Originally published in the Financial Times
In 2015, the Edna McConnell Clark Foundation was trying to address a question that often plagues philanthropists: how can we do more?
The New York-based organisation had changed its stripes multiple times since its origins in the 1950s. Initially targeting the elimination of the eye disease trachoma, by the early 2000s “we were focused on solving problems related to youth [social] mobility and the transition to adulthood,” says Nancy Roob, president and chief executive of EMCF at the time. “But affecting youth mobility takes huge changes across sectors, including workforce, education, and health.” The team decided it needed to “get more capital off the sidelines”, as Roob puts it.
EMCF then started to connect innovative non-profit leaders with funders it thought might offer support. By 2016, it settled on a new approach: “That’s when we decided to launch Blue Meridian Partners,” says Roob, now CEO of Blue Meridian.
Blue Meridian is a funder collaborative — a platform that allows philanthropists and funders to invest in social change together. EMCF had realised that donors were interested in pooling resources to make larger, co-ordinated grants, but did not want to give up their ability to decide where their money goes.
Blue Meridian designs high-impact strategies worth tens of millions of dollars and then conducts “capital calls” of a pool of “general partners” to raise the required funds for the investment. Among its partners are multibillion-dollar endowments such as the William and Flora Hewlett Foundation and the Charles and Lynn Schusterman Family Philanthropies.
This year, Blue Meridian hit $4bn dollars of allocated capital, and it now directs hundreds of millions of dollars in giving each year. It has expanded its focus beyond youth to issues affecting all Americans, including health, education and justice. “It is incredible, but I would say that we still have only scratched the surface . . . I think there is more opportunity to innovate and get more capital to these important causes,” says Roob.
A way to learn together
Though ECMF did not realise it at the time, it, and later, Blue Meridian were at the vanguard of a new trend in large-scale philanthropy.
According to 2023 research by The Bridgespan Group, since 2010, the number of funder collaboratives with assets larger than $1mn has doubled, with more than $3bn invested in non-profits and social movements by 2022.
“This may be the most significant trend in how philanthropy is operating today, and it holds enormous promise — both for the ways non-profits get funded and for the total amount of philanthropy that gets unlocked,” says William Foster, managing partner of Bridgespan.
But why would philanthropists work together? According to experts, the foremost reason is learning. “It is quite lonely being a foundation professional. Being in a funder collaborative gives you colleagues,” says Beth Breeze, director of the Centre for Philanthropy at the University of Kent. “If you share the burden of grant-making and work together, you can share learnings, new ideas, and the joys of giving.”
Funder collaboratives also allow philanthropists to share the cost of hiring experts and leverage their combined, larger networks to learn about new grantees and methods for impact.
Take, for example, Farming the Future, a UK-based funder collaborative focused on making the industrial food system more sustainable. What started as a joint venture between a foundation with experience in the food ecosystem and another foundation that wanted to learn more has blossomed into a learning hub for a range of social investors.
At the centre of Farming the Future is expertise. The collaborative has a team of “ambassadors” from various areas of the food ecosystem, ranging from leaders of community kitchens to CEOs of supply chain companies. The ambassadors direct grants from the organisation’s pooled fund, identify new potential grantees, and engage new philanthropists and foundations.
“Our ambassadors convene the funders around developing necessary changes in the ecosystem,” says Bonnie Hewson, director of Farming the Future. “[They] sit between organisations on the ground and the funders.”
Since 2019, Farming the Future has helped foundations invest £1.6mn in innovative food non-profits and agricultural solutions.
An impact multiplier
The second key reason for forming funder collaboratives is impact. By pooling resources, funders are able to put larger amounts of money behind impactful ideas. Organisations can also take a wider view of an issue, and take bigger risks.
“There is always a cost to the infrastructure to administer grants and identify solutions.” says Jim Cooke of the Association of Charitable Foundations, a UK-based membership network for philanthropic grant-makers. “Funders can share those costs, and put more into the grants.”
Roob adds: “[Our partners] are able to go after things they care about that may be riskier investments, but they feel supported in doing so because their dollars are being backed by peers.”
