2 The contribution of foundations
to development
9. Philanthropy has a number of characteristics that
enable it to 'add value' to global development efforts in ways
that more traditional donors cannot (or choose not to). Foundations
are currently providing a welcome injection of much-needed funding
and skills at a time when national aid budgets are under pressure.
But their advantages go well beyond the mere sum of their assets.
Innovation and risk-taking
10. Because they are using private funding, foundations
can take risks that national donors cannot. As one witness told
us, foundations "can be more flexible, test new approaches
and take a longer term view than agencies or departments funded
by tax payers [...] they are much less influenced by political
cycles."[18] However,
this is not always the case. The Chair of our Committee participated
in a conference during November 2011 organised as part of the
Bellagio Initiative, a series of global consultations held during
2011 exploring trends and opportunities in philanthropy and development,
which is led by the Institute of Development Studies (IDS), the
Resource Alliance and the Rockefeller Foundation.[19]
Participants at the Bellagio conference expressed frustration
about the lack of innovation amongst some foundations. It was
asserted that foundations want to appear in the best possible
light and therefore are put off from taking certain risks. Experts
from the Institute of Development Studies said
The philanthropic sector needs to better balance
risk with opportunities. It needs to view risk at the strategy,
rather than individual project level, and create cultures where
failure is accepted and seen as a source of learning. [...] [Philanthropists
need] to better understand their own risk tolerance and to construct
portfolios of grants and projects that reflect a mix of risk rather
than those that gravitate toward the lowest level of risk for
all projects.[20]
11. Official donors are generally good at innovation
but there are examples of foundations pursuing a more inventive
and ground-breaking approach than official donors. The UK-based
Children's Investment Fund Foundation told us that it targets
those communities most in need in Africa and Asia "regardless
of most political considerations", giving the example of
its $50 million 5-year programme to prevent mother-to-child transmission
of HIV/AIDS in Zimbabwe.[21]
CIFF's financing is for a Government of Zimbabwe national programme.
In comparison, DFID currently has a policy position of not channelling
any of its funding to the country through the Government of Zimbabwe.[22]
12. Another example of foundations' riskier political
approach is the Mo Ibrahim Foundation's annual Ibrahim Prize for
Achievement in African Leadership. The Foundation can award the
prize each year (worth $5 million over 10 years and $200,000 annually
for life thereafter) to a democratically elected former African
Head of State or Government who has served their term in office
within the limits set by the country's constitution, has left
office in the last three years, and has demonstrated excellence
in office.[23] David
McNair of Christian Aid told us
Foundations [...] do quite risky things.
[The Ibrahim prize]
is a really innovative approach
to rewarding best practice and encouraging African leaders to
manage their countries in a way that benefits the people. In
addition, they engage at a country level to help civil society
hold Governments to account. That pincer movement of both rewarding
the leaders and helping civil society to hold Governments to account
is really important and political.[24]
13. Secondly, foundations can take risks with their
choices of what to fund. They can choose focused interventions,
often accompanied by substantial financial resources, which can
often produce quick results. In part this advantage stems from
the fact that foundations often have more staff per pound spent
than official donors, and hence can make upfront investments and
pilot 'expertise-heavy' ideas.[25]
For example, the Rockefeller Foundation provided support to the
'Green Revolution' in Asia in the 1940s-1970s which, through technology
transfer—especially the development of high-yield crops,
irrigation, fertilisers and pesticides—increased agriculture
production significantly in the region. The Gates Foundation is
working in partnership with the Rockefeller Foundation to attempt
to emulate these successes through the Alliance for a Green Revolution
in Africa, launched in 2006.
14. Foundations can also take financial risks, for
example investing in projects with a higher risk of failure or
with results that are still at test stage. Bill Gates has a strong
commitment to innovation and risk. In his 2010 Annual Letter,
he stated
Melinda and I see our foundation's key role as
investing in innovations that would not otherwise be funded [...]
Our framework involves funding a range of ideas with different
levels of risk that they could fail. The ones with low risk are
where the innovation has been proven at a small scale and the
challenge is to scale up the delivery. High-risk innovations require
the invention of new tools. Some are at the frontiers of science,
such as finding a new drug and running a large trial to see how
well it works. Other high-risk efforts involve changing social
practices, such as persuading men at risk of getting HIV to get
circumcised.[26]
15. A powerful example of this risk-taking is the
support given by the Gates Foundation to vaccines to combat infectious
diseases. Gates has contributed $200 million to a new malaria
vaccine announced in October 2011 by its developer, GlaxoSmithKline.
