How “philanthropic” is global philanthropy?

The increasingly active engagement of the philanthropic sector in international development has brought with it a greater pool of resources but also growing concern over the impact philanthropic foundations have on

development agenda-setting and on global democratic governance.

by Jens Martens and Karolin Seitz

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Over the last two decades, the philanthropic sector has grown in terms of the number of foundations, the size of their annual giving and the scope of their activities. While detailed information about their total annual spending on international development is not available, estimates range from $7 billion to more than $10 billion per year.

Spending is concentrated on certain selected areas, especially the health sector, while other areas remain underfunded. In 2012, the largest 1,000 US foundations spent 37% of their international grants on projects in the health sector, 11% on environmental projects and only 4% on projects in the field of human rights.

At the same time, philanthropic foundations have become increasingly engaged in UN system programmatic priorities and approaches. On 23 April 2013 the UN held a special event on the role of philanthropic organizations in the post-2015 development agenda setting. Afterwards the organizers summarized: “Philanthropic organizations are ever more active in international development cooperation and have recognized the great value of engaging with each other and other stakeholders. While their contributions are difficult to fully quantify, philanthropic organizations are well-suited to play an ever-more important role in addressing sustainable development challenges including through various innovative approaches. As such, they have the potential to play a critical role in implementing a post-2015 development agenda.”

The Bill & Melinda Gates Foundation plays a special role in this regard, as its assets and annual grants exceed by far those of all other foundations. So too does the UN Foundation, particularly due to its special relationship with the United Nations and its close relationship with the UN Secretary-General.

Importantly, this increased engagement has been welcomed and indeed encouraged, not only by the UN Secretary-General and heads of UN agencies but also by some member states, seeing it as a recognition that governments alone cannot solve all of the world’s problems. Some of course also see it as a way to relieve pressure on their own development budgets while continuing with tax and investment policies that privilege the rich. Even US billionaire Warren Buffett made this point. In a New York Times op-ed he stated:

“... while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labours but are allowed to classify our income as ‘carried interest,’ thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors. These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. ... My friends and I have been coddled long enough by a billionaire-friendly Congress.”

As the engagement of philanthropy, particularly the large global foundations, in development has become more active, it has also become more complex, giving them access and influence in many programme areas, with little or no governing framework or oversight to show how they operate or what results have been achieved. Three broad issues deserve attention in this regard.

One is the absence of any framework for measuring results, not so much in terms of how well a programme meets donor-defined goals, but in terms of how well it meets the broader, more long-term goals, such as improving health outcomes or ensuring nutrition for all. Donor agreements need to be reviewed and revised to fill this gap.

The second issue is the growing engagement on the part of foundations with the programmes and goals themselves, thereby increasingly influencing programme design and outcomes and running the risk of more serious mission distortion. Accountability is thus not just a technical matter but goes to the issue of the UN agency mandates. What kind of framework needs to be in place to make sure the money contributed by foundations goes to the agency’s programme goals, rather than programme goals being shaped to meet donor interests?

A third issue goes to the impact on global governance. Does the creation of and support to multi-stakeholder partnerships, which no longer privilege the role of governments and intergovernmental bodies in setting standards and shaping the development agenda, risk undermining the credibility of publicly accountable decision-making bodies and weakening democratic governance?

The areas of concern can be grouped into four categories:

1. Philanthrocapitalism – applying a business model to the measurement of results

One prominent feature of many private foundations is their practice of applying business and often market-based approaches to development. This includes a strong emphasis on results and impact. While this approach can be beneficial in terms of increasing accountability, it may also place grantees under strain to demonstrate donor-defined results, privileging interventions that produce short-term gains at the expense of investing in initiatives where benefits may be visible only in the longer term. Consequently, foundations may neglect investments in areas where impact becomes evident only over time.

