3. En route to 2030: Mobilising, advocating, learning

Abstract

This chapter explores how foundations are mobilising by investing their assets and spending their philanthropic capital to create additional resources for development; how they are strategically advocating to amplify and sustain their impact; and how they are striving to become learning organisations and produce knowledge that can improve development policy and practice through monitoring and evaluation.

3.1. Unpacking foundations’ strategies to mobilise funds, advocate and learn from evaluations

Private philanthropy for development has bold goals. Many foundations aim to go beyond palliative solutions to alleviate poverty by using their funding strategically to dismantle some of the root barriers to economic and social development. But what foundations can give to developing countries is typically dwarfed by the resources of other players. Official development providers give more than 14 times as much as private philanthropy for development, and the volume of private remittances to developing countries surpasses philanthropy by more than a factor of 10.

Findings in this chapter draw on data from 103 foundations that replied to OECD’s organisational survey. Of the foundations in the sample, 45% are mixed foundations (they provide grants and operate their own programmes); 37% are grant-makers only; 10% are operational foundations; and the remaining 8% are either re-granter foundations (they distribute donations received from either individuals or other foundations, including crowdfunding) or belong to other categories.

3.2. Mobilising resources for sustainable development

This section examines foundations’ efforts to mobilise additional resources to leverage their role as asset owners, investors and grant makers. It assesses how foundations use assets from their endowment to advance environmental, social and governance goals. It also explores the extent to which foundations employ diverse financial mechanisms to deploy their philanthropic capital, including loans, equity and guarantees. Finally, it outlines how, through their grant making, foundations can build an enabling environment that supports investing with a mix of financial and social goals, within and beyond the philanthropic sector.

3.2.1. Foundations seek to mobilise additional finance through capital markets

There is a growing imperative to mobilise additional finance towards sustainable development. COVID-19 has had a profound impact on livelihoods around the world. It is estimated that the forgone working hours equate to 200 million people losing their jobs, and 100 million people have fallen into extreme poverty (OECD, 2020[1]). While an additional USD 1 trillion will be needed for developing countries to match the expenditures of OECD countries on the COVID-19 pandemic and recovery, external private finance towards these regions has decreased. In 2020, remittances fell by 1.6% from the previous year, to USD 540 billion (World Bank, 2021[2]) while foreign direct investment (FDI) in developing countries dropped by an estimated 8%, from USD 723 billion to USD 663 billion (UNCTAD, 2021[3]). Furthermore, developing countries that entered the crisis with large and pre-existing vulnerabilities now have limited fiscal space to support recovery actions (OECD, 2020[4]). Overall, the estimated SDG funding gap in developing countries rose by USD 1.7 trillion during the pandemic, a 68% increase from the pre-COVID annual gap of USD 2.5 trillion (OECD, 2020[1]).

The assets of foundations are negligible compared to those held by private investors, governments and multilateral donors. Yet foundations can play their part in helping to mobilise private capital markets to support development. First, a sizeable share of foundations in the sample, primarily from the United States, Latin America and Europe, are endowed. In their role as asset owners, and provided their country legal and fiscal frameworks allow, foundations can invest their endowments to advance environmental, social and governance (ESG) goals; promote responsible investment strategies among the asset managers they hire; and engage with the industries they invest in to encourage sustainable and inclusive business practices. However, while endowed foundations are common in Europe and North America, in some emerging markets they are not. An OECD study on domestic philanthropy in Colombia found that, of 54 foundations in the sample, only 12 had a private endowment (OECD, 2021[5]). Second, foundations can mobilise additional private finance for development through innovative approaches such as tailored finance.1 Finally, in their role as grant makers, foundations can support an enabling environment that facilitates responsible investing. They can fund networks and support organisations that connect investors from the private, philanthropic and public sectors, and also help build capacities and codify best and emerging practices in the sector.

Figure 3.1 illustrates the spectrum of capital in which foundations can operate. On the right-hand side of the spectrum, investments have the sole objective of maximising shareholder and debtholder value through financial returns based on absolute or risk-adjusted measures of financial value (e.g. investing endowment assets with a finance-first focus). On the left-hand side of the spectrum, disbursements have the sole objective of achieving social returns (e.g. grants). Social impact investing aims for a mix of social and financial returns. The following section outlines the extent to which foundations mix social and financial returns to mobilise commercial private finance towards sustainable development.

Figure 3.1. Leveraging foundations’ assets and pay-outs along the spectrum of capital

3.2.2. Responsible investing aims to achieve both social and financial returns

The OECD organisational survey covered 103 foundations that are active in developing countries. Of those, 71 derive their income from an endowment (Figure 3.2). Close to half of these endowed foundations have an internal investment team (36 foundations); the rest have a minimal internal structure and work with external advisors or managers (30 foundations) or do not know/cannot reply (5). Close to 80% of endowed foundations in the sample are from Europe (24), Latin America & the Caribbean (17) and North America (16). Only 14 endowed foundations are from Sub-Saharan Africa (5), East Asia (7) and the Middle East & North Africa (2).

Figure 3.2. Foundations’ sources of income

Over the past two decades, foundations have shown growing interest in investing their endowment to further social and environmental goals. These investments, often broadly referred to as sustainable and responsible investments, seek to generate a market rate of return on capital while also furthering a social and/or environmental purpose. They are generally expected to yield competitive rates of return in order to guarantee the foundations’ preservation of capital and long-term existence. In some instances, these investments can also be aligned to the foundation’s mission and programmatic goals (in which case they are often referred to as mission-related investments, or MRIs). A 2011 survey of US-based foundations found that close to half of 168 foundations that engaged in responsible investing had begun within the previous two years (Lawrence and Mukai, 2011[7]). Similarly, in the United States, the annual growth rate of mission investments averaged 16% over 2002-07, up from only 2.9% in the previous 32 years (Cooch et al., 2007[8]).

Foundations report using sustainable and responsible investing for a number of reasons (Godeke and Bauer, 2008[9]; Bolton, 2006[10]; Cooch et al., 2007[8]). By aligning assets with social goals, and particularly with foundations’ own programmatic objectives, foundations seek to extend the financial resources they devote to their mission. In the United States, for instance, foundations are legally required to disburse 5% of the average market value of their net investment assets annually. Sustainable and responsible investing has the potential to leverage the “untapped 95%” (OECD, 2018[11]; Mahlab and Harrison, n.d.[12]). This was a major driver for the creation of the W.K Kellogg Foundation’s Mission Dirven Investment Portfolio. In 2007, the foundation decided to expand the resources allocated to its mission, and to invest USD 100 million of its endowment with the aim of achieving social returns alongside financial returns (W.K. Kellogg Foundation, 2019[13]). Foundations also use their assets to demonstrate how responsible investments yield competitive market returns alongside increased social value, in the hope of convincing more prudent commercial investors to follow suit (Kölbel et al., 2020[14]; Walker, 2017[15]; McCarthy, 2017[16]; Miller and Heron Foundation, 2012[17]). For instance, in 2017, the Ford Foundation committed USD 1 billion of its endowment to mission-related investing funds, to be phased in over a period of 10 years. One of the objectives was to produce evidence on the financial and social returns of mission-related investments that could be shared with other investors within and beyond the philanthropic sector (Box 3.1) (Walker, 2017[15]). Furthermore, foundations have used sustainable and responsible investing to ensure a greater degree of consistency and avoid discrepancies between their values and programmatic priorities and the management of their own assets. At a time when public scrutiny of philanthropy is increasing, avoiding investments in industries at odds with a foundation’s mission – such as in fossil fuels, alcohol or tobacco – can help foundations protect their reputation and credibility. Finally, responsible investing can be a strategy for protecting the value of foundations’ assets in the long run. Societal values related to environmental protection and social inclusion are increasingly influencing consumer and investor choices, with a likely bearing on future corporate (and asset) performance (OECD, 2020[1]). In a 2020 global consumer survey, 70% of respondents stated that COVID-19 had made them more aware of human activity’s threat to the climate, and 87% said that companies should take better account of the environmental impact of their products, services and operations (Kachaner et al., 2020[18]).

In the OECD survey of endowed foundations, three out of four respondents (55 of 71) reported using one or more strategies to invest their endowments responsibly. The most common strategies cited are the application of ESG criteria to define an investment portfolio and the positive screening of investments. Shareholder engagement, which can constitute an effective channel to influence corporate conduct and performance, is less frequently used (Figure 3.3). Around 34% of endowed foundations (24 of 71) employ just one type of investment strategy, while 44% (31 of 71) combine two or more different strategies. Although these figures suggest that a majority of foundations employ a combination of responsible investing strategies, they do not provide the share of endowments (and value of assets) that are invested responsibly.

Figure 3.3. Foundations’ investment strategies for their endowment

Box 3.1. Ford Foundation: Unlocking the power of its endowment

Roy Swan, who leads the Ford Foundation’s Mission Investments team, provided this explanation of the foundation’s investment strategy:

“The current global capitalist system is increasing inequality. Investment policies that singularly seek to maximise short-term financial return seem antiquated and unsophisticated given what we now know about the negative and positive externalities produced by those investments. In light of that and other considerations, the Ford Foundation’s president, Darren Walker, stated in 2015: ‘I no longer find it defensible to say that our investment strategy is only to maximise the value of our endowment – just as it’s no longer defensible for a corporation to say its only responsibility is to maximise shareholder value.’

“Walker’s statement arose out of a recognition that philanthropy is a creation of capitalism and an acknowledgment of the inherent complexities of current endowment investment strategies – i.e. the need to generate investment returns in order for endowments to live on in perpetuity and continue to grow, but the fact that some of the problems we are aiming to solve, especially around inequality, are products of the system that we are investing in. From that statement sprang the idea to carve out USD 1 billion from the Ford Foundation’s endowment to create the mission-related investments (MRI) endowment dedicated to impact investments aligned with the foundation’s mission.

“The Ford Foundation created the Mission Investments programme in 2017 to perform four functions: i) invest and manage the USD 1 billion MRI endowment; ii) invest and manage the USD 350 million programme-related investment fund; iii) manage a USD 5 million annual grant budget dedicated to supporting the global impact investing infrastructure and field; and iv) help raise awareness and increase investor interest in impact and ESG-oriented investing.