Initial trials show that the vaccine may be able to cut the risk
of malaria in young children by approximately half.[27]
As Jeff Raikes, Chief Executive Officer of the Foundation, told
us, Gates effectively identified a market failure and 'filled
the gap':
GSK did not really see a real market opportunity
for a malaria vaccine, because it largely affects poor populations
that cannot afford it. But with our stepping in and helping to
underwrite the R and D, we now have not just the first phase 3
malaria vaccine candidate but the first phase 3 vaccine candidate
trial results.[28]
16. Whilst the vaccine's efficacy across different
groups still needs to be proven—trials will continue until
2014—the Gates Foundation has clearly contributed to a landmark
in malaria research. This follows other major contributions to
the fight against malaria, which are likely to have contributed
to a 20% reduction in malaria deaths over the last decade.[29]
These include the Foundation's role in developing the Roll Back
Malaria Partnership's Global Malaria Action Plan, which aims to
reduce global malaria deaths to near zero by the end of 2015.[30]
The Foundation's commitment to eradicating malaria is also borne
out through its support to the Global Alliance for Vaccines and
Immunisation (GAVI). Gates provided $750 million in 1999 to launch
GAVI, a public-private global health partnership committed to
increasing access to immunisation in poor countries.[31]
In June 2011, donors pledged a further $4.3 billion bringing the
amount committed for 2011-15 to $7.6 billion. Of this, the UK
Government and Gates were the largest donors with amounts of $2.45
billion and $1.34 billion respectively.[32]
The major pledges to GAVI were for new vaccines, such as rotavirus
and pneumococcal infection, rather than the traditional 'expanded
programme of immunization' (such as TB, diphtheria, whooping cough,
tetanus, polio, and measles).
17. Foundations can take political, 'focus' (in
terms of project choice) and financial risks that official donors
cannot. The world's largest foundation, created by Bill and Melinda
Gates, has shown that risk-taking and innovation can produce outstanding
results. The Foundation has made significant contributions to
reducing the burden of malaria in developing countries. Thanks
partly to funding from Gates, it is hoped a malaria vaccine will
come to market in less than five years' time. New vaccines for
rotavirus and pneumococcal infection, to be funded through the
latest replenishment of the Global Alliance for Vaccines and Immunisation
(GAVI, which receives around 18% of its income from foundations),[33]
hold the promise of reducing millions of child deaths from diarrhoea
and pneumonia.
Contributing to policy development
18. As well as making growing contributions to international
aid flows, foundations are having increasing influence on international
development policy. This was demonstrated by the G20's invitation
to Bill Gates to present his vision on how to finance global poverty
reduction to the Summit in Cannes, France, held from 3 to 5 November
2011. Gates' report to the Summit focused on innovation. It also
made a strong challenge to donors to adhere to their aid pledges
and recommended a number of ways to achieve this, notably through
tax proposals that could raise extra funds to meet aid targets.[34]
19. Yet there are risks associated with foundations'
involvement in policy. Christian Aid said that their involvement
must be "accompanied by accountability and transparency with
regard to [...] funding and the ways in which foundations are
steering policy."[35]
The Children's Investment Fund Foundation highlighted the importance
of bringing foundations within global policy initiatives:
Because foundations have the power to advocate
for priorities of their own choosing there is a risk that they
can skew the priorities of other donors, and, importantly, recipient
governments and multilateral institutions. For example, some
faith-based Foundations may focus their education and health programmes
on solutions which may align closely with religious beliefs.
The development community, including DFID, have been very helpful
in promoting and disseminating initiatives such as the Copenhagen
Consensus and the Millennium Development Goals in order to capture
the expertise of many of the leaders in the development field
and to try to align the priorities of all actors, including Foundations,
around the most pressing issues and the most effective solutions.[36]
20. Perhaps the most important opportunity to involve
foundations in global development efforts is the Paris Agenda
on Aid Effectiveness. In 2005, almost all major donors signed
the Paris Declaration, aimed at improving aid effectiveness through
improved co-ordination, harmonisation and efficiency. Interviews
carried out with traditional donors have shown that they are worried
about the impact of foundations' work on implementation of the
Paris Agenda. For example, one of the Agenda's key objectives
has been to reduce the burden on recipient countries of dealing
with multiple individual donors, and an array of funding cycles
and processes—yet foundations serve as yet another agency
with which countries must engage.[37]
21. Even large organisations, such as the Gates Foundation,
were not invited to sign the Paris accords in 2005, although the
Foundation told us they "participated in the dialogue"
and "focus on and believe in some of the principles."[38]
On 29 November to 1 December 2011, the Fourth High Level Forum
on Aid Effectiveness was held in Busan, Korea, to monitor the
implementation of the Paris agenda.[39]
Greater efforts were made at Busan to ensure that foundations
participated in the Forum's decision-making, and the Outcome Document
pledged to "take action to facilitate, leverage and strengthen
the impact of diverse sources of finance to support sustainable
and inclusive development", including philanthropy (although
not foundations specifically).[40]
Commentators at Busan argued that a new aid architecture is required
to accommodate the full range of development actors rather than
just official donors. As Robert Picciotto of King's College, London,
said, "the development scene has changed radically and neither
the aid architecture nor the goals, principles and practices that
govern development co-operation have kept up".[41]
22. On the other hand, Dr Noshua Watson of the Institute
for Development Studies cautioned that there were risks as well
as advantages to including foundations as signatories. She said,
"When you have an agreement to which not only donors can
agree but foundations as well, you risk watering down the principles
behind it".[42]
23. In order for their increasing contributions
to global policy development to be maximised, foundations
must be brought inside global development processes.
