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Encouraging philanthropic engagement that is transparent and accountable

Philanthropy is increasingly seen as a pivotal actor and partner in planning and implementation of the SDGs. The Addis Ababa Agenda goes beyond setting commitments targeting growth of philanthropic giving, and emphasizes elements of collaborative action: transparency, alignment with national development planning and priorities. Collecting data on philanthropy is challenging as systems for monitoring philanthropic investments are rudimentary in many places in the world. There are no global, comparable and comprehensive sources for data collection and monitoring of philanthropic giving: read more in Annex II. The challenges pertaining to an enabling environment for philanthropy are manifold. For a start, in most countries, foundations are not registered at the central level and often have limited obligations for financial disclosure. Therefore, in most countries, neither governments nor private organisations collect and/or make available important data on philanthropic giving.

Private grants

OECD statistics show that total net private grants from Development Assistance Committee (DAC) countries to developing countries since the 2000s have followed a strong and regular upward trend to reach more than $30 billion per year after 2010. The increasing trend is visible in all countries, but explained mainly by the volume of private giving in the United States. The OECD includes grants extended for development purposes by a wide range of private institutions, such as national and international non-governmental organisations as well as private philanthropic foundations. With the exception of the Bill and Melinda Gates Foundation, detailed information on the providers and beneficiaries of these grants and the main sectors targeted by their activities is not available in the OECD statistical system.

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Foundation Center, as its role as a partner in the SDG Philanthropy Platform has created an interactive website www.SDGfunders.org, which captures philanthropic data of mostly US, and some international foundations mapped to the SDGs by the Foundation Center’s Philanthropy Classification System taxonomy (US data is largely available due to the financial reporting obligations for foundations in the US). As shown in the figure, a large proportion (52 per cent) of philanthropic has been dedicated to SDG 3 (Health) and SDG 4 (Education). 

The SDG Philanthropy Platform is being implemented in Kenya, Ghana, Zambia, Colombia and Indonesia, and steps have been taken to explore ways for highlighting the value of data in achieving the SDGs, creating and sharing national data on philanthropic giving, building and strengthening existing networks and alliances of philanthropic organizations, and designing strategies and tools to focus on building trust between government and philanthropy. Specifically, Foundation Center has developed and is in the process of implementing a Data Strategy and Capacity Building program in some of these countries, and in countries that are separate to the SDG Philanthropy Platform. The SDG Philanthropy Platform, and sdgfunders.org, envisions its role as a broker and a convener while the national philanthropic associations in countries – Association of Corporate and Family foundations in Colombia, Filantropi Indonesia, Kenya Philanthropy Forum and others – play a central role in building enabling environment and stimulate mutual accountability and transparency. 

From the early lessons learnt of the SDG Philanthropy Platform there is a need for decentralized approaches built on networks, where the local initiatives on data collection for philanthropy are encouraged. Therefore, currently the Foundation Center is focused on capacity building for data collection and knowledge exchange across countries, especially recognizing the power of South-South collaboration. In April 2016 the platform, together with AFE – philanthropic network in Colombia –  organized the knowledge exchange by bringing philanthropic leaders, governments representatives and networks from Kenya, Ghana and Indonesia to learn from AFE on setting up the data platform, including designing mechanisms of incentives for foundations.

The OECD published Private Philanthropy for Development in March 2018 with the aim of reflecting on the role of private philanthropy in the 2030 Agenda development framework. The report examines philanthropic resource flows for development purposes, as well as foundations’ priorities, practices and partnering behaviours. It presents fresh perspectives and action-oriented recommendations to optimise philanthropy’s role in support of sustainable development. Key insights from the report include:

1) The total volume of philanthropic funding for development was $24 billion in 2013-2015. 

2) Globally, philanthropy is the 3rd provider of health funding in developing countries.

3) Health, by far, is the sector that benefits the most from philanthropy.

4) The Bill and Melinda Gates Foundation alone accounts for half of all philanthropic giving to developing countries.

5) Most philanthrophic funds come from the United States.

6) Africa is the region that benefits most from philanthropy.

7) Foundations working for development “play it safe”: 86 per cent of foundations’ grants are for no longer than five years.


Transparency in philanthropy

Most foundations invest their funds to optimize financial returns, and then use the earnings to fund its programs. If foundations were to invest their endowments using impact investment – with the goal of maximizing social, economic and governance impacts, along with financial returns – they could magnify their impact. 

Data is limited regarding the volume of philanthropic capital invested in impact investing. Impact Investing is defined as the pursuit of positive financial returns as well as positive social/environmental returns. In some countries, regulators have taken steps to incorporate impact investment into the regulatory and/or tax frameworks for private foundations. In the United States, for instance, the tax authority, the IRS, gave a boost to impact investing with an announcement that private foundations could use their endowments to make impact investments that made less than market-rate returns. While it has long been established that foundations may lose their favourable tax status if they profit from their grants and other charitable, endeavours known as program-related investments, the IRS had never ruled whether foundations could profit from impact investments, made with endowment funds, and still retain favourable tax treatment. However, the regulation in this regard around the world is in its nascent stage.