“The USD 1 billion MRI endowment, to be allocated over ten years, seeks risk-adjusted market rates of return and positive social impact along its themes: multifamily affordable rental housing, diverse fund managers and quality jobs in the United States; and biotech/healthtech and financial inclusion/fintech in the Global South. It will be invested primarily in the private markets (private equity and venture capital funds) to drive impact, with a small allocation reserved for public-market investments. All capital is managed internally, with the MRI Committee of the Ford Foundation’s Board of Trustees approving all investments.

“As of 31 August 2021, USD 280 million in MRI capital had been committed and USD 137 million funded. While it is much too early to measure financial success given the J-curve nature of private-market investments, the MRI endowment has achieved compounded annual returns in excess of the typical hurdle rate for perpetual foundations (spend rate plus inflation). The private equity and venture capital funds in which the MRI capital is invested have preserved more than 23 000 affordable housing units, served more than 76 million low-income consumers, improved or created nearly 7 000 jobs, and supported 15 companies developing diagnostics, therapeutics and vaccines; 83% of the MRI endowment’s fund managers are owned by women and/or people of colour.”

Contributed by Roy Swan, Ford Foundation.

ESG investing

ESG investing and positive screening are the most common investment strategies for endowed foundations in the sample (both are used by 29 of 71) (Figure 3.3). ESG investing seeks to incorporate information regarding environmental, social and governance risks and opportunities into portfolio investment and management (OECD, 2020[19]). It considers investees’ practices related to ESG issues (such as a company’s carbon footprint, protection of human rights or board independence) and identifies potential long-term risks that may affect the company’s performance by eroding its equity value or limiting its credit lines. For instance, in 2021 the Rockefeller Foundation launched a new ethical investment policy for its endowment (Rockefeller Foundation, 2021[20]). Its investment strategy seeks to generate the highest level of returns prudently while at the same time integrating ethical practices. Its endowment is primarily invested with external investment managers who are expected to consider ESG factors and their implications for asset valuations. While the foundation’s endowment includes investments that yield a market rate of return alongside social and/or environmental impact, it does not actively seek impact (double or triple bottom line) investments (Rockefeller Foundation, 2020[21]).

For foundations entering the responsible-investment space, ESG investing can be a relatively simple place to start. Vehicles such as ESG exchange traded funds (ETFs) allow for passive investment strategies and provide an opportunity for foundations to outsource the screening and constitution of investment portfolios. ESG ETFs invest in a basket of bonds, stocks or other assets and track to a specific sustainable index. Through these funds, foundations can build a diversified investment portfolio at a lower cost than with active investment strategies. In addition to broad sustainable ETFs, there are several thematic ETFs that allow foundations to focus on one specific sustainability theme, such as cardio-vascular health, gender equality or clean energy.

However, ESG investing has its limitations. It has become a lucrative sector and financial firms are developing a wide variety of new ESG products, often without a clear definition of what these products contain (Peirce, 2021[22]). For instance, ESG passive investment vehicles such as ETFs can bundle several assets, some of which may be at odds with the foundation’s values and mission. It is therefore critical that foundations carefully assess the specific assets included in the ETFs they invest in. Furthermore, there is a growing number of third-party independent companies and research groups, with no single methodology to compute ESG scores. Rating agencies can assign different weights to each ESG factor considered, and then aggregate results into a composite ESG score. As this method involves unreliable access to ESG information and human judgement, it results in inconsistency across scores and a lack of transparency about companies’ performance in specific ESG dimensions. For example, a company with a high score on environmental performance can also have high carbon emissions if other environmental factors are given greater weight (OECD, 2020[23]).

Screening

Screening is often done as part of ESG investing. It allows foundations to select investments that fulfil certain criteria or, more broadly, to build investment portfolios that better reflect their mission and values. Foundations can intentionally include, or positively screen, best-in-class companies (those with the best performance relative to industry peers), or companies that engage in desirable behaviours (such as renewable energy companies, entities that create jobs for disadvantaged communities, industries that provide quality jobs for women, etc.). Foundations can also exclude, or negatively screen, companies that engage in unethical conduct or produce objectionable goods (such as investments in firearms, fossil fuels, tobacco, alcohol, etc.). Beyond ESG criteria, foundations can screen investments based on specific investing principles that set their own boundaries when it comes to investing. About 41% of endowed foundations in the sample (29 of 71) use positive screening techniques for their endowments, while 35% use negative screening (Figure 3.3, above).

For example, the King Baudouin Foundation in Belgium invests its endowment with a mix of negative screening and a best-in-class approach. The foundation targets the best performing companies in each sector, based on ESG criteria, and systematically excludes certain sectors, such as the controversial arms industry. Its exclusion criteria draw upon legal criteria (e.g. Belgium’s Mahoux law, adopted in 2007, which prohibits the financing, manufacture, use and holding of cluster munitions) and upon the exclusion list used by the Norwegian Pension Fund (King Baudouin Foundation, n.d.[24]).

Similarly, the UK-based Children’s Investment Fund Foundation (CIFF) has prohibited investments in companies in specific sectors that can harm their mission. Its endowment managers cannot invest in companies that generate income from the production or marketing of tobacco, market breast-milk substitutes (unless they follow the World Health Organization’s code for marketing such substitutes), or in companies that generate 10% or more of profits from fossil fuels or more than 25% of profits from arms. The foundation sets a 12-month time frame to divest from companies that are already in its portfolio and fall within one of the previous categories (CIFF, n.d.[25]).

Divestment is a related investment strategy. It involves selling off shares of specific companies or products. While negative screening can be done privately and independently by a single investor, divestment is generally associated with a vocal movement and widespread media coverage to reprimand a company or industry for its behaviour. In 2019, for instance, the Calouste Gulbenkian Foundation, created by one of the world’s first oil tycoons, sold its shares in Partex, a Portuguese oil extraction company. The foundation is reinvesting the USD 622 million in revenues generated by the sale in renewable energies (Calouste Gulbenkian Foundation, 2019[26]). Meanwhile, 188 foundations have joined the DivestInvest movement, a coalition committed to accelerating the transition to a zero-carbon economy by divesting fossil fuels and switching to clean energy investments (DivestInvest, n.d.[27]). Proponents stress that divestment, media campaigns and public debate are a way for foundations to take a public stance against the fossil-fuel industry, encourage more aggressive policy to regulate it and, in the long run, strip it of its social license to operate. Through divestment movements, foundations also aim to mobilise resources in support of climate-responsible investments.

Some foundations have taken an alternative route. An example is the Hewlett Foundation, a major climate funder, which has not divested from fossil fuels. The foundation views the possible impact from divestment as not worth the financial risk. Instead it seeks to accomplish a larger impact by using its philanthropic resources to support and mobilise additional funding for climate-friendly solutions (Roohi and Keidan, 2020[28]; Hewlett Foundation, 2019[29]).

Social Impact investing (SII)

Social impact investing (SII) provides finance to organisations that address social and/or environmental needs – with the explicit expectation of a measurable social, as well as financial, return (OECD, 2019[6]). More than a third of endowed foundations in the sample invest a share of their endowment through SII, slightly less than those who employ ESG investing and positive screening (Figure 3.3). Because SII is predicated on the intention of having a social impact in addition to financial return, defining and measuring impact is critical (OECD, 2019[6]) (Box 3.2).

This study does not allow determination of the share of foundations’ endowments invested with an impact lens. However, evidence from other contexts suggests that impact investment remains limited. A 2015 survey of 64 large US-based foundations found that most respondents directed 2% of their endowment towards impact investing (Buchanan and Buteau, 2015[30]).

Some foundations note that the need to deliver a positive financial return in tandem with social impact can reduce the field of opportunities for SII. Furthermore, many if not all impact investment opportunities are relatively small and illiquid (i.e. privately traded) (Johnson and Lee, 2013[31]), while the prospect of receiving dividends is uncertain as profits are often reinvested to support investees’ growth. As endowments also need to produce sufficiently high rates of return to secure the foundation’s spending capacity, foundation endowment managers can be hesitant to invest a high share of their endowment with an impact lens.

Box 3.2. Impact standards for financing sustainable development

Achieving the 2030 Agenda is not only about mobilising resources for the SDGs in developing countries, but also about ensuring that those resources are achieving shared sustainable development objectives (OECD, 2019[6]). Impact Measurement and Management (IMM) is the process through which organisations embed impact in decision making, in their investment and business strategy, and throughout all steps of the investment process.

Most organisations are signatories to high-level IMM principles, which are meant to signal a commitment to act to achieve development impact from an investing perspective – and thus to be an impact investor, as compared to an organisation only seeking to mitigate ESG risks. Although these principles have a positive signalling effect, they fail to provide detailed information on how organisations are proactively taking an impact-centred approach, and transparently reporting on their development results. At the same time, standardised metrics and indicators have been developed in an attempt to foster more comparability across investments, and more harmonised external disclosure. However, common indicators and reporting frameworks are not sufficient to prove that an organisation has the right systems in place to seek actively to achieve development results and to report on those results transparently (and thus be classified as a real impact-centred organisation).

In this context, the OECD and the United Nations Development Programme (UNDP) jointly developed the Impact Standards for Financing Sustainable Development (IS-FSD). Recently adopted by the OECD Development Assistance Committee, the standards help all development finance actors find a common language and integrate impact management into investment practices and decision making, with a view to assessing both positive and negative effects on people and the planet. By aligning impact management practices with the Standards, organisations can prove that they qualify as impact investors, and that the organisations they support are impact centred themselves.

The OECD report Social Impact Investment 2019: The Impact Imperative for Sustainable Development calls for action across four areas: financing, policy, innovation and data. In terms of data, the report highlights that it is necessary to: i) facilitate transparent, standardised and interoperable data sharing; ii) ensure funding of data infrastructure; and iii) co-ordinate approaches for assessing investment impact (OECD, 2019[6]).

