Just Hand It Over?

The shifting foundations of charitable giving

There are over 6,000 private foundations in Canada, with collective assets in 2018 of $56.3 billion. If you add public and community foundations, the total exceeds $100 billion. Required by law to pay out at least 5 percent of their funds for charitable purposes each year, foundations are a huge factor in Canadian philanthropy and a financial mainstay for many hospitals, universities, and registered charities (including the one that publishes this magazine).

Many private foundations are very small, but others are quite sizable. Not counting the giant Mastercard Foundation, which dwarfs the rest, 64 percent of the assets and 50 percent of foundation grant making in 2018 were associated with this country’s 149 largest private foundations. That year, they donated $1.34 billion in all, with almost 60 percent going to organizations supporting social services, education, and health.

Hilary M. Pearson, author of From Charity to Change, knows foundations well. For two decades, she was the president of Philanthropic Foundations Canada, an umbrella group that brings 120 private and public foundations together “to connect, learn, and advance the best solutions for change on the issues that matter.” PFC offers a broad window into the activities of Canadian foundations, and Pearson brings knowledge, perspective, and variety to a text that will be useful and interesting, not just to insiders and grantees but to observers of the broader charitable sector.

Pearson begins with an overview that focuses mainly on private foundations. She then describes her preferred vision of how foundations can and should work in a fast-changing society: more like partners than like investors. The seven remaining chapters present a series of brief case studies on foundations whose efforts illustrate this more collaborative ideal.

Consequently, the book’s subtitle, Inside the World of Canadian Foundations, is a bit misleading. Pearson explores the world of some Canadian foundations, those on what might be called the cutting edge of philanthropic innovation and action. These are “outliers, not representatives,” she explains. “Yet even though they are not typical, they are important as examples of the variety and scope of philanthropic activity.” But it is only in the last five pages that another purpose seems to emerge: to show that there are other alternatives to the shortcomings of traditional “big” philanthropy.

Earlier pages contain hints at these shortcomings: a lack of strategic thinking that leads to the funding of food banks, say, while the causes of food insecurity remain unaddressed. The critique of big philanthropy isn’t just about strategic thinking, however. Most foundations have strategies, effective or not. Pearson writes vaguely about issues of power and effectiveness as well as “the subjective (and, therefore, supposedly arbitrary) nature of foundation choices.” But with From Charity to Change, she is primarily concerned about ways forward without much more than a sideways glance at where we’re starting.

In her concluding remarks, Pearson quotes PFC research that argues “the path forward for increased impact, relevance and legitimacy will require deep, inclusive, and challenging conversations and continued experimentation.” And, she adds, this “will take courage.” (When I saw the word “courage,” I wondered if I might have missed something in her earlier chapters.) “No one is saying this will be an easy shift.” So courage is needed for a difficult shift — but away from what? If it’s the “charity” of the book’s title, this isn’t spelled out. Obviously, there’s a problem, but here at the very end, there’s just enough space left to say that “the pressure is strong and the agenda for change in philanthropy is clear.”

In her 2021 book, In Defence of Philanthropy, the University of Kent professor Beth Breeze wrote, “The criticisms have been set out, have been heard, and are being worked on.” While Pearson deals primarily with the “being worked on” part of the foundation sphere, the journalist and long-time critic of Canadian tax policy Linda McQuaig has been more explicit in setting out the criticisms. Writing earlier this year in the Toronto Star, McQuaig argued that “thousands of working charities are starved for funds as they struggle to deliver services to Canadians,” even as private foundations “sit on mountains of idle cash.” More and more charitable donations are going into these foundations, “controlled by wealthy families,” but because annual payouts do not have to be any greater than that 5 percent of assets, the donors get an immediate tax break while the money often stays in the bank. Moreover, many private foundations employ family members who are paid from those accounts. And a lot of foundations, McQuaig explained, “tend to direct their disbursed funds towards charitable endeavours that create personal legacies for themselves — their alma maters, hospitals, opera houses and art galleries, where their donations are prominently proclaimed and celebrated.”

Pearson has relatively little to say about where the big money goes, although others are more explicit. In 2020, a study by the now defunct Charity Report found that by far the top recipient of funding from the twenty largest Canadian private foundations, over a recent five-year period, was Technion, the Israel Institute of Technology. The third-largest recipient was the Heseg Foundation, which provides scholarships to veterans who travelled from other countries to serve in the Israel Defense Forces. Also among the top ten were the University of Toronto, McGill University, the University of British Columbia, and Arizona State University. This isn’t to say that organizations falling within the “relieving poverty” category, as the Canada Revenue Agency puts it, were ignored. But as a percentage of the total, the ten largest such organizations received a pretty small take: 7.3 percent of the granted funds.

