerate progress towards achieving the UN’s Sustainable Development Goals.

Clare Woodcraft, Former Executive Director of the CSP

2. Collaboration will be essential

Meeting the SDGs is expected to require capital to the value of $5-7 trillion. This is unlikely to come from a single source and will therefore require blended capital structures. Only in this way can philanthropists and the International Development Community (IDC) hope to take a systemic approach to delivering impact at scale. Philanthropic capital has huge potential that has to date often been unmet due to the lack of alignment and engagement with traditional development finance. There are also significant opportunities for private philanthropists to partner with corporate foundations. Systemic issues are complex and require a multi-sector approach. They also require advocacy and policy reform beyond programmatic efforts. This suggests that philanthropists must work with other development actors to build leverage and influence. The absence of collaboration can lead to a potentially devastating waste of funding and missed learning opportunities. With the growth of emerging market philanthropy, avoiding the mistakes of the past will be critical. Equally, it is important to harness the new thinking and risk-based venture appetite of new generations. Disruptive innovation is as needed in the third sector as it is in the commercial one. This also means collaborating around sharing information and adopting an “open” rather than a “proprietary” approach to data dissemination. The urgency of the SDGs means philanthropists need to move beyond silos and egos. No one entity can deliver social value, systemically and sustainable at scale. Coalitions will be critical to solving long-term entrenched challenges and committing capital to much longer time horizons. Intergenerational development challenges defy 12-month grant funding cycles.

Too many people in the sector work in silos. I’d like to see more collaboration and partnerships and more transparency. I’d like to know who is doing what, so that I can partner with other organisations and support their work. And I’d like to see more data driven research so we can target the right communities and have more strategic impact. There is no shame in talking about your mistakes and learning from what experience and sharing that with like-minded organisations.

H.E. Sheikha Bodour Al Qasimi, Founder and Chair, Kalimat Foundation for Children’s Empowerment

3. Ideological philanthropy poses regulatory challenges

Governments and philanthropists need to more openly and honestly discuss, understand and address philanthropic initiatives and institutions that are built around an ideology – in some cases extreme ideologies – rather than a technocratic commitment to creating measurable social economic value at scale. Growth in ideological philanthropy stymies government efforts to create a conducive environment for encouraging more giving because it leads to overly intrusive and burdensome scrutiny and regulation. While tracking and monitoring flows of philanthropic capital that might be used for subversive or extremist goals makes sense, in the absence of better delineation between ‘ideological’ and ‘technocrat’ philanthropy, capital flows are stymied. Without more open discussion and understanding of this sensitive topic, there are unintended negative consequences for authentic, professional philanthropic endeavours as regulators seek to curb philanthropic capital flows due to suspicions about its objectives. The sector and governments need to work more closely and more openly and honestly to discuss this sensitive issue and ensure that regulation facilitates the flow and ultimate impact of authentic philanthropic capital.

If philanthropy around the world today was catalytic, risk embracing, rejected silos and clear about the responsibility of government versus the responsibility of the risk takers in the philanthropy sector, we wouldn’t need a Centre for Strategic Philanthropy. Eight out of the 10 fragile states are off-track to meet the SDGs since neither governments nor philanthropists are attending to long-term needs. Governments donors are too often short-termist, focused on inputs rather than outcomes and ill-coordinated. Too many of these sins are repeated in the philanthropic sector. If the [growing] philanthropy of emerging markets repeats too much of the hype and too much of the myopia of the West, it’s not going to be the strategic risk embracing catalytic venture that is so desperately needed. I would really urge Cambridge University to be bold and tell the truth – we have a real need for truly strategic philanthropy.

David Miliband, President & CEO of the International Rescue Committee

4. Ethical business can be a force for good

Ethical businesses that are focused on matching their commercial value creation with their social value creation can be the most powerful means of creating social impact at scale. Where business models align with local market needs and use the scalability of their commercial structures to address entrenched socio-economic issues, they have the potential to fast-track development and accelerate the implementation of the SDGs. However, for this to happen, there needs to be conducive regulatory environments that enable ethical businesses to thrive. Understanding how businesses can deliver developmental outcomes requires the language of “public good” and an understanding of how deploying private capital for public benefit can benefit the whole of society and create more robust economies. In many cases, philanthropic capital from the private sector, applied as risk capital, can be used to de-risk development projects and thus leverage additional government and commercial finance. Moreover, sections of the public appear to have a high degree of faith in business – and specifically, the ‘profit for purpose’ mentality – to the point that certain customs want to be more engaged and inspired by businesses. CEOs increasingly talk about social change and the SDGs specifically. This creates new opportunities for increasing innovative finance for development but harnessing this potentially will require greater transparency from governments on their policy goals in this area. Similarly, where governments borrow to fund development, they need to make clear why they are borrowing and to what end. Narrowing the credibility and information gaps that exist between government and the public, and government and business, will help to channel more private capital towards development outcomes.

In hyper-fragile contexts the money available is mainly emergency humanitarian support which relies on state funding, but even in the most fragile context there are opportunities to encourage self-reliance and private initiative. Here we have a big gap because we don’t have private capital coming into those markets. My hope is that philanthropists will do four things: make capital available to de-risk; support organisations with institutional readiness and capacity building; move from measuring inputs to measuring impact; and develop methodologies for new forms of capital. We want to see philanthropic capital strategically invested to move the needle from social services to strengthening self-reliance.