Philanthropic organisations can play a key role in supporting all three areas of the data impact imperative. First, foundations can adopt existing standards for IMM, including the OECD UNDP Impact Standards for Financing Sustainable Development (IS-FSD). The adoption of the highest standard of practice by foundations would give a strong signal to the market that achieving development impact is central to their strategy. In addition, foundations can support their grantees and investees in adopting solid IMM practices themselves, providing them with the necessary financial and non-financial support.

Second, foundations can support the creation of data-sharing infrastructure. Given their market-building role, foundations have the resources and the capacity to set up data collection initiatives that are independent and provide the market with real-time investment impact data. Third, foundations can be first-movers when it comes to transparency by sharing data on the social and environmental impacts they are helping to achieve through their investments, and that are being achieved by their investees.

Source: OECD Development Co-operation Directorate (DCD).

Shareholder engagement

Foundations can engage with the companies in which they invest provided they hold significant shares. Shareholder engagement involves interactions – between investors and current or potential investee companies – with the aim of improving ESG practices or disclosure (PRI, n.d.[32]). Foundations can raise their voice and help shape corporate conduct through mechanisms such as: proxy voting on topics raised by corporate management; proposing resolutions for other shareholders to vote on; and engaging informally with investees. Evidence suggests that shareholder engagement is one of the most reliable paths to improved corporate behaviour along ESG dimensions (Kölbel et al., 2020[14]). Additionally, strong shareholder rights, including voting, can have significant positive influence over companies’ returns, valuation and operating performance (Gompers, Ishii and Metrick, 2003[33]). Proponents of shareholder engagement endorse it as a long-term strategy to push for more transparency and accountability in corporate behaviour (Godeke and Bauer, 2008[9]). As an example, the policy of the UK-based Wellcome Trust is to engage actively with senior management and vote in meetings of companies in which it has direct holdings to ensure that sustainability, risk and governance issues are appropriately highlighted (Wellcome Trust, 2021[34]).

However, shareholder engagement is at the bottom of the list of investment strategies used by private philanthropy for development, according to the OECD survey (Figure 3.3). Some foundations are sceptical about its effectiveness, as their potential for influence may be limited by other investors with greater assets in the same company. Cost can also deter foundations from adopting active ownership strategies. First, proxy voting services come at a cost. Second, some foundations engage in securities lending, a strategy to earn an additional profit by temporarily transferring their shares to a borrower. But foundations need to be in possession of their assets to exercise shareholder power. They would therefore have to forgo the income from security lending in order to practice shareholder engagement.

Barriers to responsible investment

Interestingly, more than half of the 71 endowed foundations that responded to the OECD survey could not highlight specific factors that make responsible investment challenging or inadequate for the foundation. This finding suggests a possible lack of familiarity among foundation staff with the ins and outs of the foundation’s investment decisions. Foundations that cited specific barriers noted the following concerns.

The potential effect on financial performance is seen as a risk. Among foundations that reported specific barriers, the challenge cited most often is the belief that socially responsible investing can compromise the financial performance of the foundation’s investments (Figure 3.4). The fact that socially responsible investing comprises a wide range of strategies – from ESG investing to impact investing, as outlined above – makes it difficult to establish general statements on its effect on financial performance. A closer look at ESG investing suggests that this concern is not totally unfounded. Evidence is mixed and inconsistent on the performance of ESG investing, both in terms of societal benefit and financial materiality (OECD, 2020[23]; OECD, 2020[19]). This inconsistency can be driven by the wide variety of ESG practices (negative and positive screening, rebalancing portfolios towards entities with higher ESG scores, their combination with other investment strategies that may include a thematic focus), combined with disparate metrics to compute ESG scores and incorporate materiality (OECD, 2020[19]).

Accounting for the social performance of investments is challenging. The difficulty of accounting for the social dimension of ESG discourages some foundations from incorporating social goals into their endowment management. A 2017 review of 12 existing frameworks noted that there are no commonly agreed standards or definition for measuring the social dimension. Definitions are often vague or limited to narrow labour concerns, such as freedom of association, occupational health and equal opportunity, and this makes it difficult for investors to draw meaningful conclusions about a company’s performance (O’ Connor and Labowitz, 2017[35]).

Figure 3.4. Factors that make responsible investing challenging for foundations

A lack of suitable investment opportunities can limit responsible investing. Some foundations found this to be particularly the case when conducting impact investing. Building a sufficiently large investment pipeline and finding investment managers with a strong track record is deemed especially challenging when foundations also seek to align investment portfolios with their programmatic mission.

The legal environment can be challenging. Although few foundations highlighted this as a major challenge, not all national legislation is conducive to responsible investing. In some European countries, like Germany and Spain, national foundation regulations are not supportive of investment strategies that prioritise impact on mission achievement over optimisation of risk and return (European Commission, 2018[36]; Breen, 2018[37]). In the United States, it was only in 2015 that the national tax authorities provided official guidance on the use of mission-related investments (IRS, 2015[38]). This guidance clarified that prudent investment strategies that align with mission are not jeopardising the foundation’s fiduciary duty (IRS, 2015[38]). Finally, in many countries in Latin America, regulatory frameworks restrict the creation of endowments and the protection of their assets, which limits the existence of endowed foundations in the first place (UBS Philanthropy Advisory and Hauser Institute for Civil Society, 2015[39]). An encouraging development is a 2019 law in Brazil that introduces a national framework to regulate the creation and management of philanthropic endowment funds (Fabiani and Davies, 2019[40]; Bonamin et al., 2019[41]).

3.2.3. Grant making can be leveraged to mobilise additional private finance

Foundations can move beyond grant making and choose from a variety of instruments to support their partners and help them mobilise additional, commercial finance. The process of adapting financial instruments to partners’ specific needs is often referred to as tailored finance (Gianoncelli and Boiardi, 2017[42]).

Private philanthropy for development is still conservative in the way it disburses its philanthropic resources. Most foundations in the sample use grants, matching grants and prizes/awards (Figure 3.5). Other instruments like loans, guarantees or equity are less widely used, with 63% of foundations in the sample not currently using any of these three financial mechanisms.

Figure 3.5. Financial instruments currently employed by foundations

Although the use of loans, equity and guarantees remains limited among foundations, they can be beneficial in specific situations. Through loans, foundations can directly support partners that do not have the credit history to access commercial finance. As loans will be reimbursed, foundations can use the same philanthropic capital several times. For instance, the Packard Foundation provided a USD 4 million loan to the African Population and Health Research Center. The loan was used to purchase and renovate real estate in Nairobi, Kenya (David and Lucile Packard Foundation, 2020[43]). Foundations can also issue guarantees to help partners access commercial finance. By agreeing to cover partners’ losses in case of default, up to a given amount, foundations can reduce the risk for traditional credit providers. Guarantees also allow foundations to advance their programmatic goals and unlock commercial finance without spending any money upfront. The Skoll Foundation provides an interesting example. Through a programme-related investment, it granted a credit guarantee to scale up the activities of Riders for Health in the Gambia, which partners with the government to manage and maintain vehicles used to provide health care services in rural communities. Skoll Foundation’s credit guarantee helped Riders for Health to secure a USD 3.5 million loan from Nigeria’s GTBank (Rammohan, 2010[44]).

Foundations can also mix grants with equity investments for promising early-stage ventures. While grants can support the financial survival of new ventures as they establish proof of concept, equity investments can send a positive signal and attract traditional investors’ support. The Bill & Melinda Gates Foundation has made equity investments in biotech start-ups to encourage them to focus on neglected diseases such as malaria and tuberculosis (Brest, 2016[45]).

Foundations’ lack of internal capacity to manage investments is a limitation to engaging with financial instruments other than grants. In some ways, tailored finance can be easier to deploy than sustainable and responsible investing with the endowment as it uses philanthropic capital without challenging the financial conventions that normally guide endowment management. Yet there are still barriers that limit its use in the philanthropic sector. About 28% of respondents highlighted a lack of internal capacity for deal sourcing, due diligence, design and management of an investment portfolio (Figure 3.6). Programmatic or grant-making staff generally come from an academic or non-profit background, and do not always have the needed combination of programme knowledge and financial acumen to oversee investments. Board education is also critical, as trustees are not always well acquainted with legal and tax requirements, and with the due diligence needed to source investment opportunities. Finally, as with the endowment’s investing, national regulations can also constitute a barrier for foundations. Some national legislations lack a definition of social enterprises (OECD, 2019[6]), and in some countries, foundations are only allowed to deploy their capital through grants (Breen, 2018[37]).

Figure 3.6. Largest limitations to engaging with financial instruments other than grants

3.2.4. Foundations are strengthening the ecosystem for private responsible investing

Foundations have played a central role in building a more robust marketplace for responsible investment. For instance, the Global Impact Investing Network (GIIN) sprang out of the Rockefeller Foundation’s efforts to provide a platform that connects and supports an otherwise fragmented impact investing ecosystem. More recently, a group of leading foundations launched the Response, Recovery, and Resilience Investment Coalition (R3 Coalition), which streamlines impact investing to address the large-scale social and economic consequences of the COVID-19 pandemic. The initiative, managed by GIIN, is a collaboration across several impact investing networks.

Foundations have also facilitated the creation of networks that connect actors from different sectors of the responsible investment ecosystem, from corporations, investing firms and family offices to philanthropy, academia and the public sector. For example, the European Venture Philanthropy Association (EVPA), and its sister initiatives in Latin America (LatImpacto), Africa (AVPA) and Asia (AVPN), connect investors from different sectors, build their capacity and raise awareness on investing for impact.

National and regional associations of foundations have also become centres of gravity for philanthropy to learn more about socially responsible investment. In Europe, one example of a working group is EVPA’s Foundations Along the Spectrum of Capital. SwissFoundations, the association of Swiss grant-making foundations, also has dedicated working groups on responsible investing that explore opportunities for foundations to expand their portfolios. In the United States, examples include The Forum for Sustainable and Responsible Investment, a membership association for institutions and individuals engaged in sustainable, responsible and impact investing, and the Mission Investors Exchange, a network that promotes the use of endowments for impact.

