What Your Nonprofit Needs To Know About Trust-based Philanthropy

Traditional grantmaking processes are becoming a thing of the past.

Many funders have started to take a trust-based approach to philanthropy in an effort to shift power dynamics and give nonprofits a greater say in how grant dollars are used.

Through increased transparency, deepening and strengthening relationships, and a focus on awarding unrestricted grants, trust-based philanthropy works to reimagine funders’ roles in supporting communities and improving our world.

In this article, we will walk you through the basics of trust-based philanthropy, what it is, why it’s important, and examples of grantmakers who take a trust-based approach to giving.

So—what is trust-based philanthropy, exactly?
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At its core, trust-based philanthropy works to shift power dynamics in the nonprofit sector and to develop new models of giving based on mutual trust, collaboration, and holistic support that empower nonprofit leaders and build sector capacity.

The Trust-Based Philanthropy movement aims to divest from old systems and practices that have historically disadvantaged marginalized populations and put undue burdens on nonprofit professionals.

Ultimately, this approach to philanthropy puts the power into the hands of communities and nonprofit leaders, or in the words of the National Philanthropic Trust:
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“The trust-based model shifts the donors’ position from patron to partner.”

At its core, trust-based philanthropy is an approach that focuses on cultivating relationships with grantees that are centered on mutual accountability and trust so that nonprofits can spend more time making an impact.

So how exactly is trust-based philanthropy put into practice?

Trust-based giving is facilitated through a number of key strategies applied by funders. According to the Trust-based Philanthropy Project, a trust-based approach is defined by six key grantor practices:

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Give Multi-year Unrestricted Funding

At the heart of trust-based philanthropy is unrestricted giving, a notably powerful type of giving that allows nonprofits to direct funds as they see fit.

Unrestricted funding empowers nonprofit leaders and gives them the opportunity to formulate a nimble response to unforeseen challenges and direct funds to where they would be most impactful.

Not only do trust-based approaches focus on unrestricted awards, they also prioritize giving multi-year grants. Multi-year awards help sustain programs and give nonprofits the flexibility to plan several years out instead of hoping for grant renewals or new sources of funding year after year.

Do the Homework

Traditionally, it has been a nonprofit’s or nonprofit leader’s responsibility to make a case for funding and convince a funder that they deserve to receive a grant. This is an excessive burden on nonprofit professionals and takes a significant amount of time away from the work of the organization.

Trust-based philanthropy asks that funders “do the homework” or put forth the effort to do their own research into a nonprofit’s work and understand their impact.

Simplify and Streamline Administrative Requirements

Grant management can be a significant strain on nonprofit resources.

Without the staff or financial capacity, nonprofits have to stretch themselves thin trying to keep up with onerous reporting requirements, which can include detailed data collection and tracking, working with participants to obtain participant stories, and producing spend-down reports.

A trust-based approach has funders eliminate unnecessary administrative requirements that make reporting challenging, especially for smaller nonprofits who don’t have staff that are dedicated to grant management.

Solicit and Act on Feedback

A core principle of trust-based philanthropy is collaboration.

To ensure that funders are appropriately responding to the needs of nonprofit organizations, trust-based funders request feedback from grantees and then make a sincere effort to act on that feedback and adjust practices to address issues and find solutions.

This also shows nonprofits that the funder is invested in their needs, cares about their opinions, and is willing to take action to better support their work.

Open, Honest, and Transparent Communication

Trust-based philanthropy is rooted in deepening relationships between grantors and grantees.

In an effort to build trust between the grantor and grantee, it is essential that funders are open, honest, and transparent in their communications.

Trust-based funders are open about their work—their goals, how they aim to achieve them, and how grantseekers can join them in this work as a partner. If a funder’s priorities, guidelines, or requirements seem purposefully obfuscated and their staff are difficult to communicate with, this can weaken the relationship between grantor and grantee and lead to a decrease in the intended impact of the grant.

Holistic Support

Trust-based philanthropy recognizes that support for grantees is more than monetary awards. Trust-based approaches to philanthropy are holistic, providing nonprofits with the support, guidance, and resources they need to accomplish their work.

This type of support can be in the form of:

• Training
• Mentorships
• Advocacy
• Leadership development
• And more

It is important to note that trust-based philanthropy is a movement that is growing and adapting day in and day out. While these practices are the core of this funding approach, it is important to acknowledge the iterative nature of this practice and that as funder and nonprofit dynamics shift, so too will the nature of trust based approaches.

Trust-based philanthropy is a movement that is essential for nonprofits to thrive on their terms, making an impact in their communities unencumbered by onerous administrative burdens.

For years nonprofit leaders had been calling upon philanthropists and grantmakers to alter traditional models of giving to respond to the needs of nonprofits and redistribute wealth to address problems at the root. Organizations like Community Centric Fundraising and activists like Vu Le were at the forefront of a movement against donor centric funding approaches.

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Community Centric Fundraising was one of the first of its kind holistic fundraising models that prioritized social justice, equity, and mutual support within the nonprofit sector.

A recent report published by the Trust-based Philanthropy Project indicates that funders are beginning to implement more trust-based practices and approaches in their grantmaking:
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Since 2020, of funders surveyed for the study, 90% streamlined applications and reporting processes, 71% increased unrestricted funding, 55% introduced systems to identify overlooked and underfunded prospective grantees, and 47% introduced and/or increased the number of multi-year grants awarded by the organization.

