Leading philanthropic funder Equity Trustees has revealed the inner workings of its grantmaking response to the COVID-19 emergency.
The response reveals some great lessons about partnerships, communication, agility (with stability), income planning, short- and long-term grantmaking, and the need to keep a clear eye on your purpose at all times.
The steward of more than 650 charitable trusts in Australia distributed almost $79 million across 3031 grants in 2019 and maintains more than $2.6 billion in funds under management.
It’s a complex business, but it’s the diversity of those funds, structures and interest areas that gives Equity Trustees its financial strength, stability and adaptability.
Speaking with Grants Management Intelligence recently, the funder’s senior philanthropic leaders revealed Equity Trustees had:
- Responded to urgent needs with a $3 million round of emergency grants
- Consulted with hundreds of grantees about their rapidly changing needs
- Reconfigured grants spending to address those needs
- Streamlined application processes to get money out the door faster
- Addressed concerns from co-trustees and active philanthropists about distribution levels and long-term commitments as their investments suffered a series of investment shocks
- Helped clients adjust grants strategies to suit the times
- Set aside millions of dollars to protect hundreds of multi-year funding agreements.
While the current environment is challenging for all, grantmakers in larger organisations will understand that bigger funders must consider particularly large and complex governance structures, stakeholder relationships and financial commitments.
But as the general manager of charitable trusts and philanthropy, Jodi Kennedy, puts it: “Adversity can drive innovation”.
In fact, Ms Kennedy said the speed with which the organisation had been able to adapt – admittedly under duress and a heavy workload – had been surprising.
“It really forced us to listen more actively to the sector and focus on putting the end beneficiaries at the centre of all of our funding. That insight is something we want to take to our clients and other stakeholders, so we can use this opportunity to get them to think differently about grantmaking.”
Ms Kennedy said one of the opportunities to come out of the COVID-19 emergency was the chance to challenge old-school views of philanthropy and to “bring people up the strategic curve of innovation”.
“Sometimes that means breaking hundreds of years of tradition about what it means to be a philanthropist, and even challenge the whole dynamic of who holds the power in any grantor-grantee relationship,” Ms Kennedy said.
That minor revolution has occurred largely in the growing area of Equity Trustees’ discretionary funds, which comprise about two-thirds of the funding it distributes. For those funds, Equity Trustees has been given the (whole or partial) discretion to manage funds based on its understanding of how best to achieve impact.
In contrast, non-discretionary trusts (as the name suggests) are trusts where people have stated in their wills or trust deed that money must be distributed to specific organisations.
But some of those clients were concerned their funds might not be having the desired effect during the pandemic, sparking conversations with Equity Trustees about how they too could use their funds more effectively.
Equity Trustees is upfront in saying that it welcomes conversations about becoming a more effective funder.
Communication the key for partnerships
In that vein, Ms Kennedy’s team committed early to good communication with its many funding partners and grant recipients.
The team worked the phones hard, making hundreds of calls to philanthropic clients and grant recipients to discuss how money should be spent, and what strategic adjustments could be made – particularly in an environment needing a rapid response.
In speaking with beneficiaries, grantmaking specialists learned from those on the ground about the pandemic’s impact on fundraising, service delivery, and “where it was hurting”.
That understanding is reflected in a “message of support to grantees and the For Purpose sector” on the Equity Trustees website, which outlines the kind of support grantees can expect.
On the other side of the equation, the organisation was able to advise clients about the sector’s most pressing needs and secure funding for those critical areas by acting as a kind of information “triage service”, linking recipients and funders.
This enabled the organisation to meet the needs of both beneficiaries and funders through such methods as:
- Untying funds where possible
- Giving project and reporting extensions to grant recipients
- Allowing the redirection of funds to core operations.
Ms Kennedy hailed the shift in thinking as a positive outcome of the disaster.
“We’ve probably learnt more in the past six months about funding than we have in the past six years,” Ms Kennedy said.
One thing the organisation has learnt is how to increase the availability of quick-response funding.
More grants, more quickly
As part of the organisation’s desire to make a difference to pandemic-hit organisations quickly, Equity Trustees established a $3 million emergency funding round.
There was no application process. Instead, the funder issued about 70 untied grants – worth up to $50,000 each – to groups it had dealt with in the past.
Drawing on existing relationships reduced the usual paperwork and instead relied on “a different, more flexible type of governance” based on trusted relationships, said Ms Kennedy.