3.3. Advocating for a cause to achieve change

Foundations have broadened their ambitions in recent years, moving from narrowly defined interventions to bolder objectives aimed at influencing social systems and informing policy design (Powell and Bromley, 2020[46]). This section delves into foundations’ engagement in advocacy. It clarifies the concept of advocacy, examines foundations’ objectives in advocating for a cause and outlines the strategies they use to achieve these aims. It also considers the obstacles to advocacy that foundations continue to face and proposes good practices for overcoming them.

3.3.1. Advocacy means working to support a cause

Advocacy denotes an activity or set of activities aimed at supporting or defending a cause. This is not the same as lobbying, which involves contact with policy makers to influence legislation. The OECD survey on private philanthropy for development that was conducted for this report considers advocacy to be “an organised attempt to change policy, practice, and/or attitudes by presenting evidence and arguments for how and why change should happen” (OSF, 2010[47]). Under this definition, advocacy comprises not just efforts to influence the public policy agenda and policy design, but also initiatives to change social norms and practices.

While advocacy comprises a wide set of activities to induce change, lobbying is a more narrowly defined form of special interest politics that involves attempts to influence the legislative or regulatory process via contact with lawmakers or members of regulatory agencies (Helpman and Grossman, 2001[48]). Advocacy is considered legitimate and permissible in most countries, whereas lobbying is more contentious and in some countries is explicitly prohibited for private foundations. Initiatives to educate the public are broadly accepted, yet disagreement persists on whether and to what extent foundations should be allowed to engage in lobbying (Box 3.3).

Box 3.3. Legal regulations and restrictions on advocacy

National regulations concerning advocacy by private foundations vary significantly across countries. Some distinguish among different types of activities related to advocacy and outline in detail what is allowed and what is not.

In the United States, where private foundations are tax-exempt organisations under section 501(c)(3) of the Internal Revenue Code, private foundations are prohibited from engaging in campaigns that support or oppose candidates for public office, and their lobbying activities are subject to restrictions (IRS, 2021[49]). Under the law, lobbying includes attempts to influence legislation by contacting or urging the public to contact employees or members of legislative bodies to propose, support or oppose specific legislation, or by advocating the adoption or rejection of legislation. Private foundations are allowed to fund public charities registered as 501(c)(3) organisations that engage in lobbying, but they cannot earmark grants for lobbying (Atlantic Philanthropies, 2008[50]; Bolder Advocacy, 2012[51]). The only exception where private foundations are allowed to engage in what is defined as lobbying is in self-defence, i.e. attempts to influence specific legislation that affects the foundations’ existence, powers and duties, tax-exempt status or the deductibility of contributions (Bolder Advocacy, 2012[52]; Council on Foundations, n.d.[53]). Advocacy to educate the public on policy issues through educational meetings, dissemination of educational materials or other initiatives is not considered lobbying (IRS, 2021[49]). This leaves foundations space to influence public policy and engage in advocacy without jeopardising their tax-exempt status.

Other countries also prohibit foundations from engaging in partisan political activities, i.e. supporting or opposing a political party, but allow them to engage in lobbying aimed at influencing legislation. In South Africa, the Income Tax Act [section 30(3)(h)] prohibits public benefit organisations from using their resources to support, advance or oppose a political party, but does not explicitly prohibit lobbying (Council on Foundations, 2020[54]). Similarly, in the United Kingdom foundations may engage in lobbying and advocacy as long as these activities are conducted on a non-partisan basis and promote the foundations’ charitable purposes. However, foundations cannot be established to pursue a political purpose; hence advocacy or lobbying cannot be the only approach by which foundations pursue their mission (Dafne and EFC, 2020[55]; Foundation Center, 2012[56]).

In a recent publication, the Donors and Foundations Networks in Europe (Dafne) and the European Foundation Centre (EFC) provided a detailed overview of the legal and fiscal regulation of foundations in 40 countries across Europe (Dafne and EFC, 2021[57]). It found that in the Nordic countries, specifically Denmark, Finland, Norway and Sweden, hardly any limitations are specified in civil or tax law concerning political or general lobbying and advocacy activities.

Source: Authors’ elaboration.

The line between advocacy and lobbying is blurred in public discourse. Lobbying is often seen as a channel to promote private interests above the broader well-being of society (Keidan, 2020[58]). One reason for this perception is that lobbying has historically been dominated by large corporations that pursue private interests and whose influence offsets the lobbying activities of the non-profit sector (Keidan, 2020[58]; Alemanno, 2021[59]). Furthermore, there is some scepticism towards foundations’ efforts to influence policy. The harshest critics portray foundations’ involvement in advocacy as an illegitimate exercise of power that allows wealthy individuals and corporations to distort public policy decisions while benefiting from tax exemptions (Raman, 2011[60]; Reich, 2018[61]). This negative view, and measures foundations can take to counter it, are discussed further below.

3.3.2. Advocacy aims to influence policy and shift social norms

Foundations committed to systems change aim to address the root causes rather than the symptoms of social issues in order to achieve lasting change (Ashoka & McKinsey, 2020[62]).2 Depending on the applicable legal framework, foundations can influence the underlying structures and mechanisms that hold a system in place. They can change formal rules by mobilising policy makers and the public around the impact of existing policies and possible alternatives. Foundations can also use advocacy to reshape informal rules such as conventions, values, social beliefs and behaviour (Ferris and Williams, 2010[63]). Since formal and informal rules interact with each other, efforts to change policies and social norms may reinforce or complement each other. Changing collective behaviour is more likely to succeed if new laws and social beliefs are not too distant from each other (Bicchieri, 2016[64]). Changes in formal rules alone may have limited effect if social norms push in the opposite direction, and vice versa (Kinzig et al., 2013[65]; Bicchieri, 2016[64]).

In the OECD organisational survey of foundations conducted for this report, 84 of the 103 respondents (82%) reported engaging in advocacy – either indirectly, through networks, collaboratives or grantees, or directly, through in-house leadership or advocacy teams. Among the remaining 19 foundations, 15 reported that they do not engage in advocacy and 4 chose not to respond to the question.

Of the foundations that engage in advocacy (directly or indirectly), more than three-quarters seek to influence the public policy agenda and/or inform policy design (66 of the 84, or 79%), and a similar proportion strives to change social norms and behaviour (69 of the 84, or 82%) (Figure 3.7).

Figure 3.7. Why foundations engage in advocacy

Advocating to influence policy

Foundations seeking to influence public policy acknowledge that their budget is small compared to public- sector spending and that national policies and programmes tend to reach a broader public than interventions funded or implemented by foundations themselves (Orensten et al., 2020[66]). They also recognise that grant making may not suffice to address the root causes of development challenges. Some foundation leaders therefore consider the use of their resources for policy advocacy a better investment than allocating all funding to solve social problems directly via grants for intervention programmes (Raman, 2011[60]; Orensten et al., 2020[66]).

Foundations can use their full range of resources – money, knowledge and networks – to influence different stages of the policy-making process, from problem definition and policy design to programme implementation (Ferris and Mintrom, 2009[67]; Elson and Hall, 2016[68]). For example, foundations can conduct or fund research to identify the determinants of social problems and analyse the impact of current policies and legislation to identify their shortcomings. An example is the Open Society Foundations’ (OSF) report “Ethnic Profiling in the European Union”, which makes the case that ethnic profiling – the use in law enforcement of generalisations based on ethnicity, religion, race or national origin – is pervasive, discriminatory and inefficient (OSF, 2009[69]). Arguing that better alternatives exist to identify suspects, the report recommends that national governments and the European Union both outlaw ethnic profiling and collect data to track law enforcement.

Foundations can also support pilot projects to explore viable policy alternatives and create spaces to disseminate new policy ideas and innovative approaches (Ferris and Mintrom, 2009[67]). For example, Google.org supports the non-profit organisation GiveDirectly in running the world’s longest-term universal basic income (UBI) study, which is in progress in rural Kenya (GiveDirectly, n.d.[70]). The project aims to explore the potential of UBI to improve livelihoods and close knowledge gaps on the effectiveness of long-term unconditional cash transfers (more information on demonstration pilots can be found in Section 3.3.3 below). Furthermore, foundations can promote exchanges among relevant stakeholders and forge coalitions to build a critical mass in support of policy change (Ferris and Mintrom, 2009[67]). In the run-up to the Paris Climate Conference in 2015 – the 21^st Conference of the Parties (COP21) – foundations teamed up to create the International Policies and Politics Initiative (IPPI), a platform used by various actors, including philanthropic organisations, non-governmental organisations (NGOs) and think tanks, to better co-ordinate and catalyse climate action and to promote ambitious outcomes of the COP21 (Morena, 2016[71]; Aykut, Foyer and Morena, 2017[72]).

Advocating to shift social norms

Many foundations use advocacy to increase public awareness of a particular issue in the aim of changing collective beliefs and behaviour. A prominent example of advocacy on this front is the Robert Wood Johnson Foundation’s work to shift social norms around smoking in public places, such as indoor sporting events or hospitality venues, in order to combat tobacco addiction in the United States (RWJF, 2011[73]). Between 1991 and 2009, the foundation invested nearly USD 700 million to curb tobacco use and help smokers quit. Together with researchers, advocates and broader coalitions, it promoted excise taxes, bans on indoor smoking and bans on smoking advertising targeting youth. It also made efforts to expand access to health services such as smoking cessation treatments. The foundation reported that these efforts were associated with: declining smoking rates, particularly among high school students; the establishment of new infrastructure for the prevention and treatment of smoking addiction; and increased support for smoking bans in public places. Another example is Population Foundation of India’s programme to change discriminatory gender norms and inform the population on family planning issues (Population Foundation of India, n.d.[74]). To help shift social norms and behaviour, the programme uses communication via entertainment. Reaching out via TV and radio drama series, social media and a chatbot, it provides women, men and young people information on sexual and reproductive health. An increasing body of evidence shows promising results of the use of mass media to change social norms and behaviour (Bicchieri, 2016[64]; Haider, 2017[75]).