Chief amongst these are efforts to improve aid effectiveness,
known as the Paris Agenda. It was encouraging that, at the recent
High Level Forum on Aid Effectiveness, held in Busan, Korea, in
November 2011, philanthropy was given a higher profile than
at previous international fora. We recommend that DFID make efforts
as far as are practicable to engage foundations as fully as possible
in future development events and processes, including: follow-ups
to Busan in 2012; the 'Rio+20' UN Conference on Sustainable
Development in June 2012; and discussions of a post-2015 Millennium
Development Goal Framework including the MDG 'special event'
in 2013.
Venture philanthropy
24. A new form of philanthropy termed 'philanthrocapitalism'
or 'venture philanthropy' is increasingly being practised by a
wide range of foundations. It aims to apply business techniques
to philanthropy with a greater focus on effectiveness, the market,
performance goals and on return on investment. Sometimes the returns
sought are financial as well as social. Organisations such as
the Omidyar Network, created by eBay founder Pierre Omidyar and
his wife Pam, are piloting ethical for-profit investments in developing
countries. This type of investing is known as 'impact investing'.[43]
The Omidyar Network describes its approach as:
A hybrid model centred on 'flexible capital':
we make grants to non-profit organisations but also invest in
for-profit companies that we believe can generate both financial
and social returns - what is known as 'impact investing.' This
hybrid model marries the 'social good' focus of the not-for-profit
sector with the market incentives and drive for scale of the commercial
world.[44]
The Omidyar Network operates both a foundation and
a for-profit investment fund under the same roof, dedicating nearly
equal resources to each: of the $450 million invested so far,
46% has supported equity investments and 54% grants.[45]
DFID states in its written evidence:
'Impact Investments' [are] designed to yield
equity returns as well as a broader benefit for society. Examples
of this 'profit with a purpose' approach include life insurance
to people with HIV/AIDS in South Africa and savings, insurance
and investment products in Kenya. […] JP Morgan predicts
that by 2020 up to $1 trillion could be invested in this way.[46]
25. Matthew Bishop and Michael Green, co-authors
of the recent book Philanthrocapitalism,[47]
told us that this trend would mark "a significant shift in
the way development is financed" and said there was a "powerful
case for the mainstream investment community to explore impact
investing as a business opportunity".[48]
They attributed the recent opening of offices in London by 'philanthrocapitalists'
such as Gates and the Omidyar Network to the UK's "leadership
role in the fighting against poverty […] drawing interest
from private actors".[49]
However, they were concerned that DFID was missing an opportunity
to exploit these new relationships because "of the continued
focus of DFID on working primarily with other official donors
[…] Many foundations and businesses feel that the door to
UK government is closed".[50]
Whilst they welcomed the creation of DFID's Private Sector Department,
they noted that other donors, such as the US Agency for International
Development (USAID), had already created 'partnership offices'
to facilitate joint working with private actors.[51]
26. When we put this to DFID, it told us that its
Global Partnerships Department was responsible for co-ordinating
engagement with foundations. When we asked the Rt Hon Alan Duncan
MP, Minister of State, DFID for his views on whether there was
a role for DFID in co-ordinating and encouraging 'venture philanthropy',
he said the answer "is an unequivocal yes". He said
this form of philanthropy "will be a growing process by which
philanthropy can have effective influence" and that it "absolutely
ties in with our focus on private sector development and growth".[52]
We will return to the issue of how DFID organises it relationship
with foundations in Chapter 4.
27. 'Venture philanthropy' or 'philanthrocapitalism'
represents an exciting new direction for some forms of development
funding by the private sector. The idea of 'profit with a purpose'
products, whereby funding brings about financial as well as social
returns, merits serious consideration as a new way to incentivise
the business community to become more involved in development.
DFID is clearly aware of the potential offered by this form of
philanthropy work and has indicated it would like to do what it
can to support it. We recommend that DFID now take some practical
steps to build its support for venture philanthropy where it is
appropriate to do so. For example, it could open a 'partnership
office', possibly within DFID's Private Sector Development Department,
to facilitate collaboration with foundations and businesses, as
donors such as the US Agency for International Development have
done.