Funds helped grant recipients to secure food supplies, conduct crucial COVID-19 medical research, and assist remote and vulnerable communities with the technology they needed to stay connected.
In some cases, the funder advised clients to allow recipients to “repurpose” existing tied funding to address immediate needs, such as boosting remote technology access.
Keeping up commitments for the long term
To provide the cash for those essential quick-response grants, Equity Trustees first had to set aside the funds needed to fulfil hundreds of multi-year funding commitments.
Ms Kennedy said Equity Trustees was proud of the scale of its multi-year funding commitments, which help meet its mission of creating long-term impact across its four focus areas, which are:
- children and young people
- ageing and aged care
- medical research and health
- animals and environment.
One of Equity Trustees’ bigger philanthropic funds under management is the William Buckland Foundation, which on its own had about 80 multi-year commitments before the pandemic began.
Trust goes both ways
Melbourne Indigenous Transition School, a long-term major beneficiary of the William Buckland Foundation, reported to Equity Trustees that it planned to move its operations to the Northern Territory temporarily in response to the pandemic.
The school informed Equity Trustees that it did not need short-term crisis funding, but would instead rely on the resources it had built up over its long-standing relationship with the foundation.
Ms Kennedy said the example demonstrated the high levels of trust that long-term relationships can engender.
In another case, Kids Under Cover sought permission to redirect funds that had already been granted, so it could use them for more pressing needs.
The organisation installs studio housing in the backyards of households with at-risk youth.
The concept is an early intervention model which reduces the risk of violence in crowded houses, and helps prevent homelessness, by reducing overcrowding and family tension, and by creating more personal space for young people.
When the pandemic began, Kids Under Cover had recently won funding for a new pilot program in regional Victoria, but COVID-19-related pressures meant the most pressing need was for housing that could be installed immediately, so the funding was quickly redirected.
Firming up the finances in a volatile environment
Setting aside sufficient funds for future commitments is easier said than done, given the massive global financial shock and sharemarket volatility triggered by the pandemic.
After decades of sustained and predictable income growth, the Equity Trustees faced the prospect of insufficient funds to pay longer-term grants as they fell due. This was partly a result of the way it manages some of its funds, which sees it locked into longer-term investments with disbursements based on income from those investments. In many cases, Equity Trustees cannot access the underlying capital or lend money to cover costs.
“We’ve never before been in a situation where we thought it might not be possible to pay out on those multi-year funding agreements that we’ve entered into,” Ms Kennedy said.
A lot of work has gone into ensuring payments have been secured.
In addition, Equity Trustees continues to see most philanthropist clients “top up” their trust funds and foundations, even though many of them have taken a big financial hit.
Pushing for a better deal for the for-purpose sector
Ms Kennedy said the financial issues faced by Equity Trustees were mirrored in philanthropic trusts across the world, and the economic impact of the pandemic would continue to be felt for at least the next 12–18 months.
While the organisation had built a financial buffer to protect spending, funds for grants would continue to be managed “month by month”, she said, and there would be a link between the economic conditions and “our ability to fund social change”.
One thing appears certain. Grant spending looks set to drop in the short, to medium term.
But Ms Kennedy stressed that philanthropy’s role was not to single-handedly save the for-purpose sector, but to build on its strengths of “innovation” and encouraging “a greater risk appetite” among philanthropists, to influence change and to “unlock other capital” that could be deployed to assist the sector.
Along with other sector leaders, Equity Trustees was examining the use of debt facilities for not-for-profits as a way of helping the sector survive, she said.
While she accepted this was a longer-term prospect, it was also part of Equity Trustees’ bigger social change agenda.
“One of the key roles of philanthropic funding is to ... keep encouraging governments to think differently about how they collaborate and work with other funders of social change.”
She said while there were many highly capable people in government, it remained “a massive beast” that often suffered from “fragmentation” and lack of collaboration.
That meant it often failed to fully grasp the needs of the third sector.
This gap in understanding was one reason why the philanthropic sector was increasingly raising its voice through peak bodies such as Philanthropy Australia, combining with others to push for legislative change on issues such as the fundraising problems crippling the sector.
As a funder – and as someone in close contact with many not-for-profits right now – Ms Kennedy was acutely aware of the critical role the sector plays in a healthy and well-functioning society, she said, and the huge hit it has taken from COVID-19.
She believes the current environment provides a chance “to show that if [the government] can fix fundraising and bring on board some innovative thinking such as with a fit-for-purpose not-for-profit loan facility, the sector can be empowered to help itself”.