Peter Maurer, President of the International Committee of the Red Cross

5. Complex challenges deserve greater attention

Philanthropists should address the challenge of securing philanthropic capital for ‘wicked problems’ such as extreme poverty, child poverty and working in fragile conflict environment. Today 40 per cent of the extreme poor are in conflict afflicted states and eight out of the 10 fragile states are off track to meet SDG since neither governments nor philanthropy are attending to the needs of the extreme poor. Philanthropic capital is often focused on ‘quick wins’ and some of the less complex aspects of development despite acute needs for funding to better understand the complex areas of development that exacerbate broader system issues. By working strategically with academia and by being willing to fund research rather than just programmatic work, philanthropists could help address some of the most pressing development challenges. This is particularly the case with humanitarian work where sometimes the best long-term solution is one based on upfront research into causality rather than emergency funding once the crisis has hit. This means sharing research agendas, reconciling focus areas and ensuring that all actors have input on identifying what to research and how to make the outcomes of that research accessible and applicable.

This is a timely discussion and governments do have an important role to play by offering policy frameworks that create a compelling opportunity for businesses to complement ODA finance. We are 10 years aware from the 2030 fulfilment of the SDGs which requires trillions of dollars. Philanthropic capital is definitely a solution to the financing gap – what is encouraging is if it’s done on a more focused basis with metrics and analysis that helps identify the return on that investment. It’s also important to help those seeking capital to do a better job of presenting their case because philanthropic capital is scarce and there is so much that it can be spent on.

H.E. Dr Rania Al Mashat, Minister of International Cooperation of Egypt

6. Transparency is part of the process

All actors working with philanthropy need to be bolder and more courageous about acknowledging the failures of the past and the need for the sector to take a radically different approach. Too often egos drown out transparency in the sector with philanthropists reluctant to acknowledge programs that didn’t work. This leads to poor institutional learning, limited sharing of best practice and the duplication of efforts that have failed to deliver impact at scale. A new approach is critical given the vast intergenerational wealth transfer expected in the coming decades, the need to ensure that the next generation learns from the past and that new innovative ways of thinking are encourage. Youth are driving a more entrepreneurial philanthropic approach that embraces social enterprise and impact investing and live in a digital world that uses data for immediate feedback. They espouse a culture of pivoting, iteration and change making where their predecessors may have preferred tradition and stability. This change is long overdue and essential if philanthropy is to build a catalytic, risk embracing, collaborative culture that is so critical to impact. If this were currently the case, there would be no need for discussions about ‘strategic’. Potential has been thwarted by a focus on inputs rather than outputs and myopia that undermines impact. Many practitioners acknowledge this in private but too few discuss openly or call for a real paradigm shift.

Stephen Toope.
Professor Stephen Toope, Vice Chancellor of the University of Cambridge

Philanthropy has enormous potential – it is patient risk capital, can accept lower returns and can focus on development impact more than just financial return. And yet we still see very little of that capital actually invested in blended structures. Where it does exist, it comes from a few Western foundations with hardly any from emerging economies and yet we know there is an enormous amount of philanthropic capital in these markets. It isn’t just about research and evidence – it’s about working with specific cultural constraints in those regions to see how we can mobilise that capital. Convening strategic conversations in this respect, will be just as important.

Sara Pantuliano, Chief Executive of the Overseas Development Institute

7. Not all philanthropy looks the same

There is a danger that the dominant constructs of Western philanthropy in global discourse around delivering on the SDGs skew policy debates and decisions. In many markets, philanthropy looks very different from traditional Anglo-Saxon constructs and may be decentralised and in the form of direct grassroots engagement through business or family structures. It may also be more innovative by engaging multi-sector actors. The predominance of Western foundations in development finance should not obfuscate the importance of considering new, different and more local ways of deploying philanthropy capital. These may not only turn out to be more effective but also potentially more sustainable since they are a product of local thinking about local problems and work with indigenous institutional structures rather than exogenous ones. Not all foundations in the developing world are familiar with the SDGs nor have they engaged with the OECD’s DAC. Development policy makers would do well to engage philanthropists from growth markets. It is time to reject norms, bring new ways of thinking and drive new levels of creativity. Philanthropists can learn from NGOs and from local context but the power dynamic needs to change. The endowment is an Anglo-Saxon construct and may not be the most effective way to deploy philanthropic capita in emerging economies. Progressive thinking and keeping an open mind about the shape and form of new philanthropic capital will help improve impact.

We do need to be obsessed with how philanthropy can be more strategic and more focused on systems to avoid reinventing the wheel. Philanthropy is not living up to its full potential. We need more research to inform our work, but we already know some of the principles that can drive impact. Here are four. Change takes a long time and doesn’t happen in 12-month intervals, so philanthropy needs to be long-term. Systems are complex so no one actor can drive change – we need to work in partnership with governments, the private sector and different NGOs. We also need larger, less dispersed and more aligned funding. And finally, we should provide leadership and set a vision for the role of philanthropy beyond the funding – how do we accompany our beneficiaries in their mission? It’s important to undertake research but we also need to act on it and make sure that philanthropy really does live up to its full potential.

Olivia Leland, CEO of Co-Impact