Will the money-back guarantee appeal to wealthy donors? | Economic news
By DREW LINDSAY of The Chronicle of Philanthropy, Chronicle of Philanthropy
A glossy book is coming to the homes and offices of America’s wealthiest individuals. Inside is a charity pitch that aims to raise up to $6 billion for nonprofits fighting global poverty.
Proposal? Donate and get results — or your money back.
Advocacy group Global Citizen and financial firm NPX are organizing this campaign. It targets the Forbes 400 billionaires, members of the Giving Pledge and the wealthy in general – a group increasingly criticized for what is seen as tight purse strings. The campaign launched recently with dinners, meetings, and a Wall Street Journal ad that asked, “Will you donate…if we get results?”
Initially, the effort aims to raise at least $150 million through six $25 million funds. Each of the programs could absorb up to $1 billion, according to campaign officials.
The will is an unusually large effort to tap into two great sources of capital – the wealth of individual philanthropists and the funds raised for impact investments that seek both social and financial returns. It’s also a test of whether a ‘pay for results’ model can get millions of dollars that are earmarked for social good but sit on the sidelines – including more than $1.3 trillion in assets. foundation, $160 billion in donor-advised funds and an estimated $700 billion managed by impact investment firms.
Many wealthy people worry that their money won’t be well spent or that results won’t follow, says Lindsay Beck, co-founder of NPX. They declare themselves ready to give – if they see a clear line in the results.
“I’ve heard that in many one-on-one meetings,” Beck says. “And that’s what we’re solving here. We say, ‘OK, here are the results.’
The “pay for results” financing plan would work as follows:
Donors would pledge to make donations, but the money would only be released when measurable results were achieved. For example, $500 from a donation could be allocated to each woman lifted out of poverty. If the nonprofit organization misses its goals, donors could shift the donations to another project or organization.
NPX and other impact investors, meanwhile, would lend the money for the program’s expansion. Their reimbursement, which would be based on donor money, would also be results-based. If the results were high, the output would be high, and vice versa.
Five associations are involved:
— BRAC will expand a program to lift 50,000 female-headed families in Bangladesh out of poverty.
— Charity: water for the drinking water supply of 500,000 people.
— The Global Fund to expand malaria care to treat an additional 5.1 million cases.
— The International Rescue Committee to educate 300,000 young children out of school in Bangladesh, Nigeria and Niger.
— The One Acre Fund to work with farmers in Ethiopia, Kenya, Malawi and Rwanda to increase food supply and reforestation.
Global Citizen and NPX reviewed these programs to ensure that their results were supported by evidence and could scale quickly. Research on International Rescue’s tutoring program, for example, found that third graders gained a year and a half in reading comprehension and reading aloud after 21 weeks of instruction. The cost: $63 per child.
The capital to scale these programs is all we need, says NPX’s Beck. “The solutions exist. We know how to provide access to drinking water. We know how to educate children. We know how to increase food security. We know how to plant trees and sequester carbon.
For many years, Global Citizen has advocated for increased public spending to achieve the United Nations’ 2030 Sustainable Development Goals, according to Mick Sheldrick, the organization’s chief policy officer. More recently, he has tried to persuade the wealthy to open their wallets through a Give While You Live campaign, urging the world’s billionaires to donate 5% of their wealth each year to important causes such as l help with COVID-19.
Tying donations to results could motivate big philanthropy in ways never seen before, Sheldrick says. “It’s a case study. The potential really has no limit if it works.
Each of the deals proposed by Global Citizen would create a funding agreement similar to a “social impact bond.” Typically, with impact bonds, private investors provide seed capital for an effort on climate, social services, etc. A municipality or regional or national government agency reimburses the investor — with interest — based on the success of the program.
The proposed Global Citizen impact bonds are unusual in both their size and the role of philanthropy in paying for results, says Emily Gustafsson-Wright, Brookings senior research fellow in global economics and development. If completed, she adds, it would be the largest results-based program in which philanthropy alone would provide results funding.
The Quality Education India Development Impact Bond, which aims to improve the outcomes of more than 200,000 primary school students, counts only philanthropy among its funders. These are the Michael and Susan Dell Foundation, Comic Relief, the Larry Ellison Foundation and the Mittal Foundation. But their combined commitment is only $9.2 million over four years.
Featured together, the six Global Citizen funds are meant to make donors an offer they can’t refuse. “To be honest, it removes an excuse not to give,” Sheldrick says. “A donor can’t say, ‘You’re not covering my problem.'”
Chris Stadler, president of Global Citizen and managing partner of private equity firm CVC Capital Partners, said he plans to make a mid-to-high seven-figure contribution split between a donation and an impact investment. Investors will like the programs to be proven, Stadler says, which means there’s little risk to their capital. Donors will appreciate that their money only pays for results.
“We’d like to help connect people who struggle to find impact that can scale,” Stadler says.
Global Citizen and NPX expect financial industry executives to be attracted to the model, but also the wealthy in general. NPX donors include five Giving Pledge members: Richard and Joan Branson; Charlie and Candy Ergen; Gordon Gund (who signed the engagement with his late wife, Llura); Lyda Hill; and Pierre and Pam Omidyar.
This article was provided to The Associated Press by the Chronicle of Philanthropy. Drew Lindsay is a senior editor at the Chronicle. Email: firstname.lastname@example.org. The AP and the Chronicle are supported by the Lilly Endowment for coverage of philanthropy and nonprofit organizations. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.
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