An agenda to reform philanthropy to advance economic, social and racial justice

“We are in this together.”

That is the message we’ve heard time and again during the past year. But when it comes to the philanthropic sector, this couldn’t be farther from the truth.

We as a sector have not been genuinely advancing racial justice. If we really want to rebuild better, we need an approach that centres racial, economic and social justice, otherwise we will only further marginalization and systemic oppression. This requires that those in the philanthropic sector do more — and that policy-makers make changes that require us to do more.

Over the last 12 months, facing the devastating financial impact of a global pandemic, individual Canadians rallied to support worthy charitable causes, at a time when the charitable sector was struggling. According to Imagine Canada, 81 per cent of Canadians believe the need for charitable services has increased during the pandemic. Canadians collectively responded by donating more than $480 million to charity through Canada Helps, an increase of 116 per cent from 2019. Individual Canadian donors are doing their part.

Meanwhile, as the Black Lives Matter movement gained momentum in 2020, corporations and foundations across Canada released statements of support and committed to improving inclusivity in their organizations. Social media campaigns were implemented, awareness was raised and financial commitments were pledged to Black and Indigenous communities.

Yet despite these efforts, some genuine and others reactive, there was no real, significant shift within Canadian philanthropic culture toward meaningful impact in the name of justice and equity.

We are at a moment when the public is looking for change and progress on issues of racial, economic and social justice. The philanthropic sector needs to step up more aggressively and be accountable for the choices it makes and how it invests. And governments should make legislative and policy changes related to the charitable sector that will drive real change on these issues.

Putting the money in play

There is more than $80 billion in charitable assets sitting on the sidelines in Canada. These are funds that have already been donated, receipted and designated solely for charitable purposes, but foundations are holding them in their coffers. How does that help Canada to rebuild better?

There is nothing that philanthropists, foundations, fund managers, wealth managers, estate planners, family offices and philanthropic intermediaries can say to justify hoarding more than $80 billion in taxpayer money amid several different crises related to climate, housing, homelessness, substance abuse, racial inequalities, systemic oppression and reconciliation with Indigenous peoples.

We are at a crossroads. As long as these charitable assets remain in the hands of more than 10,000 foundations across Canada, they won’t have any impact on these complex social and economic problems — and these problems will not be resolved in my lifetime. We need to address this with a sense of urgency.

The philanthropic sector can do more. Bold and creative reform will help. Our recently launched organization, Justice Fund, was created in part to reform philanthropy in support of communities in crisis, especially those that are experiencing conflict with the law and the legal system. Reform has not come quickly enough, nor with sufficient ambition.

What can we do?

There are practical steps that can liberate more charitable assets so they can have a real impact in communities across Canada.

What is required at this point is not a mystery. There are roadmaps that have been articulated by activists and academic research. We need to get dollars out of the hands of asset managers and into communities, where they can address the systemic issues that so many people in the philanthropic sector say they want to address. How can we do this?

First, we need to increase the disbursement quota, the minimum percentage of assets foundations must pay out to charities, from its current 3.5 per cent. We would suggest moving to 10 per cent over time. This will get more funds out of bank accounts and into communities. It is estimated that increasing the disbursement quota will generate an additional $14.4 billion invested in communities annually.

Second, the government should introduce mandatory spend-down requirements for all newly registered foundations, and require existing foundations to establish guidelines on how they will spend down their existing assets. Charitable endowments should not be able to exist in perpetuity, which starves not-for-profit organizations working to address issues of injustice in our communities.

Third, government should require a disbursement quota for donor-advised funds. A donor-advised fund is a charitable giving mechanism that allows donors to make charitable contributions and receive an immediate tax benefit, often through an institution’s wealth management services or through community foundations. However, the funds often remain within the institution — and are not spent in communities. We have to end these charitable parking lots for donors.

Fourth, we need to lift the restrictions on partnerships that currently exist in the Income Tax Act, as proposed in Bill S-222. Today, charities cannot partner with other organizations, even if those not-for-profits can more effectively deliver a program, except with onerous conditions. Removing these restrictions, as Senator Ratna Omidvar has stated, will “enable charities to establish equal partnerships with non-charities, especially empowering the voices of BIPOC organizations, while still ensuring accountability and transparency.”

Fifth, Canadian foundations today hold their assets in many different kinds of investment vehicles and funds. Many invest in sustainable and social justice funds, but they are not required to do so and many do not. The result is investments in real estate investment trusts, the fossil fuel sector and private prisons. Foundations should choose to avoid unethical investments, but government should mandate it. By requiring foundations to move all of their assets into certified impact investment funds over the next decade, the Government of Canada can introduce more than $80 billion in impact investing to support affordable housing, community infrastructure and renewable energy.

And finally, we need to create incentives to direct more funds to Black-led, Black-mandated, Black-serving and/or Indigenous-led public philanthropic foundations. One way would be for existing foundations to transfer some of their assets to Black- and Indigenous-led ones. This could be even more significant and regenerative if governments were to match these transfers of wealth. These pools of new capital could be transformative in Indigenous and Black communities on many of the issues foundations care about.

To address the dire impact of the multiple crises of racial, economic and social injustice that we are facing across Canada, philanthropy can play a much more significant role. This is the agenda that the Justice Fund is pursuing.

Government policy has a role to play in reforming philanthropic organizations that retain significant funds meant for helping people and communities. To have more than $80 billion languishing in charitable asset accounts is not only bad policy — it is immoral. As organizations we must choose to have more impact, and government policy can force us to make that choice.