The impact of philanthropy can be weighed down by a burdensome, transactional, and top-down grantmaking approach, but it need not be the case.

Trust is a crucial component of any healthy relationship. But when it comes to philanthropy, the natural power imbalance between funders and recipients can result in a bureaucratic approach that relies heavily on metrics.

A trust-based approach, including unrestricted multiyear funding and less paperwork, gives organisations the flexibility to respond quickly and allocate more resources to emerging needs.

This is the essence of Trust-Based Philanthropy – a five-year funder initiative launched in 2020 to address the inherent power imbalances between foundations and non-profits. It is providing a foundation for new practices, cultures, structures, and leadership styles that build relationships, cultivate mutual learning, and trust with non-profits.

The six key principles of trust-based philanthropy are:

• Do your homework – identify your family’s values and vision and reflect on them regularly. Then map your grantmaking criteria, complete due diligence, and get to know prospective grantees to ensure they share the same values.

It might be a one-on-one meeting with the fundraising team, a site tour, or attending an event hosted by the charity (your Equity Trustees Relationship Manager can help arrange this).

• Give multi-year, unrestricted funding – this gives grantees the flexibility to assess and determine where grant dollars are most needed. It allows for innovation, action, flexibility and sustainability.
 
It is about trusting that the grantee knows best how to spend grant money. This supports the stability and sustainability of the grantee and empowers them to deliver the impact that philanthropists seek.

• Be transparent and responsive – open communication builds relationships founded in trust and mutual accountability. When grantees and philanthropists are transparent about granting criteria, funding and program delivery challenges, better outcomes can be achieved.

• Offer support beyond money – listening to their needs, challenges and opportunities may reveal other ways to provide support. This can be a way to build the strength and capacity of the grantee organisation, as well as their leadership.

• Solicit and act on feedback – social impact achieved through philanthropy is more successful when it’s informed by the expertise and lived-experience of grantee partners. Supporting those with experience in the social area you’re focusing on ensures they are the subject matter experts delivering change in the field.

• Simplify and streamline paperwork – streamlining processes and reducing unnecessary administrative steps allows for more time for genuine learning and conversation with grantees. It also frees them up to get on with the job.

The Trust-Based Philanthropy Project conducted three focus groups among non-profit executive directors in 2022 to assess the impact of this shift among funders. They described their new partnership with trust-based funders as “liberating” although only a small percentage of funding remains unrestricted and multiyear.