Some philanthropic foundations, like the Gates Foundation, favour problem-oriented interventions that produce fast results. However, by focusing on quick-win approaches, such as developing vaccines or disseminating insecticide-treated bed nets, they tend to neglect structural and political obstacles to development (e.g., weak public health systems). Grant-making on the basis of cost-benefit analyses and social return on investment analyses risks not supporting those in real need, but rather those who are able to deliver successful and cheap interventions. Foundations which are following a mere business logic have been criticized for “managing” the poor rather than empowering them.

While the Gates Foundation’s long-term pledges to the GAVI Vaccine Alliance and the Global Fund to Fight AIDS, Tuberculosis and Malaria have provided more sustainability than is generally true of government support, this also means that these partnerships are highly dependent on the continued benevolence of Bill and Melinda Gates.

Nevertheless, as private foundations invest most of their assets in the financial markets, their income from interest and dividends is dependent on the overall economic situation – and so is their grant-making. During the recent world economic and financial crisis, international funding by the largest 1,300 US foundations dropped dramatically (by 32% between 2008 and 2010). Therefore, not only is philanthropic giving generally unpredictable, at least over the long term, it also tends to decline in times when it is most needed.

2. Influence on policies and agenda-setting

Philanthropic foundations can have enormous influence on political decision-making and agenda-setting. This is most obvious in the case of the Gates Foundation and its role in global health policy. Through the sheer size of its grant-making, its practice of providing matching funds and its active advocacy, the Gates Foundation influenced priority-setting in the World Health Organization (WHO) and the political shift towards vertical health funds.

The Gates Foundation’s increased influence on the priorities and operations of WHO is also due to changes in the funding patterns of WHO’s traditional state donors. Because in recent years WHO has faced a serious lack of resources, which stands in stark contrast to the enormous and growing funding needs in global public health, including emergency preparedness and crisis response, the increasing imbalance of voluntary in relation to assessed contributions has led WHO to “attract new donors and explore new sources of funding.” As the influence of these sources increased, so too have gaps in the WHO ability to respond adequately to global health emergencies, as seen in the case of its response to the Ebola outbreak in 2014.

The same has been true of the influence of the Rockefeller Foundation on agricultural policy in the context of the Green Revolution and the Gates Foundation’s push for “modern” farming technologies, including genetically modified seeds in African countries, despite growing public concerns over genetically modified food. With its focus the Gates Foundation undermines pro-poor and bottom-up approaches and important alternative concepts to handle the world food crisis and the global food and agriculture agenda, as described in the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD).

Foundations exert influence not only through their grant-making. The UN Foundation, for instance, has been contributing to shaping the discourse in the UN through advisory support to the UN Secretary-General, convening informal meetings with member states, and providing extensive communications and media support. The UN Foundation has been a driving force behind multi-stakeholder partnerships, such as Every Woman Every Child and Sustainable Energy for All, and just recently launched a global media campaign on the Sustainable Development Goals.

Indeed it is important to learn from the experience of the UN Foundation, which began as a vehicle to accept a one-time, multi-year contribution from Ted Turner to advance UN causes but has also expanded its activities in various ways, raising money from public and private sources and running programmes under the UN banner but outside the UN system.

3. Fragmentation and weakening of global governance

Philanthropic foundations, particularly the Gates Foundation, the Rockefeller Foundation and the UN Foundation, are not only major funders but also driving forces behind global multi-stakeholder partnerships. In fact, many of these partnerships, like the Children’s Vaccine Initiative, the TB Alliance, the GAVI Alliance and Scaling up Nutrition (SUN), have been initiated by these foundations.

But the mushrooming of global partnerships and vertical funds, particularly in the health sector, has led to isolated and often poorly coordinated solutions. These initiatives have not only contributed to the institutional weakening of the United Nations and its specialized agencies, but have also undermined the implementation of integrated development strategies at national level.

Supporters see the variety of global initiatives as a strength and as a possibility to maintain political flexibility and to mobilize a broad range of different actors. However, it in fact results either in duplication and thematic overlap, or in high transaction and coordination costs at international and national levels.