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Overall, this is an exciting trend for nonprofit professionals!

Relationships between funders and nonprofits that are built on openness and trust will only help nonprofits advance their missions and make an impact on the people they serve.

This movement doesn’t fall only to the funders—nonprofits are key drivers of trust-based approaches. Nonprofits can leverage existing, trusted relationships with grantors and engage in open and honest communication about implementing trust-based funding models.

Ultimately, trust-based philanthropy is not an all-out solution to the inequities present in the nonprofit and philanthropic systems. It is an ever-evolving movement that requires the participation of leaders throughout the sector—both funders and nonprofits—to work together and create better methods of serving communities and improving our world.

Identifying whether a funder employs a trust-based approach to their giving can help you determine how impactful that partnership may be.
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If you come across a funder that explicitly aligns themselves with the practices listed above (transparency, honesty, unrestricted multi-year funding, etc.) you can proceed with confidence that you are entering into a partnership that will be built on mutual trust and collaboration.

Even if a funder is only beginning to implement trust-based practices, it can be a relief to know that they are open to a relationship with your organization where you can speak honestly with them about your organization's needs and how they can work with you to respond to them.

While more and more funders are adopting this model of giving, passing up a funder who doesn’t implement all the practices of trust-based giving could mean that you are passing up a great opportunity for your organization. Remember, this is a new movement and it will take time for this approach to become the philanthropic status quo.

‍Building a portfolio of funders who are focused on trust-based relationships will take time. If this is a priority for your organization, consider pursuing grants from organizations whose values are aligned with trust-based practices, even if they haven’t adopted the model in its entirety.

We will dive into some examples of funders who implement trust-based approaches to their giving.

Getting acquainted with these foundations will give you an idea of what the trust-based funding landscape currently looks like and how you can initiate a partnership with these organizations.

Liberated Capital

Liberated Capital is a giving apparatus born out of Decolonizing Wealth, a project founded by author and activist Edward Villanueva.

Liberated Capital manages funds that center the urgent needs of Black, Indigenous, and other people-of-color with a focus on liberation and racial healing. Liberated Capital uses a “reparations model” of giving that supports leaders who have been most affected by systemic and historical racism.

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Yield Giving

Yield Giving is the foundation established by MacKenzie Scott and is likely the most widely known grantmaker who adopts trust-based principles. Even the foundation’s name exemplifies the principles of trust-based philanthropy, which came from the idea of “adding value by giving up control”.

Yield Giving and its founder have been making headlines for years due to the astronomical amount of money the foundation has given to community-based organizations. To date, the foundation has given (or “yielded”) over $14,000,000,000 to over 1,600 nonprofits.

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All grants awarded by Yield Giving are unrestricted and have minimal reporting requirements.

Firelight Foundation

The Firelight Foundation is a grantmaker that supports community-based organizations (CBOs) in Africa.

The Foundation recognizes the importance of relying on the lived-experience and on the ground expertise of community organizations that are led by and embedded in communities. Their theory of change is built around the community, with community members as the primary drivers, determining what problems exist and what solutions are needed.

The Firelight Foundation does more than just award grants, it provides comprehensive capacity building, including:

• Participatory learning and action,
• Technical and programmatic capacity,
• Systems thinking, and
• Organizational capacity.

The Foundation also builds CBO networks and facilitates sharing and cross-collaboration between organizations doing similar and complementary work.

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Trust-based philanthropy has proven to have an undeniable impact on nonprofit organizations. This movement represents an investment of billions of dollars in unrestricted funding to organizations and leaders who have the depth and breadth of experience necessary to make an impact where it really counts.

That being said, trust-based philanthropy does not come without its challenges.

While it represents a transformative model for change, nonprofits and funders will have to iterate constantly, work diligently, and put in the work to ensure that authentic, trust-based relationships are built with their grantors.

Grant consultant Veronica Kulon of Empowerment Solutions speaks to this challenge from their own experiences with trust-based funders:
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“In my experience with trust-based philanthropy as a grant professional, I've found its emphasis on flexible funding, capacity building, collaborative decision-making, and reduced administrative burden to be highly effective. However, challenges include striking the right balance between accountability and trust, navigating power dynamics, and addressing concerns about resource allocation.”

At its heart, trust-based philanthropy is all about relationships. This means that nonprofit organizations are just as critical to ensuring the success of trust-based approaches as funders are.

Nonprofits should not only advocate for funders to take on trust-based models, they should also work to set up processes and controls that will hold themselves accountable to the same standards of transparency and openness that a trust-based funder would.

Relationships in general are challenging, and require open, honest, and oftentimes difficult conversations. Nonprofits will need to have the courage and agency to speak out and speak up for themselves with their trust-based partners and push them to take action and respond appropriately to issues.

But don’t be discouraged! While the challenges exist, a trust-based approach is a worthy model for funders in pursuit of increased equity and just practices throughout the nonprofit and philanthropic sectors.

Trust-based philanthropy represents a radical departure from out-dated and harmful philanthropic systems and practices. Utilizing these trust-based approaches can help shift power to historically oppressed communities and begin moving the needle on achieving true equity and justice for those who need it most.

To learn more about funding approaches, types of foundations, and how to win best-fit grants for your nonprofit visit Instrumentl’s blog.