However, even as foundations seek to change the structures and mechanisms that hold systems in place, their ambitions can conflict with the resources and strategies deployed. Foundations often provide short-term financial resources for specific purposes (OECD, 2018[11]), yet effective advocacy aimed at changing social norms requires long-term support and a high degree of flexibility. Short funding horizons and restrictions on how the money can be spent constrain grantees’ capacity to adapt their strategies to changes in external circumstances and move away from piecemeal solutions to structural problems. Instead of imposing concrete spending guidelines, foundations could consider providing core funding, and then serving as “thought partners” to discuss how the funds could be used (Ashoka & McKinsey, 2020[62]). They could also consider longer funding horizons to increase the financial stability of implementing partners. This requires a more trust-based approach, with foundations granting greater responsibility to their partners on the ground. A pioneer on this front is the Dutch Postcode Lottery, which mainly provides long-term core support to its grantees (Wallace and Saxton, 2018[76]). In 2019, two-thirds of its funding was provided as core support (OECD, 2021[77]). One of the foundation’s long-term beneficiaries is Human Rights Watch, which recently received additional funding for its research and advocacy work (Human Rights Watch, 2020[78]; Human Rights Watch, 2019[79]).

Advocating for other purposes

Advocacy can also be used to raise additional resources for a cause, to hold policy makers accountable for their actions and to improve the enabling environment for philanthropy. In the OECD survey, more than two-thirds of the foundations that engaged in advocacy (59 of the 84, or 70%) reported using advocacy to mobilise more funding and find co-operation partners by increasing the visibility of a cause. For example, the Save Our Future movement sought to encourage international investment in children’s education during the COVID-19 crisis (Save Our Future, 2020[80]). Another example is the Equality Fund, which leverages resources to promote feminist movements and shift power dynamics. The Fund was launched by the Canadian government with strong support of philanthropy through the network Philanthropy Advancing Women’s Human Rights (PAWHR), which is committed to strengthening the women’s rights ecosystem (Equality Fund, n.d.[81]; Equality Fund, n.d.[82]).

A smaller share of respondents (38 of the 84, or 45%) use advocacy to ensure that citizens are equipped with the information, oversight and tools they need to hold political representatives accountable. For example, the MacArthur Foundation promotes Nigerian-led efforts to curb corruption and strengthen accountability (MacArthur Foundation, n.d.[83]). This includes: support for independent media and investigative, data-driven journalism; funding civil society organisations working to raise accountability and advocating for policy change; supporting entertainment organisations that address corruption-related issues via television, radio and online formats; and working with religious leaders and interfaith organisations to promote the anti-corruption campaign and help shift social norms and behaviour.

Finally, about two-fifth of survey respondents that engaged in advocacy use it to promote an enabling environment for philanthropy (34 of the 84, or 40%). An example is the Worldwide Initiatives for Grantmaker Support (WINGS), a network of more than 100 philanthropy associations and support organisations. WINGS calls on governments to provide the conditions and policies that enable the philanthropic sector to do its work, particularly at a time when restrictions on domestic and cross-border philanthropy are growing (Ribeiro, 2016[84]; WINGS, 2021[85]).

3.3.3. Advocacy strategies are collective and take various forms

Foundations engage in advocacy collectively, not individually, through networks and partnerships. Most of the 84 foundations in the sample that engage in advocacy do so indirectly as part of a broader network or donor collaborative (70 of the 84, or 83%) or by supporting grantees’ efforts to promote or defend a cause (60 of the 84, or 71%) (Figure 3.8). A slightly smaller but still substantial share (56 of the 84, or 67%) also use their own leadership or advocacy teams to engage in advocacy, although no foundation does this exclusively. Interviews with key respondents indicate that some foundation leaders see their implementing partners as having greater expertise and legitimacy to influence policy, social norms and practices in the local context.

Figure 3.8. How foundations engage in advocacy

Most foundations in the sample use more than one channel to engage in advocacy. Almost half (39 of the 84, or 46%) report advocating through all three channels: networks, grantees and their own advocacy teams or in-house leadership. For example, the Bill and Melinda Gates Foundation has its own advocacy teams but also provides grants to non-profit organisations such as Malaria No More and global networks like the Roll Back Malaria Partnership to strengthen global advocacy in the fight against malaria (BMGF, 2006[86]; BMGF, n.d.[87]; BMGF, 2011[88]). In addition, the Open Society Foundations are currently using multiple channels to promote equal access to COVID-19 vaccines, including financial support for the People’s Vaccine Alliance, a coalition of organisations and activists campaigning for vaccine equity (The People’s Vaccine, n.d.[89]; OSF, 2021[90]). Another example is the World Diabetes Foundation, which advocates for greater focus on non-communicable diseases (NCDs) in global, regional and national health and development agendas. It works through a variety of channels, including in partnership with the NCD Alliance, a civil society network committed to better prevention and control of NCDs, as well as engagements with the World Health Organization (WHO) at different levels (NCD Alliance, 2021[91]; WDF, n.d.[92]).

The interviews indicated that foundations use different channels to pursue different objectives. One foundation leader said that the in-house team was used for advocacy to shift common practices in the philanthropic sector, while support of grantees’ efforts was the channel used to influence the policy agenda and inform policy design. Another expert said that in-house leadership was used when the foundation’s leaders had already established credibility in the field, while grants were provided when other organisations or voices were better suited to promote a cause.

Evidence gaps persist concerning the share of foundations that provide grants for advocacy and the proportion of funding allocated to advocacy efforts. In addition, little is known about the evolution of grant making for advocacy and the sectors supported by these grants.

Foundations use a range of strategies to advocate for a cause. They include demonstration pilots, research and dissemination, capacity building, media outreach and grassroots organisation.

Demonstration pilots involve the small-scale implementation of programmes to generate knowledge about policy or programme alternatives that can be implemented at scale if proved successful. Of the 84 foundations engaged in advocacy, 76 said that they always, often or occasionally used demonstration pilots (Figure 3.9). A prominent example of a successful pilot is the Ultra-Poor Graduation Approach, a holistic programme to lift people out of extreme poverty (see also Box 3.7). This approach was used by an NGO in Bangladesh, the Bangladesh Rural Advancement Committee (BRAC). When the pilot achieved promising results, the Ford Foundation teamed up with the Consultative Group to Assist the Poor (CGAP), a global partnership of leading development organisations and donors, to test and adapt the Graduation Approach across eight countries in Asia, Africa and Latin America (Ford Foundation, n.d.[93]; Thacker, 2017[94]). Based on the positive results of this effort, the Ford Foundation and CGAP developed a strategy to promote the Graduation Approach as an effective measure to combat extreme poverty (Ford Foundation, n.d.[93]).

Figure 3.9. Advocacy strategies used by foundations

Research and dissemination of the findings of academic scholars, think tanks or other experts is conducted by most foundations that engage in advocacy (73 of the 84, or 87%). This strategy may use primary research, reviews of existing evidence, policy analysis and evaluation. The aim is to bring rigorous evidence to policy debates and encourage evidence-based decision making.

Capacity building is also used by foundations on a regular basis to help other organisations improve their advocacy efforts (70 of the 84, or 83%). As noted above (Section 2.5.3), many foundations have come to realise that they can support grantees with resources that go beyond financial support. This includes investing in capacity building – helping individuals directly engaged in advocacy to develop their skills; convening experts and relevant stakeholders; and building bridges across organisations, including grassroots bodies, research institutes and public authorities. For example, the OSF’s policy and advocacy branch in Europe, the Open Society European Policy Institute, provides inputs on EU processes and country programming to help foundations and the implementing partners of OSF initiatives better understand the political economy (HRDN, n.d.[95]). Furthermore, Nadace OSF provides workshops and networking events for civil society organisations in order to strengthen their ability to advocate for public interests (Nadace OSF, n.d.[96]).

Media outreach is another frequent tactic. About four-fifths of the foundations in the sample that engage in advocacy, regularly use social media, the press or television to share evidence and arguments for why and how change should happen (68 of the 84, or 81%). Emerging technologies enable foundations to identify potential supporters, target a specific audience and test messages in real time at low cost (Guerriero and Wolf Ditkoff, 2018[97]). Such technologies include listening reports, which track trending themes on social media in order to identify opportunities to advocate and craft compelling messages, and online polling tools that test how messages are resonating and help target convincing messages to a particular audience.

Movement building or grassroots mobilisation is used by 57 of the 84 foundations that engage in advocacy (68%) to increase the visibility of public efforts to advocate for a cause and to give marginalised groups a voice. Although the majority of foundations that engage in advocacy support grassroots movements in their efforts to defend a cause, it is the least cited advocacy tactic. One example is the donor collaborative Girls First Fund, which supports community-based organisations and women-led grassroots efforts to eliminate child marriage (Girls First Fund, 2021[98]). The fund receives financial support from the Children's Investment Fund Foundation (CIFF) and the Ford Foundation, among others. CIFF also provides grants to support communications for youth climate leaders (CIFF, n.d.[99]) and to develop channels of engagement between youth activists, the C40 Cities Climate Leadership Group and C40 mayors (CIFF, n.d.[100]).

3.3.4. Barriers to advocacy include a lack of resources and fear of negative publicity

The barriers to engagement in advocacy cited most frequently by foundations are a lack of time, resources and the knowledge needed to advocate successfully, and the risk of facing negative publicity.

Many foundations have limited organisational capacity to advocate professionally and, therefore, successfully. Almost one in three foundations in the sample (32 of 103 foundations, or 31%) report that constraints on resources and time as well as a lack of knowledge pose obstacles to their engagement in advocacy. Successful advocacy requires staff that have the skills to assess when advocacy efforts are promising and how to allocate time and resources effectively. It also requires staff to have a profound understanding of the local context, relevant stakeholders and different advocacy strategies in a given policy environment. Finally, foundations need staff or partners who can provide quick feedback and data to advance advocacy efforts and be responsive to changes in the external environment (Atlantic Philanthropies, 2008[50]).