According to social sector insiders, funder collaboratives can get more money into a space, rather than just being the sum of philanthropic donations that would have otherwise gone to the same issue.
“[From our research] there is no evidence that money to a collaborative comes at the cost of other grants — it is not a fixed pie . . . When a [funder collaborative] builds a vehicle to direct money into a space, it can get [other foundations and philanthropies] to put new funding into the cause,” explains Foster of Bridgespan.
By combining larger scale and risk-taking, some funder collaboratives have been able to introduce innovative, effective schemes that governments and more traditional foundations would not think to support.
Bringing new ideas to light is where the City Fund shines. Originally a part of Arnold Ventures, the family foundation of former Enron executive John D Arnold, City Fund is a US-based funder collaborative focused on strengthening school systems and helping them become more responsive to the communities they serve. For example, it has invested in The Mind Trust, an Indiana-based non-profit focused on improving local education.
“While engaging our communities a few months into the pandemic, we started to realise the immense learning loss facing students who were attending virtual school, especially students from marginalised communities,” says Brandon Brown, chief executive of The Mind Trust.
With City Fund’s support, The Mind Trust launched Indy Summer Learning Labs, a summer programme focused on helping disadvantaged students who have fallen behind. “In the first summer, we reached 3,000 students by working closely with local schools and partnering with communities,” says Brown.
The first cohort of students saw 20 per cent jumps in English and maths scores, resulting in better outcomes in school the next year. “We knew we had something special, and decided to roll it out more. City Fund was with us along that journey,” says Brown. Since 2021, Indy Summer Learning Labs has become a mainstay in schools across the entire state. In just three summers, the programme has reached more than 10,000 pupils in Indiana.
Summer programmes are not a typical part of American public education, nor have they been touted by philanthropies in the past. But City Fund, inspired by the success of Indy Summer Learning Labs, is now working with school districts, non-profits and philanthropists across the country to launch similar programmes.
“By working with organisations on the ground [such as The Mind Trust], we are able to spread the idea to other cities and grantees, and help them achieve similar results,” says City Fund’s chief executive Marlon Marshall.
From learning to giving
But, according to experts, readying collaboratives to actually get money out the door is the biggest challenge. “It can be hard for some donors to make the shift from learning to giving,” says Foster of Bridgespan.
Funder collaboratives vary in their legal, financial and operational structures but they generally sit on a spectrum somewhere between “pooled funds” and “co-granting”.
Pooled funds, such as Farming the Future, are funder collaboratives where donors put their money into a shared pot, and then engage in internal processes to figure out where that funding should go. It is arguably the most democratic way of distributing capital, but, as Hewson of Farming the Future says, it is “hard work” to get donors to buy in.
On the other side is “co-granting”, where donors do not have any formal commitments to provide funding, but are engaged in the process of sourcing investments.
Experts say that most collaboratives fall somewhere in the middle, as they want to have guaranteed funding but do not wish to lock out any interested donors. One collaborative that has made the shift from learning to giving The END Fund. Founded in 2012 by a mix of philanthropists and investment firms interested in ending neglected tropical diseases, such as trachoma and roundworms, the organisation used a novel funding approach.
“We are not a foundation — we are a fund,” says interim CEO Diana Benton Schechter. “We have a portfolio of pooled funds within our organisation, and our donors decide which portfolio they wish to contribute to. As a programme is administered, we gather the philanthropists to hear about their ‘returns’ and give them opportunities to share learnings from their other work,” says Benton Schechter. “It creates a really joyful learning community of peers passionate about the same causes.”
The END Fund has 7,000 investors from 68 countries, and the large amount of capital has allowed it to make a difference on neglected tropical diseases. For instance, in Burundi, 340,000 trachoma treatments have saved large areas of the country from blindness. In Ethiopia, more than 58,000 patients have received sight-saving surgeries.
“It is not easy to make a funder collaborative work — people do not collaborate unless they have to,” says Hewson of Farming the Future. “But we do have to, because we are in this moment where everything is urgent.”
Foster of Bridgespan says: “I think we will look back, one day, and say that [collaboration] is the most significantly impactful change in philanthropy.”
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment