Rhodri Davies on key trends in philanthropy, from paused grantmaking to the changing demographic of funders

Rhodri Davies is a well-known expert and commentator in the UK on philanthropy and civil society issues. He is the founder and director of the thinktank Why Philanthropy Matters and the host of the Philanthropisms podcast. He kicked off Philanthropy Australia’s recent UK Study Tour with a presentation about the state of play in the UK sector and emerging trends. Beforehand, he spoke to Philanthropy Weekly on what he sees happening locally and globally – and what’s on the horizon.

This is Part 1 of an longer Q&A. Read Part 2 in the next edition of Philanthropy Weekly.

Read an overview of Philanthropy Australia’s 2024 UK Study Tour.

1. What are the current trends in the UK philanthropic landscape?

We’re still in that period where everybody’s trying to figure out post-pandemic whether some of the changes that happened are permanent or we’re going back to old norms. We had a lot of focus on getting money out quicker, both from foundations and donors, on giving more in unrestricted ways and on core-cost grants. There was a sense of excitement that we were going to see a big change in the way that philanthropy works, but I’m not sure how much of that will be the case.

Unfortunately, one of the big current trends is that a number of foundations and funders are pausing their grantmaking. It’s unclear how much of it is about organisations going through strategic reviews etc in light of the above, but my sense is that a reasonable proportion is a pragmatic response to being overwhelmed by grant applications.

The big challenge for the foundation world is that even if it’s understandable to pause for practical reasons and many charities would understand, the fact that it’s at a time when charities are facing even more demand for services and severe financial conditions is difficult. Charities don’t have the ‘luxury’ of stopping to think about what they’re doing. So, there’s a real danger about the two sides misunderstanding each other, which can be overcome by openness and good communication through well-built and maintained relationships.

In terms of a longer-term solution to the overwhelm, some of it might be about better coordination in the sector because a lot of philanthropic funders still work in isolation. Having more of a mechanism to let charities know where else they could be eligible funding if your organisation can’t provide it, for example, would help. And there is a reasonable argument for getting on more quickly with using some of the available technology. There are risks associated with AI tools, but if your problem is that you’ve got a backlog of grant applications to process, there are tools that can help you sift or summarise them, so foundations could probably be using those more widely.

2. What do you see on the horizon in the longer term?

There are those big-picture questions about what is philanthropy’s role in an increasingly polarised society? Can it bring people together across divides? Do people become more polarised within philanthropy itself? There’s also the impact of rapidly changing technology, which is opening up amazing opportunities, but also huge challenges that are difficult for philanthropy just to keep pace with.

In terms of individual philanthropy, there’s the evolving demographics of philanthropists. There’s obviously this big shift potentially in terms of wealth transferring into the hands of a significantly younger generation of donors who, anecdotally at least, often have quite different views and approaches to philanthropy. Philanthropists are not a uniform bunch obviously, but among those I’ve met, there’s a sense that the younger generation are more willing to be critical of their own philanthropy. They’re thinking about where money has come from, how they’re spending it, how they’re investing endowment assets and all those things. So, there are potentially significant changes on the way in the next 10 or so years.

3. The new UK Labour government has indicated that it wants to work more closely with the civil society sector. How is philanthropy working with government in the UK, compared to Australia where collaboration with the sector has been strengthening in recent years?

The philanthropy area of the policy landscape in the UK actually feels a bit less developed than in Australia at the moment. I often say to people, we should look at what’s happening in Australia and the recommendations of the Productivity Commission and others to see if there are good ideas we could use over here. The recent announcement of the Civil Society Covenant was welcome to a lot of people in the charity sector and to some extent, the philanthropy world, but there’s a lot of detail to be filled in.

It was unfortunately then closely followed by the Budget, which included policy changes that meant many organisations will now be subject to taxes that they weren’t before. So, it’s all still up in the air.

4. What do you think is the role of philanthropy in supporting and protecting democracy?

At its best, philanthropy can try things out that government or the market would struggle to do, and it can be more responsive to emergencies and crises. It can also take risks that governments can’t. So, philanthropy has the potential to experiment with ideas and if it can align with government, there’s an opportunity to influence policy or the market that can really drive issues forward. The challenge is not to work in isolation and lose the potential for influence.

Philanthropy also has an important role to play in supporting a healthy civil society so that there are differences of opinion and voices that can challenge the government and the status quo. Democracy depends on a multitude of voices being heard respectfully and that is currently being challenged. There is polarisation and people saying that certain things should be delegitimised, which presents clear dangers to a healthy civil society. We’re seeing that play out in other places, and it’s worrying to think we could see it in the UK in the not-too-distant future.

5. Impact investing is an area that is fast growing in interest in Australia. What’s the situation in the UK?

It’s been growing steadily for the last 15 or 20 years. There’s an interesting overlap point for philanthropic foundations in that they can perhaps use their grant money to make social investments in not-for-profits, but do they also use their endowed assets to make impact investments?

There’s so much more that could and should be done on this. The issues are partly to do with a lack of understanding of what the requirements are and the rules governing how trustees manage assets. The industry around investment advice and investment management hasn’t moved fast enough.

The other issue is that the impact investment landscape in the UK is closely tied to public policy because a lot of the opportunities are ones where the government has outsourced services, such as in social care etc. That represents opportunities, but also challenges around political risk and changes of government, particularly in relation to long-term investments.

If you want to go beyond screened ESG investment into measurable social impact through investment, that’s most likely additional effort requiring specialised advice. So, we need to find more ways to lower the barriers so that it makes it as easy as possible for people at foundations to act on that motivation to use their assets in line with their mission.

Rhodri is also a Pears Research Fellow in the Centre for Philanthropy at the University of Kent and Philanthropy Expert in Residence at the Pears Foundation. He is the author of two books: What is Philanthropy For? (2023) and Public Good by Private Means: how philanthropy shapes Britain (2016). He was formerly Head of Policy at Charities Aid Foundation (CAF), where he also set up the in-house thinktank Giving Thought.