Furthermore, almost one-third of foundations in the sample (30 of 103 foundations, or 29%) fear that engagement in advocacy could lead to negative publicity or adversely affect perception of their work (Figure 3.10). This fear may be partially grounded in adverse public perceptions of lobbying and political influence. As noted above, the line between lobbying and advocacy is not always clear-cut, and lobbying is often seen as an unaccountable channel of power that distorts policy decisions towards corporate interests (Keidan, 2020[58]).

Figure 3.10. Barriers to engagement in advocacy

Scepticism regarding advocacy by foundations has been documented in the United States (Vallely, 2020[101]; Tompkins-Stange, 2020[102]). For example, the Gates Foundation has come under fire for its alleged influence over US education policy, with critics challenging its approach to the reform of public schools (Cody, 2014[103]; Vallely, 2020[101]). Some critics consider the involvement of tax-exempt foundations in advocacy to be an illegitimate exercise of power enabling wealthy individuals and corporations to influence policy in their favour (Raman, 2011[60]; Giacomin and Jones, 2021[104]). Evidence shows that this view is not entirely unfounded. For example, one study shows that shortly after US corporations provided grants to non-profit organisations, these same non-profits were more likely to comment on new policy proposals that favoured their benefactors’ bottom line (Bertrand et al., 2018[105]). A separate study found that grants by the charitable foundations of major corporations in the United States tend to serve the interests of politicians who are important for the corporations’ profitability (Bertrand et al., 2020[106]). Another phenomenon is “astroturfing”, through which corporations support fake grassroots voices in order to pursue corporate interests (Keidan, 2020[58]; Alemanno, 2021[59]). Foundations can reduce scepticism towards their engagement in advocacy by introducing checks and balances in their advocacy work and implementing clear accountability structures (Alemanno, 2020[107]; Keidan, 2020[58]). They can make efforts to increase transparency in grant making and advocacy, to work in close partnership with local organisations and relevant stakeholders, and to promote a better balance between private and public interests in policy debates (Box 3.4).

Box 3.4. Good practices for countering scepticism about advocacy by foundations

A first step towards overcoming scepticism towards policy advocacy is to demonstrate accountability by investing in transparency and improved governance. Foundations could: disclose grant-level information to increase transparency on who funds what and where, in instances where this does not pose direct risks to grantees; explicitly communicate the objectives behind their grant making and advocacy efforts; and provide feedback to potential grantees whose funding is not approved on why they were rejected (Alemanno, 2020[107]). In addition, foundations could guarantee independence from corporate funders by working on issues that are not directly connected to the business activities of the corporation with which they are associated. Finally, foundations should be prepared to answer critical questions and justify the routes they are taking by referring to credible evidence and research.

A second step is to work in close partnership with other organisations and relevant local stakeholders rather than organising advocacy initiatives unilaterally or detached from local ecosystems. Foundations could continue supporting local organisations in their efforts to inform policy debates and convene like-minded organisations to align their messages. This does not suggest that foundations should hide behind the advocacy work of other organisations, but that they should ensure that their advocacy efforts are supported by a wide network of local actors and embedded in their work.

Furthermore, foundations can counter the image of policy advocacy as an illegitimate instrument of power by striving to increase diversity in political discourse and communicating this aim effectively. While companies lobby for private interests, foundations can promote a better balance between private and public interests by lifting up voices that have been left unheard and representing the interests of those who are not part of policy debates, such as future generations or the voices of women and girls in some countries (Reich, 2018[61]). The non-profit civic startup The Good Lobby works to balance the influence of special-interest groups in policy making by promoting civic engagement and facilitating unconventional collaborations among NGOs, progressive corporations and foundations to inform policy decisions, disseminate new policy ideas and hold political representatives accountable (The Good Lobby, 2021[108]). Foundations can also promote civic engagement by supporting grassroots organisations and giving visibility to different perspectives. In the OECD survey, support for grassroots movements was the least frequently used advocacy tactic, but good examples in this field are evolving. For instance, the global philanthropic organisation Luminate seeks to promote civic empowerment to enable meaningful and inclusive participation in governance, improve equitable access to public services and ensure accountability of those in power. To pursue this aim, Luminate supports local organisations and focuses on amplifying and defending the voices of excluded, marginalised and underserved communities (Luminate, 2021[109]). Another example is the Omidyar Network’s grants to grassroots organisations in Kenya that are seeking to elevate public debate and shape public policy surrounding the accelerated issuance of a new digital ID system in response to the COVID-19 pandemic (Omidyar Network, 2020[110]).

Finally, established platforms and networks of philanthropic organisations can facilitate safe spaces to discuss contentious issues and establish standards of responsible advocacy. An example is the PEXforum, a conference on European philanthropy that addresses foundations’ engagement in advocacy as a key priority. Discussions at the first annual forum, held in 2020, resulted in a joint project called Philanthropy Advocacy that is to be a hub for “monitoring, legal analysis and policy engagement for European philanthropy”. It was developed by the Donors and Foundations Networks in Europe and the European Foundation Centre (Dafne, 2021[111]; Dafne and EFC, 2021[112]).

Difficulties in measuring and reporting tangible results of advocacy efforts were cited as a barrier to engagement in advocacy by 25 out of 103 foundations (24%). While rigorous evaluation might be possible for well-defined campaigns, it can be difficult to attribute changes in norms, practices or policies to advocacy efforts that comprise multiple strategies. For example, mass-media communication campaigns have been rigorously evaluated (Haider, 2017[75]; Bicchieri, 2016[64]), and it might be possible to assess whether demonstration pilots have been brought to scale or replicated to expand the evidence base. But assessing the impact of other advocacy strategies, such as the support of research or grassroots movements, can prove difficult. Changing entrenched social norms and behaviours takes time, and even successful approaches can face setbacks due to changes in external factors. A promising new approach would entail measuring advocacy success against improvements in the advocacy capacity of a given organisation (Alemanno, 2020[107]; Alemanno, 2021[59]). In other words, regardless of the outcome in terms of changes in policy or social norms, it should be possible to evaluate the improvement of the relevant organisation against its previously defined advocacy capacity baseline.

Less frequently cited barriers include lack of credibility for successful advocacy in a specific thematic area (14 of the 103, 14%); limited knowledge of legal restrictions or of tolerance for advocacy in countries where the foundation operates (8 of the 103, 8%); and fear of putting implementing partners at risk (8 of the 103, 8%).

3.4. Learning through evaluation of philanthropy’s effects

Private philanthropy for development strives to realise tangible improvements, such as reducing illness, enhancing learning or fostering women’s economic empowerment. Experience shows that not all well-intentioned investments achieve their goals, and some may even unintentionally cause harm. Whether the grants or programmatic efforts of foundations translate into real changes for people is therefore a central question.

Monitoring and evaluation (M&E) are at the heart of organisational learning. Monitoring provides ongoing insights on performance and results achieved to enable managers to correct course, learn, be accountable and communicate. Evaluations involve the systematic and objective assessment of a planned, ongoing or completed intervention, its design, implementation and results. The aim is to determine the relevance and fulfilment of objectives, and the coherence, effectiveness, efficiency, impact and sustainability of the intervention (OECD, 2002[113]).

Well thought out M&E strategies, developed at the outset, are essential to test innovations in programme design or service delivery, and to shed light on approaches that improve development outcomes. Assessing whether a programme is responding to existing needs and priorities, reaching the people it aims to benefit, delivering planned results and, importantly, having a concrete positive and lasting impact on people’s lives is also crucial for allocating resources effectively. When evaluations rely on suitable, rigorous scientific research methods and are published transparently, they can constitute a global public good and benefit communities, researchers, practitioners and policy makers. Finally, monitoring and evaluation constitute the basis for transparency and accountability. At a time when governments and civil society are increasingly demanding accountability from philanthropic actors, robust and objective evaluations can yield credible evidence on philanthropy’s contribution to development.

This section provides an overview of foundations’ M&E practices. It sheds light on how foundations are learning from evaluations, the types of evaluations they employ and some of the challenges to using what is learned and communicating lessons with the field.

3.4.1. How are foundations learning from M&E?

Foundations are developing in-house evaluation capacities. Of the foundations active in developing countries that took part in the OECD organisational survey, around half (53%, or 55 of 103) have a dedicated evaluation person, unit or department, separate from the programme department (Figure 3.11). These in-house evaluation teams generally have a dedicated budget for monitoring, evaluation and learning (for 73% of respondents with an evaluation unit or staff).

Figure 3.11. Foundations with a dedicated evaluation person, unit or department, separate from the programme department

Evaluations have a dual purpose: promoting both learning and accountability. Foundations’ evaluation staff or units have a range of mandates. The most common are to encourage the use of monitoring, evaluation and research data to improve the foundation’s grant making or programmatic strategy; to conduct or commission evaluations of the foundation's initiatives/programmes; and to provide accountability to the board. It is less common for the evaluation staff or units to lead capacity building for partners or foundation staff (Figure 3.12).

Figure 3.12. Purpose of the foundation’s evaluation person, unit or department

Reporting lines ensure the independence and credibility of the evaluation function, and create feedback loops to ensure action is taken on findings and recommendations. In most cases, the head of evaluation reports to the foundation’s CEO or the board (Figure 3.13). Many also report to senior management or programme teams to support learning. In only a handful of foundations is there a direct reporting line with the communications department. This suggests that evaluation is generally considered as a tool to improve the foundation’s strategy and impacts.

Having a dedicated evaluation person, unit or department can be an important step to improve M&E capacities and influence. It can ensure that the unit or staff has the specific technical skills and the explicit mandate to plan, commission and disseminate evaluation results, while also supporting adequate monitoring throughout implementation. When the head of evaluation reports to the foundation’s board or senior management, it creates a direct channel for evaluation findings to inform the strategic choices of foundations at the highest level. Dedicated evaluation staff or units can also enhance the coherence and synergies across a foundation’s monitoring, evaluation and learning efforts, as they have a comprehensive vision of all ongoing and planned evaluations across teams and portfolios. However some foundations, and particularly smaller ones, may not have the resources to designate a team or person for evaluation. In these cases, some foundations are including a decentralised M&E function, whereby the foundations’ programme staff co-ordinate monitoring, evaluation and learning within their specific portfolio. Other foundations are outsourcing the M&E function to learning partners (evaluation consultancies, evidence brokers or academics).

