Impacting investing: trends, issues and capabilities
In the late 1990s, the Ugandan Government initiated a newspaper information campaign to boost the ability of schools and parents to monitor the government’s handling of a large school grant programme funded by a group of donors.
This significantly contributed to a rise in the amount of money reaching schools from 20% in 1995 to more than 80% in 2001, and in turn researchers found that this transparency rivalled the effects of some of the very best health interventions. As a result of putting information into people’s hands, 40-50% more children received dietary supplements and vaccines, health services were used more, and 33% fewer children died under the age of five, amounting to 550 lives saved in a small area of Uganda encompassing 55,000 households.
The rise in philanthropic funding has led to increased interest in where and how foundations are investing their resources, with a general perception that they are not as open and accountable as they could be about how they spend their money.
In the US, foundations gave 21% of their total disbursements to international purposes in 20101, while in the UK, the estimated annual value of spending by foundations on international development was £292 million in 2009/20102. That is nearly double the amount of giving recorded in 2004/53 which placed the figure at £150 million per year.
At the same time, a report on private foundations by the UK’s International Development Committee last year noted, “The precise volume, distribution and targeting of foundation spending are currently unclear. Compared to official donors, foundation reporting is weak.”
For donor governments and publicly-funded NGOs, one of the main drivers for increased transparency is the role it can play in maintaining public support for their activities but private foundations do not rely on public funds and are accountable primarily to their Board of Trustees. So what are the incentives for increased transparency in the case of foundations? And why does it even matter if they are transparent?
First, from the perspective of the individual foundation, it is important to know what all of the other development actors in a particular country or sector are doing in order to decide where and how to target their own interventions in order to avoid duplication and achieve maximum bang for their bucks.
Second, by failing to publish details of their overall contribution to the development sector, foundations are in danger of underselling their collective efforts. The US Foundation Center says for “a true picture of funding to emerge and for philanthropy’s contribution to making a better world be known, data about foundation funding must be part of this larger narrative”. This means charting who is giving, where they are giving, and who is receiving this assistance over time.
Third, there is a clear demand from stakeholders in developing countries for more and better information about the activities of all development actors, including NGOs and private foundations – this emerged as a key priority from a UNDP-led consultation of 77 developing country governments undertaken in 2009. They need to be able to have a complete picture of all of the external resources available for poverty reduction, to plan and manage resources effectively, and ensure coordination with domestic efforts.
For all of these reasons, increased transparency represents a sound investment for philanthropic foundations – and there are encouraging signs that this is increasingly recognised by foundations themselves. The Bill and Melinda Gates Foundation began to publish data on its health grants to the OECD Development Assistance Committee in 2010, while the William and Flora Hewlett Foundation became a founder member of the International Aid Transparency Initiative (IATI) in 2008.
Launched in September 2008 at the High Level Forum on Aid Effectiveness in Accra, IATI aims to increase the transparency of aid in order to improve its effectiveness in tackling poverty. IATI now has 37 signatories and 132 organisations publishing their aid information to IATI’s internationally agreed, open standard. These organisations include everything from bilateral donors and multilateral institutions, to global funds and NGOs. The publication of information in IATI’s common, open format means that aid information from many different sources is easy to find, use, combine and compare.
The Hewlett Foundation became the first foundation to publish its data to IATI in 2011, and it is anticipated more foundations will follow its lead as awareness builds around IATI in the foundations environment and as they increasingly recognise the value of such approaches. The London-based Indigo Trust says, “as a charitable foundation working to promote transparency and accountability, we really felt we should live up to our ideals and publish to IATI ourselves. It’s still early days, so it may be too soon to assess the full impact of IATI but one thing is certain: it has put aid transparency firmly on the map and the policy agenda.”
The mechanisms for doing this are getting easier. The US Foundation Center is able to map the data that US foundations collect internally and share publicly to IATI fields. This means that any of the foundations that electronically report grants data to the Center directly can opt-in to their IATI reporting programme. Increased participation in the programme will be a significant step forward, enabling data from US foundations to be compared with information from other sources, and helping to create a more complete picture.
Meanwhile, IATI is keen to encourage more foundations to engage with IATI on an individual basis – they can do this in a variety of ways: by joining IATI and undertaking to publish their own data to the IATI standard; by engaging in IATI’s Technical Advisory Group and helping to further develop and improve the IATI standard in ways that meet the needs of foundation members; and by supporting and funding organisations that advocate greater transparency and improved access to information.
1. Foundation Center(2012) ‘International Grantmaking update: a snapshot of US foundations’, December 2012, available at http://foundationcenter.org/gainknowledge/research/pdf/intl_update_2012.pdf
2. Pharoah, C. And L. Bryant (2012) ‘Global Grant-making: A Review of UK Foundations’ Funding for International Development’, Nuffield Foundation, UK, available at http://www.nuffieldfoundation.org/sites/default/files/files/NUF1272_Glob...
3. Fiennes, C. and de las Casas, L. (2007) ‘Going global: a review of international development funding by UK trusts and foundations’, New Philanthropy Capital, UK, available at http://www.thinknpc.org/publications/going-global/