Draft:Trust-based philanthropy

Trust-based philanthropy is an approach in philanthropy that emphasizes shifting decision-making power to nonprofit leaders, providing them with the flexibility and resources necessary to address complex and evolving community needs. Core practices include providing unrestricted funding, offering multi-year grants, and minimizing administrative burdens, which allows grantees to allocate resources efficiently and pivot strategies when new challenges or opportunities arise.

Relationship with traditional philanthropy

The trust-based model counters traditional philanthropy, which often ties funds to specific projects and imposes rigorous reporting requirements. By contrast, trust-based philanthropy relies on building open, trustful relationships between funders and grantees.

These relationships foster a collaborative environment, enabling funders to gain a deeper understanding of grantees' needs and challenges. This approach can be seen as more strategic, as it acknowledges the expertise of nonprofit leaders and provides them with the latitude to make timely decisions in response to shifting conditions.

Use by donors

While it existed before the pandemic began, the trend of trust-based giving has been accelerated by the COVID-19 pandemic. Many funders reduced reporting requirements, converted restricted grants to general support, and streamlined application processes, allowing nonprofits to adapt swiftly and allocate resources where they were most urgently needed.

Examples of foundations which have explicitly embraced the trend include Yield Giving, led by MacKenzie Scott, as well as Sheng-Yen Lu, Durfee, Satterberg, and Stryker Johnston foundations.

Challenges

A challenge in adopting the practice is maintaining meaningful impact measurement while reducing reporting requirements for the grantees. Foundations must balance the need for accountability with a commitment to trust, often by finding alternative methods, such as open conversations or simplified reporting options, to ensure they stay informed without imposing excessive administrative burdens.

A strategy for addressing this challenge has been the deployment of artificial intelligence techniques for discovering suitable grantees and tracking their achievements. Some organizations have had success at scale with this approach, combining a network of analysts with machine learning techniques involving web scraping and Natural Language Processing.