Figure 3.13. To whom does the head of evaluation report?

Some foundations are starting to build learning agendas to identify gaps in knowledge, co-ordinate evaluations across different portfolios and encourage evidence sharing internally and with other stakeholders working on similar issues (Box 3.5). These agendas are iterative documents that outline a set of critical open learning questions and activities to guide an organisation’s evidence building and decision making. For example, the Hewlett Foundation regularly publishes detailed overviews of its sectoral strategies, including the specific questions it aims to answer with its learning partners. One such strategy focuses on approaches to improving public service delivery through enhanced transparency and accountability between governments and their citizens (Hewlett Foundation, 2018[114]). The Jacobs Foundation has also developed a learning agenda to better understand how heterogeneity and individual differences among children and youth affect learning (Jacobs Foundation, n.d.[115]). Similarly, the Laudes Foundation has developed a learning agenda to advance its mission of promoting a climate-positive and inclusive economy (Laudes Foundation, 2021[116]). Setting up a relevant agenda generally requires involving a broad set of stakeholders, from policy makers and academic researchers to implementing partners, who can raise issues important in their specific context and highlight promising or innovative solutions that warrant further evidence (Nightingale, Fudge and Schupmann, 2018[117]). Foundations also use evidence gap maps, systematic reviews and meta-analyses to take stock of evidence on specific questions and inform both programme design and future evaluations and research.

Box 3.5. Building learning organisations

Fondation Botnar is a Swiss foundation committed to improving the health and well-being of young people in urban environments. Acknowledging the complexity of social change, the foundation is developing a learning and evaluation system. The system’s goal is to help the foundation understand what difference it makes, to whom and how. It involves generating utilisation-focused evidence to inform strategic decision making and promote reflexive adaptation on this basis, and to ensure a participatory and inclusive approach to evaluating the contribution and outcomes of selected initiatives and the effectiveness of the different approaches taken to achieve them.

To facilitate the development of this comprehensive system, in 2017 the foundation established a strategic learning function including a Chief Learning Officer (CLO) and a Strategic Learning Manager (SLM). Their task is to position strategic learning and evaluation (SLE). The CLO and the SLM, with external experts, established an initial learning agenda with an organisational theory of change and priority learning questions at the foundation level (e.g. “To what extent and in what ways is Fondation Botnar’s role evolving to have the greatest funding impact?” “To what extent and in what ways are our assumptions and understanding of the potential for digital and AI-based solutions to drive long-term outcomes evolving?”). The agenda supports foundation staff in the design of a learning and evaluation strategy for specific portfolios and programmes, and facilitates activities for staff and partners to draw on M&E data to refine programmatic approaches.

Looking ahead, the foundation will place greater efforts on building the M&E and learning capacity of partners in low- and middle-income cities, and on deepening participation in and use of its processes.

Contributed by Aline Cossy-Gantner and David Suhr, Fondation Botnar.

The Jacobs Foundation is devoted to the creation of learning ecosystems in diverse contexts that provide children with effective knowledge, skills, attitudes, tools and equitable opportunities to reach their full learning potential and thrive together. The strategy is grounded in the commitment to being a leading learning foundation that embraces a culture of learning and proactively shares what is learned to inspire systems change beyond the foundation’s direct reach.

In 2021, the foundation developed a learning agenda for its new Strategy 2030. First it identified priority learning areas in alignment with its theory of change. It then worked to formulate and prioritise a set of strategic learning questions designed to increase the knowledge base in key areas of child learning and development and support a better understanding of the most impactful role the foundation can play. In doing so, the foundation engaged with its stakeholders, partners and peers to ensure that the learning agenda is relevant and meaningful in advancing shared priorities. In addition, the foundation brought onboard a Learning & Evaluation partner – a trusted thought-partner leading the implementation of a robust but agile Monitoring, Evaluation, and Learning (MEL) strategy that supports the Jacobs Foundation in ensuring that Strategy 2030 is as impactful as it can be.

Looking ahead, the Jacobs Foundation considers it is essential for funders to engage in greater collaboration around learning, including exploring opportunities to foster joint learning activities and support increased alignment and transparency in how research and evaluation work is designed and shared. In this context, openly communicating about the foundation’s learning strategy is crucial to increase visibility and encourage opportunities for constructive engagement and honest exchange.

Contributed by Donika Dimovska, Jacobs Foundation.

3.4.2. What types of evaluations are foundations employing?

Foundations’ evaluation efforts focus primarily on relevance and efficiency of programme design and implementation, while impact evaluations and cost-effectiveness analyses are less common. There are many types of knowledge, and correspondingly many useful evaluation methods that can be used (Gertler et al., 2016[118]) (Box 3.6).

Box 3.6. Tools for monitoring, evaluation and learning: Definitions

Needs assessments, also referred to as context analysis, gap analysis or needs analysis, help to identify the problem and provide insights on its likely source and extent. They focus on the gaps between current results and desired results.

An intervention design or theory of change is a roadmap that outlines the causal pathway through which an investment (programme) works to produce outputs and influence outcomes. Theories of change include assumptions about how the programme will work. To be sound, they must be informed by rigorous evidence.

Monitoring data can help understand what goals are being achieved or not.

Process evaluations assess how a programme is executed, focusing on whether it was implemented as designed, whether milestones are attained well or efficiently, and whether intended beneficiaries are reached.

Impact evaluations establish the causal link between an intervention and outcomes. At the heart of impact evaluation is comparison using counterfactual methods: to the extent possible, the evaluation team compares outcomes at sites, communities or people supported by the programme with similar groups not supported by the programme. The comparison group, or “counterfactual”, provides a measure of what would have happened in the absence of the programme. The best method for establishing a solid counterfactual, when properly designed and conducted, is randomly assigning entities from a sufficiently large sample to the comparison and to the treatment group.

Cost-effectiveness analysis estimates the ratio of the amount of “impact” an approach can achieve for a certain amount of cost. Comparative cost-effectiveness analyses compare the relative efficiency of different approaches that aim to achieve a similar outcome.

Programmatic evaluations assess the relevance, coherence, effectiveness, efficiency, outputs and sustainability of a given programme, judging the merit or worth of the intervention and its results.

Source: (Gertler et al., 2016[118]; Watkins, West Meiers and Visser, 2012[119]; OECD, 1991[120]).

Foundations active in developing countries frequently use needs assessment, theory of change, monitoring evaluation and programmatic evaluations. They also use result reports from field visits, case studies, feedback from people involved in or benefiting from their programmes, and testimonials. Cost-effectiveness analyses and counterfactual impact evaluations are less frequently used (Figure 3.14).

Figure 3.14. Methods employed by foundations to assess their programmes and grants

Impact evaluation remains the least used evaluation method by private philanthropy despite its proven potential to improve the effectiveness of development interventions. Around half of respondents have never employed an impact evaluation, or highlight that such an approach does not apply to their work. Rigorous impact evaluations are an important tool for learning about the components and dosage that make an intervention effective. They also identify cost-effective approaches that can be scaled and, more broadly, provide robust scientific knowledge to inform development policy and practice (Box 3.7). Some ODA providers are actively supporting rigorous impact evaluations of development policy and programmes. For instance, in 2013, the United Kingdom, partnered with the World Bank’s Development Impact Evaluation (DIME) group to create a USD 180 million multi-donor trust fund to support impact evaluations. The fund, i2i (Impact Evaluation to Development Impact), is co-financed by the European Union (EU), the Norwegian Agency for Development Co-operation (Norad), and the World Food Programme (WFP), and has received support from a number of multilateral and bilateral organisations (World Bank, 2019[121]).

Box 3.7. How impact evaluation of the Graduation Approach helped lift millions out of poverty

The Graduation Approach has achieved success by showing how to improve the livelihoods, income and well-being of millions sustainably. Pioneered by the Bangladesh Rural & Advancement Committee (BRAC), a local NGO, the Graduation Approach has an ambitious M&E and learning agenda, including rigorous randomised evaluations, process evaluations and qualitative household surveys. This agenda was critical to growing a pilot programme into a global model that benefits approximately 14 million people across 50 countries.

The BRAC programme provided a mix of cash or food consumption support, cash or productive asset transfers, financial literacy training, life coaching on life skills and access to basic health or education. It showed promising results early on. A first randomised evaluation found that, seven years after participation, targeted households were continuing their path out of poverty, exhibiting 37% growth in annual income (Balboni et al., 2015[122]).

In view of the encouraging evidence, the Ford Foundation and the Consultative Group to Assist the Poor (CGAP) collaborated on 10 pilots based on the BRAC model across eight developing countries from 2006-14. Together they set up a research and learning plan to monitor the effects of the intervention and disclose the results. Despite adjustments made to adapt to the different contexts, randomised impact evaluations conducted in six of the targeted countries recorded similar results to those attributable to the original BRAC programme (Banerjee et al., 2018[123]). CGAP and the Ford Foundation were extensively involved in the pilots’ design and monitoring, and covered part of the research and implementation costs. Other funders included the Mastercard Foundation, the Michael & Susan Dell Foundation, the European Commission, the International Fund for Agricultural Development, Swiss Development Cooperation, USAID and the World Bank.

Source: (World Bank, 2019[124]).

However, a properly designed and implemented impact evaluation requires planning and capacity and the evaluation must be integrated from the outset. It can be costly (depending on the scale of primary data collection and the follow-up period). It often demands substantial additional work from implementing partners. This may explain why impact evaluation is not used more often. Carefully assessing the specific interventions that warrant a rigorous impact evaluation is an important step to earmark foundations’ limited evaluation resources.