“At our expense,” McQuaig wrote in the Star, “we’re granting huge tax relief to wealthy families, enabling them to channel billions of dollars into their private foundations where the money can sit for decades, serving no ostensible purpose other than enhancing the family’s prestige and influence.” Without saying so, this is what Pearson seems to be driving at with her praise for those with different grant-making approaches.

Pearson describes several new ways of working. “Building fields,” for example, is about bringing diverse actors together “to create more organized activity around an issue.” Meaningful, intentional coordination can lead to greater and more effective action, as seen in the partnership between the McConnell Foundation and the Maytree Foundation in the area of immigrant employment; the initiative encourages organizations receiving grants to discuss their work and share best practices with one another. “Strengthening community” means moving from one-off, siloed projects toward a broader approach that covers many sectors and brings a variety of voices into public policy development. “Shifting power” or “participatory grant making” sounds a bit risky, until you understand that it means fewer short-term grants for projects that fit with a donor’s priorities and more longer-term arrangements that allow for the building of openness and trust. The Lyle S. Hallman Foundation, for instance, initiated a pilot project in 2018 that gave unrestricted funds for the general operating costs of its partner organizations. This meant that within the overarching framework of youth engagement, those organizations could invest in their own priorities rather than those of the foundation. This trust-based approach — almost radical in the grant-making field — gave Hallman’s partners the stability and capacity they needed to deal with fast-changing community needs when the pandemic struck.

According to Pearson, few foundations view the advancement of public policy as a legitimate charitable activity. But, she argues, there are moral, strategic, and structural reasons for philanthropic engagement on the policy front. Whether the issue is poverty, at-risk youth, or climate change, foundations can bring together the experience and understanding needed to influence public policy. In Alberta, the Max Bell Foundation launched an institute that promotes research on policy and trains charitable groups in the development and monitoring of the challenges that are of importance to them.

In her final chapter, Pearson discusses the much-neglected area of relationship building with Indigenous communities and an approach that, of necessity, goes far beyond the simplistic idea of grants and projects. Separately, the Gordon Foundation, the Catherine Donnelly Foundation, and the Indigenous Peoples Resilience Fund are testing different ideas of trust, community, and commitment that, if they work, will give new meaning to words like “resilience” and “responsibility.”

“Any foundation with a concern for the well-being of communities should be concerned about climate change,” Pearson says, yet few have taken up such work as an explicit target of their funding. Although the dollar amounts going toward climate change remain small, she describes three foundations that are making a difference. The Donner Canadian Foundation is “deploying its assets through collaboration to accelerate efforts to protect marine environments and steward land, as well as to mitigate and adapt to climate change.” In Montreal, the Trottier Family Foundation has become “directly involved in launching a new player on urban carbon reduction.” And in 2014, the Ivey Foundation initiated a ten-year program on the economy and the environment, aiming to create “systemic change drivers” on the pricing of environmental costs, innovative investments in resource-efficient business, and a measurement of well-being that goes beyond traditional standards like gross domestic product.

Globally, under 2 percent of philanthropy supports the mitigation of climate change, and among Canadian foundations the percentage is a fraction of that. As a way to improve the balance, some in the voluntary sector argue that the minimum annual foundation payout should be increased to 10 percent, which would release hundreds of millions of new dollars. Without the collaborative changes that Pearson advocates, however, additional funding might not make much difference.

Recently, the Ivey Foundation came up with an alternative approach entirely: Spend it all. Right now. On the biggest issue we face. One of Canada’s oldest foundations, it announced in November 2022 that it will spend its entire endowment of $100 million by 2027, effectively doubling in five years what it gave over the previous seventy-five. “The Ivey Foundation’s singular focus on addressing climate change,” it says, using standard donor-speak, “makes capital distribution especially well-suited to achieving maximum impact in the near term. By distributing the entire endowment, we hope to inspire other private funders to join the growing number that are substantially increasing disbursements, establishing a limited-life term, or choosing to wind up to increase the shorter-term benefits for Canadians.”

In the world of private foundations, this really is a radical approach, one that answers Linda McQuaig’s criticisms, takes Hilary M. Pearson’s idealized approach to a new and laudable level, and gives Canadian foundations something to think about.