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Conditional Philanthropy: Impact driven individual giving

Funding pressures on the arts and culture sector in the UK are widespread, with most organisations all too familiar with the ongoing challenge of covering core costs in the face of growing uncertainty. Conventional sources of income such as grant funding and corporate sponsorship can be competitive, unpredictable and are commonly accompanied by restrictive terms and conditions. Major gifts from wealthy people may have fewer restrictions but are predicated on organisations being able to invest time and resources in identifying and cultivating relationships with donors who are receptive to their work.

Motivations for giving are complex and personal, and the capacity to donate is unavoidably dependent on financial wherewithal. It makes sense, therefore, to ensure an organisation’s work appeals to as wide a range of philanthropists as possible. Enter conditional philanthropy, which could allow arts organisations to unlock new philanthropic income by emphasising the positive social outcomes delivered by their work rather than the artform central to their practice. Implemented thoughtfully, this presents a unique opportunity for arts organisations to devise programmes on their own terms, defining the social impact they set out to achieve and matching this with new donors for the arts.

How does it work?

The premise behind conditional philanthropy is straightforward: donors give funds to an organisation upon the meeting of a condition. The condition – perhaps most intuitively, the delivery of particular social outcomes – is defined by the organisation and agreed with donors in advance of delivery. Whilst this sounds deceptively simple, complexity arises from the fact that donors are likely to need specific measures of success as well as agreement around how much funding is released per outcome. For this reason, a framework is typically developed for donors where intended outputs and outcomes for a clearly defined population are predetermined, and details of how progress will be tracked are provided. Crucially, work must be undertaken not only to identify the appropriate outcomes, but also to ensure they are rigorously evidenced through a combination of recognised measures and well triangulated indicators. This framework is then used as a tool to bind an agreement between the delivery organisation and interested philanthropists, who pledge donations that are contingent on progress towards achieving the specified outcome(s).

It is vital to note that this is designed to be additional funding for organisations and to widen opportunities for philanthropists. Conditional gifts replacing unrestricted funds could be hugely detrimental in a funding arena in which core costs are rising and remain very challenging for organisations to cover. It should also be emphasised that this approach is dependent on an organisation’s capacity to pre-fund the activity at risk. This can be where a motivated risk/working capital provider such as Arts & Culture Finance enters the equation, bearing in mind that the financing costs will have to be factored into the success payments if the organisation needs the transaction to be cash neutral or positive.

New money, stronger impact?

Whilst the concept of conditional philanthropy is relatively uncomplicated, the benefits for the sector are potentially more nuanced. Unsurprisingly, the ability to unlock new money from new donors who are motivated by impact is a central tenet. But another opportunity is the strengthening of the impact practice in participating organisations, which brings with it the potential to raise the standards of the evidence base for the efficacy of arts-based interventions in the sector more broadly.

A requirement to thoroughly evidence social impact in a way that can be confidently attributed to the host organisation requires a critical engagement with existing monitoring and evaluation processes. Donors who are motivated by impact typically have high standards and may be quick to identify flaws or gaps in how change is evidenced. Granted, to some this may seem like an obstacle framed as a reward, but improvements in monitoring and evaluation capabilities will typically yield benefits extending beyond a conditional philanthropic agreement. Stronger evidence contributes to more compelling stories for all funders, policymakers and the public at large, giving rise to a greater recognition of the arts by society. Conditional philanthropy also reduces the risk for all stakeholders involved, whether the organisation itself through reserves, impact capital funder, grant funder or direct outcomes commissioner, when assessing their appetite to fund the delivery of similar programmes in the future. Most importantly, conditional philanthropy creates a mechanism and incentive for maximising and driving positive outcomes for individuals, communities and societies.

The right conditions?

Conditional philanthropy is not a one-size-fits-all solution. Evidencing impact to the required standard relies upon having robust frameworks in place to track progress alongside the requisite skills and capacity to enact them. There is a need to operate at scale to achieve the critical mass necessary to attribute observed outcomes to a specific intervention. More often than not, this means it is most appropriate to be building on a tried and tested programme of work, as a proven track record enables the setting of realistic targets based on learning from previous delivery. Finally there is a need to have access to donors and networks to bring a proposition to; this is not a replacement for the many hours spent cultivating prospects. Here in particular is a huge opportunity for collective or coordinated action between interested organisations, to provide a menu of diverse options for individuals looking to deploy their philanthropic funds in this kind of experiment.

Case Study:

The Royal Shakespeare Company (RSC) is an innovative and globally significant theatre company that is committed to captivating diverse audiences through performance of and engagement with Shakespeare’s work. RSC approached Arts & Culture Finance (ACF; incubated by Nesta) with a request for a loan to fund, and strategic support to develop, a pay-for-success fundraising model to enable the expansion of its Associate Schools Programme (ASP). ACF worked closely with RSC to co-develop a structured and rigorous outcomes framework to take to new potential fundraising prospects. Building on the foundations of RSC’s own extensive research into the outcomes of the ASP over its history, the framework measures the ASP’s contribution to improvements in literacy for Year 5 and Year 6 pupils in areas of structural disadvantage through a range of indicators, including validated scales, analysis of written work and progress against age related expectations.

Read more about this project here.

Developing the right outcomes framework takes time, experience and ideally access to support from experts and critical friends. The primary focus should be on evidencing a small number of outcomes to a high standard – one hard, targeted and rigorously evidenced outcome is vastly preferable to a plethora of softer outcomes of varying quality. Presenting a donor with a clear cut difference that will be observable at the end of the programme, and providing the associated evidence to give them confidence you will be able to demonstrate it has occurred, is essential.

One way or another, the motivation for the arts and culture sector to engage with the considerations that underpin conditional philanthropy is likely to grow, and it is a space that Arts & Culture Finance is keen to explore in more depth. If this is something your organisation is already doing, we would love to be able to learn from your experience. We are in the early stages of planning a small-scale programme to support a handful of organisations well placed to deliver in this space, and we are keen to hear from organisations who feel it might be a good fit for them. Moreover, if you are in a position to support the development of our pilot programme please get in touch.