The Gates Foundation heavily criticized the weakness and fragmentation of the global nutrition system and was instrumental in creating the SUN movement. But SUN has not worked to overcome this fragmentation. Rather, it has added to the proliferation of global partnerships on food security and nutrition, such as the Global Alliance for Improved Nutrition (GAIN), the Micronutrient Initiative (MI), the Flour Fortification Initiative (FFI), the New Alliance on Food Security and Nutrition and many others. Meanwhile the UN System Standing Committee on Nutrition, which claims to be “the food and nutrition policy harmonization forum of the United Nations,” remains weak and underfunded.

Furthermore, inasmuch as partnerships give all participating actors equal rights, the special political and legal position occupied legitimately by public bodies is sidelined. Multi-stakeholder partnerships implicitly devalue the role of governments, parliaments and intergovernmental decision-making bodies, and overvalue the political status of private actors, including transnational corporations, philanthropic foundations and sometimes even wealthy individuals like Bill Gates and Ted Turner.

Whether or not partnerships actually undermine democratic decision-making depends entirely on who selects the participants, how transparent the partnership is, how representative its composition is, and how accountable the partners are to their own constituencies, as well as to public mandates. If members are handpicked or self-nominated, then the partnership simply gives the illusion of democratic participation and cannot purport to be democratically legitimate.

4. Lack of transparency and accountability mechanisms

While foundations like the Gates and Rockefeller Foundations have significant influence on development policies, they are not accountable to the “beneficiaries” of their activities, be they governments, international organizations or local communities. Generally, they are only accountable to their own boards or trustees. This can be a quite limited number of people, as in the case of the Gates Foundation, where three family members and Warren Buffett act as trustees and co-chairs.

Foundations have to meet only limited public disclosure requirements. In the US philanthropic foundations are obliged to file annual returns and have to make them available for public disclosure (the form 990 PF). They contain basic information on finance, investments and grant-making. Some foundations provide basic information about their grants and grantees on their website, like the Gates Foundation and the Rockefeller Foundation.

However, most foundations do not report in accordance with global reporting standards. Only seven foundations participate in the International Aid Transparency Initiative (IATI), among them the Gates Foundation and the Hewlett Foundation. Only a few foundations, if at all, make impact assessments and project evaluations publicly available.

Conclusion

So far there has been an often undifferentiated belief among governments and international organizations in the positive role of corporate philanthropy in global development. Most recently, in the outcome document of the Third International Conference on Financing for Development (13-16 July 2015), the Addis Ababa Action Agenda, governments declared: “We welcome the rapid growth of philanthropic giving and the significant financial and non-financial contribution philanthropists have made towards achieving our common goals. We recognize philanthropic donors’ flexibility and capacity for innovation and taking risks and their ability to leverage additional funds through multi-stakeholder partnerships. We encourage others to join those who already contribute.”

But in light of experiences in the areas of health and agriculture, a thorough assessment of the impacts and side-effects of philanthropic engagement is necessary.

Governments, international organizations and civil society organizations (CSOs) should take into account the diversity of the philanthropic sector and assess the growing influence of major philanthropic foundations, especially the Gates Foundation, on political discourse and agenda-setting. They should analyze the intended and unintended risks and side-effects of their activities, particularly the fragmentation of global governance, the weakening of representative democracy and its institutions (such as parliaments), the unpredictable and insufficient financing of public goods, the lack of monitoring and accountability mechanisms, and the prevailing practice of applying the business logic to the provision of public goods. In light of these problems, CSOs engaged in joint initiatives with corporate philanthropy should carefully evaluate the impact and side-efects of these initiatives and potentially reconsider their engagement.  

Jens Martens is Executive Director of Global Policy Forum and Director of Global Policy Forum Europe. Since 2011 he has coordinated the international Civil Society Reflection Group on Global Development Perspectives. Karolin Seitz is a Junior Programme Officer at Global Policy Forum’s office in Bonn, Germany. The above is extracted from Philanthropic Power and Development: Who shapes the agenda? (November 2015), published by MISEREOR, Bread for the World and Global Policy Forum. The full report is available at www.globalpolicy.org.

Third World Economics, Issue No. 604, 1-15 November 2015, pp14-16