Why do foundations matter? I have spent decades thinking about this question in a Canadian context.

To try to answer it, I wrote a book about the work of Canadian foundations and their impact today, called From Charity To Change (MQUP, 2022). I interviewed over 30 foundation leaders for their insights about the work they do and how they think foundation philanthropy is evolving.  With a similar intent, my colleague Michael Alberg-Seberich of Wider Sense in Berlin has interviewed many European foundation leaders in the last two years. Together during the recent conference of Philanthropic Foundations Canada in Montreal, we spoke about what we have learned.

Philanthropic foundations contribute a unique value to our social and political ecosystem. It’s true that in the sub-ecosystem of philanthropy, foundations are only some of the players, joining individual donors, giving circles, mutual aid associations, and online giving intermediaries. So, what is their special contribution to the ecosystem?  It’s not their capital, not that alone, but the way in which it is deployed. Foundations create a unique value when they apply their assets of risk tolerance, long(er) life and independence of thought and action to the challenges we face as a society. We need foundations because when they take risks, hang in for the long term with their support and choose to act on the complex problems we face…when they become crucial agents and sources of creativity and innovation for society, as Michael put it, quoting the European foundation theorists Helmut Anheier and Diana Leat in their 2006 book Creative Philanthropy: Towards a New Philanthropy for the 21st Century. This is a hard thing to do for many foundations and many are not comfortable with this role. But it is a powerful one when foundations choose to aspire to it.

Admittedly, foundations can’t focus exclusively on risk, time, and innovation when today’s problems are so urgent. Michael and I discussed the urgency of the situation in Europe, with war, pressures on migration and energy supply, compounded by inflation, climate change, and the lingering effects of the pandemic.  How are European foundations responding? He emphasized the impetus that the pandemic and the war have given to collaboration among foundations, and between foundations, government, and civil society.  We have seen a similar growth in collaborative funding in Canada, and this is not likely to decrease post-crisis. Michael also gave examples of German foundations rising creatively to the present challenge to support civil society infrastructure: supporting national platforms for Ukrainian refugees to find housing (UnterkunftUkraine), supporting Ukrainian investigative journalism and countering disinformation (JX Fund), and other collaborative initiatives.

In Canada and in European societies, democratic institutions and practices are threatened today by polarization, populism, and civic disengagement. There is a growing lack of trust in institutions and leaders.  Economic and social inequalities fuel this distrust which extends to foundations across North America and Europe.  The response of foundations is to find new ways to fund and counter disinformation. Michael noted that all large European foundations now have portfolio commitments to nonprofits working to counter disinformation, through nonprofits keeping watch on algorithmic decision-making (AlgorithmWatch), pursuing strategic litigation against people and platforms which infringe on privacy and press freedom (Society for Civil Rights) and funding for infrastructure to support public benefit journalism (Publix). Again, we see some (although not as much) of this activity by foundations in Canada. A good example is the Atkinson.

Both Michael and I have had long conversations with foundation leaders over the last year and we have heard that they are thinking more creatively about taking risks. There are many risks for these leaders to manage: financial, operational, regulatory compliance, reputation, and impact. Foundations may focus too much on risk particularly when considering impact investing, or more participatory and trust-based grantmaking strategies. How can foundation leaders think more creatively about risk and avoid retreating into what is safe?  Michael noted that foundation management teams need to think about their attitude to risk, and the need to accept “failure” not as a risk but as a learning opportunity. There is no change without risk, and no learning without failure.  Foundations can deliver value through performing an R&D role for society. Arguably, foundations are social institution that are better positioned than any other to try, fail, reflect, and share.  This is how innovation happens.

Michael and I also discussed the idea of trust-based giving. There are many different interpretations of this type of giving, but at the core is the idea of partnership: funders acting as partners with organizations to achieve a common purpose, trusting each other to collaborate effectively. How is trust created and sustained when funders and their partners occupy very different contexts and roles? Michael described Trust Creates Impact, an initiative in Germany, Switzerland and Austria to bring together over 40 foundations to discuss philanthropic principles and practices that create trust and impact, with a focus on listening, learning and approaches to funding with fewer conditions and longer time frames.  These approaches are also gaining traction within foundations in Canada, as I have discussed in recent pieces on trust and on listening practices.

We concluded that the conversations that many of us are having today about the philanthropic model are both more profound and more urgent than they have ever been.  There has been enormous change in the foundation world in Canada and in Germany over the last decade and continuing deep reflection about questions of power, partnership, and legitimacy. Foundations do matter hugely. We need to make the case and create the narrative around the value that foundations bring, as bridgemakers, innovators and sources of ideas that will contribute to a better future for Canada, Europe and around the world. 

Hilary Pearson is the former President of Philanthropic Foundations Canada, and on Twitter at @hilarypearson20.