Some foundations have led important efforts to improve the quality, relevance and supply of impact evaluations. For example, the Bill & Melinda Gates Foundation and the Hewlett Foundation supported the Evaluation Gap Working Group hosted by the Center for Global Development from 2004-06. This group’s final report, “When Will We Ever Learn? Improving Lives through Impact Evaluation”, built the case for robust impact evaluation and led to major increases in the use of rigorous methods in development (Savedoff, Levine and Birdsall, 2006[125]). It also led to the inception of the International Initiative for Impact Evaluation, which funds systematic reviews and impact evaluations across a diversity of development issues, and numerous efforts by bilateral and multilateral development agencies to improve the use of robust evaluation methods. The Network of Networks on Impact Evaluation (NONIE) later produced guidance on the use of impact evaluations in the realm of development, including the application of different methodologies (Leeuw and Vaessen, 2009[126]).

3.4.3. Foundations face challenges in preparing evaluations

Foundations find it challenging to produce quality evaluations. A majority of respondents (60%) find it particularly challenging to ensure that evaluations are of sufficiently high quality. They also highlight the inadequate capacity of their partners to collect and report reliable data (Figure 3.15). As noted in Chapter 2, 75% of respondents in the sample help partners to improve their monitoring, evaluation and learning capacities through non-financial support. These findings suggest that there is still much room to consider how to enhance partners’ capacities to gather and use high-quality data throughout the programme cycle (Box 3.8).

Figure 3.15. Monitoring and evaluation challenges faced by foundations

Box 3.8. Lifting the barriers to using insights from evaluations

The Sawiris Foundation for Social Development provided this perspective on its approach to making the most of monitoring and evaluation.

“At Sawiris Foundation for Social Development (SFSD), the Learning and Strategy department is responsible for monitoring and evaluating the projects that the foundation supports, and for funnelling findings and insights from monitoring and evaluation into organisational and external learning and into the foundation’s evidence-based strategy. The foundation currently accepts unsolicited proposals throughout the year across its three technical sectors: economic empowerment, education and social empowerment. Submitted proposals can enter one of two tracks – Track A: smaller funding for innovative pilot projects with limited supporting evidence and to be tested using rigorous methodologies, or Track B: larger funding for rigorously tested and proven projects to be scaled up. All projects are evaluated, and the methodology depends on the supporting evidence or lack thereof. Projects are also reviewed to ensure that they align with the foundation’s evidence-based strategy.

“The foundation’s learning component aims to build the capacities of the organisation and its partners to understand and use evidence. Through clear executive leadership buy-in, the learning component is using Donnela Meadow’s systems change approach to establish clear processes, information flows and procedures to promote learning within the organisation. This takes the form of evidence reviews for strategic priorities, internal learning seminars, learning bulletins that share evidence, training on how to use evidence and creating a learning bank that houses all of that knowledge for ease of access by its staff. The learning component also covers findings from evidence reviews; gap analyses; and completed impact evaluations in easy-to-understand learning products such as policy toolkits, learning agendas, blogs and a learning podcast.

“SFSD understands that access to evidence is not enough, and that a lot of investment is needed to train and improve the capacities of its NGO partners to implement high-quality projects with sound monitoring and evaluation mechanisms. As such, the foundation is leading the development of a nation-wide capacity-building programme that will assess the critical needs of partner NGOs regarding monitoring, evaluation and organisational learning, in addition to the release of an NGOs report that will share findings on a representative sample of NGOs in Egypt and their critical challenges and opportunities for improvement in these areas.”

Contributed by Farida El-Gueretly, Sawiris Foundation for Social Development.

Partners’ capacity to report reliable data can be hindered if they have multiple, incoherent monitoring, reporting and evaluation requirements for different donors. Building the right incentives could also improve the reliability of partners’ data and support learning. A narrow focus on reporting for donor accountability can discourage partners from taking on the most challenging social problems for fear of failing, or can compel them to understate challenges and present the work in the best possible light.

Furthermore, one-fourth of foundations in the sample (26 of 103, OECD Private Philanthropy for Development organisational survey, data not shown) highlight that foundation staff do not have adequate capacity to manage monitoring and evaluation work or to interpret or use evaluation data and results. Yet foundation teams need a minimum set of competencies to be able to judge and weigh different types of evidence along other considerations to be able to inform their day-to-day tasks. An increasing number of foundations are expanding the role of evaluation staff to include support of organisational learning in an ongoing way, and to support the use of evidence during programme design and implementation (Centre for Effective Philanthropy, 2016[127]). Some foundations are also creating chief learning or knowledge officer positions to transform the organisation’s learning capacities and culture, and to ensure the continuous professional development of staff and partners, as outlined above.

3.4.4. Learning challenges also exist beyond foundations

Foundations’ programme and grant evaluations are rarely publicly shared, limiting the learning potential within and beyond the philanthropic sector. The design of development programmes does not begin with a blank slate. For all topics on which foundations work, there is at least some body of evidence on the needs, operational lessons from similar efforts or on approaches that have been more or less effective in delivering change. However, there is a strong perception that foundations often “reinvent the wheel” and fail to capitalise on existing work or past experience.

This perception might be driven by foundations’ lack of transparency when it comes to sharing evaluation results. Foundations are more likely to share information about their strategy, priorities and inputs (e.g. annual expenditures, annual budgets) and sometimes outputs (e.g. annual report) than evaluations of their programmes and grant results or information about the foundation’s performance (Figure 3.16). Transparency is one of the core OECD principles for results-based management (Box 3.9).

Figure 3.16. Information foundations make available via publicly accessible sources

Box 3.9. Managing for Sustainable Development Results: OECD DAC Guiding Principles

The OECD DAC devised six Guiding Principles on Managing for Sustainable Development Results (MfSDR) to support development organisations in adapting their result-based management (RBM) policies to complex development challenges. Principles include:

1. Support sustainable development goals and desired change. MfSDR approaches should reinforce the efficacy of measures aimed at achieving inclusive sustainable development.

2. Adapt to context. MfSDR approaches should be adaptable to the different operational contexts, modalities of engagement and types of partnerships.

3. Enhance country ownership, mutual accountability and transparency. MfSDR approaches should align to partner countries’ strategic planning, monitoring and statistics systems to avoid duplication costs, increase local capacity and foster the effectiveness of partnerships.

4. Maximise the use of results information for learning and decision making. Alongside communication and accountability, evidence should be used for learning and decision making at all levels.

5. Foster a culture of results and learning. Leadership should promote and sustain a culture of results through appropriate guidance, tools, and incentives, both within the organisation and with partners.

6. Develop a results system that is manageable and reliable. Results frameworks, measurement and reporting systems should be regularly reviewed and maintained as fit for purpose, credible and adaptable.

Source: (OECD, 2019[128]).

Interestingly, few respondents believe that sharing information about what did or did not work could negatively affect the foundation’s reputation (12 of 103, or 12%) or harm the possibility of grantees receiving support from other donors (9% of respondents) (OECD Private Philanthropy for Development organisational survey, data not shown). The discrepancy between this low perceived risk of openly sharing evaluation results and the actual lack of transparency in this area may suggest that foundations see internal teams as the primary audience of their evaluation efforts. However, sharing data and usable knowledge from results monitoring and evaluations can help advance learning among foundations, partners and the broader development community (Hamilton et al., 2005[129]). It can help foundations better co-ordinate their evaluation efforts with other development players working on similar issues, and encourage greater efficiency and higher quality standards, as evaluations could be accessible for peer review and scrutiny.

Foundations find it hard to translate evaluation findings into lessons for policy makers. As noted in Section 3.3, more than half of the foundations in the sample use research and dissemination as an advocacy strategy to inform policy. Communicating evaluation findings can lead to the scaling up of effective programmes. However, 54% of respondents find it challenging to use the results of evaluations to provide useful lessons for policy makers (Figure 3.17).

Figure 3.17. Challenges for the uptake of evaluation results

Close to half of respondents (45%) highlight that their staff have limited time to analyse and communicate evaluation results (OECD Private Philanthropy for Development organisational survey, data not shown). Another potential factor is that foundations’ evaluations are not always aligned with policy makers’ needs and demand. Not all foundations have an in-country presence, which might limit their capacity to engage directly with national and local stakeholders and share evaluation findings. They may have limited understanding of the local political economy (i.e. the incentives and interests of local decision makers) and of government learning needs.

To overcome these challenges, some foundations are partnering with governments to fund the evaluation of the results of a government-led programme. This enables the government to test and scale what works. Foundations are also creating strategic partnerships with academic institutions and donor and expert networks that disseminate findings with policy makers. One example from the education sector is Building Evidence in Education (BE2), a donor collaborative that brings together bilateral, multilateral and philanthropic organisations in order to improve the standards for commissioned evidence in education, find synergies in their research and evaluation agendas, and share actionable lessons with policy makers.

Some foundations are also investing in the capacity of evaluators in the countries where they work. Evaluations, and particularly rigorous impact evaluations, are often conducted by professionals from donor countries, who are generally not part of the local context and may have limited capacity to develop and sustain relationships with decision makers in the field (Savedoff, Levine and Birdsall, 2006[125]). Locally based and qualified evaluators can enhance the relevance of evaluations and encourage their uptake for decision making. An example is the Hewlett Foundation’s support of the West Africa Capacity-building and Impact Evaluation initiative, launched by the International Initiative for Impact Evaluation. The initiative aims to improve the capacity of countries in the region to articulate valuable questions and conduct evaluations. Similarly, the Mastercard Foundation is training new cohorts of young African and Canadian Indigenous evaluators, and matching them to more experienced evaluators to deliver commissioned rigorous evaluations on the foundations’ work (Mastercard Foundation, 2020[130]).

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Notes

← 1. Tailored financing is defined as “the process through which a venture philanthropy organisation or a social investor finds the most suitable financial instrument (FI) to support a social purpose organisation choosing from the range of financial instruments available (grant, debt, equity, and hybrid financial instruments)”. (https://evpa.eu.com/uploads/publications/EVPA_Financing_for_Social_Impact_2017_online.pdf)

← 2. Systems change refers to “a change in the policies, processes, relationships, knowledge, power structures, values or norms of participants within a system that affects a social issue” (OECD, 2018[11]). Systems consist of multiple interconnected parts, including people, institutions and resources, as well as intangible elements such as relationships, values and perceptions (OECD, 2018[11]).

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