Vast amounts of wealth have been accumulated in digital industries. Huge fortunes have been grown in what used to be called ‘emerging economies’. A stretched distribution of wealth that has favoured the top 1 per cent, and even more the top 0.1 per cent and 0.01 percent has meant that many people have far more money than they can easily spend on themselves.

That explains the growth in supply, just as at the turn of the 19th and 20th centuries philanthropy was an obvious outlet for a previous generation of industrial titans. Then, Carnegie, Rockefeller and Ford used their money to do good but also to gain credit and to distract attention from the often questionable ways they had made their fortunes. The same mix of motives and responses is visible today.

What of the demand? Here the picture is more complex. On the one hand, most people would prefer to see money being spent on social good rather than yet another lavish home or sports car. Philanthropy means love of humanity – who could be against that? Social and environmental action needs at least some money to fuel it, and help the world protect everything from threatened oceans to divided communities.

On the other hand, many fear that philanthropy is a superficial response to deep questions, that it distracts attention from the real causes of social problems and that it makes people who are already powerful in the economy even more powerful in society too.

The mood has certainly shifted from a few years ago. Then there was much talk of philanthrocapitalism, of the newly wealthy solving social problems which governments and traditional civil society had failed to solve. Now there’s a lot more humility. Philanthropy has made a big impact on some issues, notably diseases. But it hasn’t ‘solved’ any big social challenges. Its scale rarely matches up to the scale of problems. And the philanthropists themselves – particularly those who made their money in finance or digital – are seen in a much less rosy light than in the 2000s.

Yet with governments often weak or distracted, who other than foundations can address the big long-term issues head on? Who else can take big risks, unconstrained by accountability to shareholders or voters?

Foundations are uniquely endowed not just with money but also with freedom and solidity. They should be uniquely well suited to work on the truly big challenges of our time, from climate change to inequality, ageing to unemployment.

Our Foundation Horizon Scan research paper surveys the changing landscape, and explores the readiness of foundations to play a bigger role. The insights highlight some of the eternal dilemmas of philanthropy, summarised by Shakespeare’s comment that it is excellent to have a giant’s strength but not to use it like a giant, and their paradoxical position of having power and moral purpose but little formal accountability. In this landscape each foundation has to decide how it will answer a series of difficult questions:

Challenge government or collaborate?

In countries where political leaders are hostile to civil society, resistant to criticism or independent power, and especially prone to bristle at foreign foundations, foundations have to decide whether to become more overtly political, supporting opposition and protest, or whether to keep their heads down. In other places, by contrast, foundations are learning to work more closely with government recognising that in many contexts that is the only way to have serious impact at the scale of problems.

Challenge business or collaborate?

Most foundations are naturally close to business and many want to apply business methods to social issues. But proximity to business can create tensions, especially on environmental issues where business may be more the problem than the solution. An even more challenging question, after a period that has seen such a big shift of power and wealth from labour to capital, is what role to play in relation to precarious workers, empowerment and trade unions.

Predictable impact or big bets?

All foundations grapple with how to ensure their money has a useful impact in the world. Their challenge is not just about metrics but also about timescales and risk. It is far easier to measure impact if you’re working on relatively incremental tasks and on relatively short timescales. By contrast, the results of big, long term bets are inherently harder to predict, and it may be decades before anyone can confidently say they are working.

Transparency or secrecy?

Some foundations have opened themselves up to scrutiny. But others are nervous, and have remained secretive, both for bad reasons (not wanting to be accountable) and for better ones (if they’re operating in hostile environments where any open information can empower enemies).

Transforming systems or modest improvements?

Many foundations understandably want to be involved in profound systems change – shifting to a low-carbon economy or transforming healthcare. But the more they play a leadership role of this kind, the more the limits of their legitimacy come into view. So an opposite view says that they should be humble, limited, and willing to play a subordinate role.

Fast or slow?

Foundations face few competitive pressures to innovate. As a result most use very traditional tools of grantmaking. They have been slow to adopt or experiment with alternatives, slow to engage seriously with the new possibilities arising from data, AI and collective intelligence, slow to empower beneficiaries. But using new methods is itself risky and may involve short-term impairment to performance before gains kick in.

These are not, of course, binary choices. The best answers will be subtle and nuanced. But hopefully, our horizon scan – packed with good examples from around the world – will encourage more imagination, boldness and honesty on the part of foundations in thinking through answers that make sense to them.

In some respects, foundations are almost medieval institutions, somewhat anachronistic in the world of 24/7 media and an economy changing at warp speed. Yet we rely on them more than ever to use their unique power – and their unique freedom – to do what is necessary, and not just what is comfortable or easy.

Summary findings

The next ten years will be a defining decade for foundations. Internationally, the trends point to a booming philanthropic sector, one which is poised to expand in both size and ambition. In contrast to governments and businesses, foundations are capitalising on their power to focus on long time horizons, and many are setting out to shape the future in ever more profound ways.

Future challenges: legitimacy and impact

Two themes surfaced repeatedly in our expert interviews and the literature review. Firstly, if foundations do not find a way to convince their critics – and the wider public – that they are becoming more transparent and accountable, then they will find themselves confronting the difficult consequences of deepening mistrust. Scepticism about the legitimacy of their power is only likely to increase at a time of rising populism and antipathy towards ‘elites and the establishment’.

Secondly, foundations must be able to argue robustly that they are effective, rather than simply serving as fig leaves to protect the wealthy from closer scrutiny. Are they capable of bringing about deep social change or are they simply too embedded in the system to do so? Are the tools at their disposal equal to the task of addressing highly complex, systemic problems such as social inequality and climate change?

Emerging responses: foundation practices

1. Enhancing legitimacy

Investing endowments to align with social mission
Making data transparent
(Re)defining relationships with the public sector
Addressing the power imbalance

2. Enhancing Impact

Collaboration
Adopting private sector approaches; combining profit and purpose
‘Systems change’: moving from rhetoric to action
Leveraging digital and data analytics
Rethinking impact measurement
Reimagining place-based approaches
Using strategic foresight to explore emerging trends
Supporting movements, people or ideas

A look ahead: strategic choices

The challenges facing the foundation sector in future do not have simple solutions. Whilst foundations are experimenting with a diverse array of approaches to enhance their legitimacy and deepen their impact, in devising their strategies they will inevitably have to make tradeoffs between different priorities. Pursuing one path might well mean forfeiting the benefits afforded by a different approach. We highlight some of the live tensions foundations will need to manage in coming years.

The full research paper, Foundation Horizon Scan, Taking thelong view, Magdalena Kuenkel and Celia Hannon with EdmundLe Brun, Nesta, November 2019 is available online.

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