High profile advocates
28. Some foundations use celebrities (for example,
Bono, Bob Geldof) or high-profile philanthropists (Bill Gates,
George Soros) to promote or even lead their work. This has many
advantages, including: building media profile; securing support
from young people and new audiences; boosting donations; and increasing
political pressure on global leaders.[53]
The Gates Foundation's 'Living Proof' initiative is an example
of the way advocates—in this case Bill and Melinda Gates—can
attract new audiences. Living Proof, now being taken forward by
the NGO ONE, aims to communicate concrete results of aid and the
value for money it can represent, and is particularly aimed at
young people.[54]
29. Like foundations, advocates and celebrities can
take political risks that taxpayer-funded agencies cannot. For
example, the ONE campaign told us of a recent strongly-worded
letter written by Bob Geldof to the French and German governments
urging them to scale up their response to the famine in the Horn
of Africa. ONE said, "This kind of statement is difficult
for diplomatic actors to make in political fora".[55]
30. Many witnesses, including the DFID Minister himself,
agreed that a key advantage of advocates and celebrities was their
ability to counteract the negative view of aid that was sometimes
portrayed in the media.[56]
The Gates Foundation told us:
The media representation of aid predominantly
reinforces the scepticism of many people, by focusing on failures
of aid programmes and stories of corruption. There is little attention
given to stories of aid working, let alone to the full complexity
of the realities in developing countries. This representation
skews the picture [...] As such, there is a greater need for advocates
on international development both to keep international development
on the national agenda and to balance the way in which it is discussed.[57]
31. High-profile advocates tend to communicate development
ideas well to the public. A recent example of this was the role
played by Bill Gates in the June 2011 replenishment of the Global
Alliance for Vaccines and Immunisation (GAVI) initiative. It is
significant that a recent YouGov poll noting declining UK public
support for development showed much stronger support for the UK
contribution to the replenishment of GAVI, perhaps indicating
that advocates and foundations—in this case Gates—are
better at identifying interventions that resonate with the public,
and that they communicate them more effectively.[58]
It is also certainly true that advocates and celebrities have
better contact networks and communications experience in finance
and campaigning than official donors.[59]
32. However, there are also criticisms made about
foundations' use of celebrity advocates. For example, some believe
that their interventions can skew development interventions planned
by recipient governments and other donors.[60]
Their role may be short-term rather than making a sustainable
contribution to development. The Wood Family Trust recommended
that, in order to minimise these risks, high profile advocates
needed to communicate their activities to both the public and
other donors in order to avoid duplication and promote co-ordination.[61]
33. We questioned the DFID Minister about the pros
and cons of high profile advocates. He told us that such advocates
"have done more for […] development awareness than any
DFID budget could ever have done."[62]
High profile advocates are good at communicating development
ideas. They attract new audiences and draw on contacts in a way
that neither foundations nor official donors can. At a time when
national and global aid budgets are being squeezed by the financial
climate, advocates have an especially important role in underlining
'good news stories' about aid that can help counteract the negative
view of aid sometimes portrayed in the media.
18 Ev w41 Back
19
The Summit was held at the Rockefeller Foundation Bellagio Center
in Italy on 8-22 November 2011. Participants included international
development practitioners, commentators, social entrepreneurs,
donors and philanthropic organisations. The Summit's aim was to
bring together thinking about the role of philanthropy in international
development, and formulate "a new framework for philanthropy
and development for a changing world". Back
20
Ev 69 Back
21
Ev 42 Back
22
DfID's £80 million 2011-12 Zimbabwe programme is seen as
a 'pre-election programme' which, whilst still not channelled
through the Government of Zimbabwe,will "complement support
with technical advice to the reformers in Government in preparation
for transition to a more stable government" following elections
(DFID Zimbabwe, Operational Plan 2011-2015) Back
23
In 2007, the prize was awarded to Joaquim Chissano of Mozambique;
in 2008 to Festus Mogae of Botswana; and in 2011 to Pedro Pires
of Cape Verde. No award was given in 2009 or 2010. Back
24
Q 8 Back
25
Ev w25 Back
26
Ev 35 Back
27
http://www.gatesfoundation.org/grantee-profiles Back
28 Q 78
Back
29
Q 78 Back
30
Ev 57 Back
31
Partners include developing country and donor governments, the
World Health Organisation, Unicef, the World Bank, the vaccine
industry and private philanthropists such as Gates. Back
32
These figures are taken from the 'Resources Now Assured for 2011-2015'
column in the 'GAVI Alliance pledging conference - Key Outcomes'
table, online at http://www.gavialliance.org/funding/donor-contributions-pledges/.
The UK Government's donation is the second of two large commitments
to GAVI: it had existing provisions of £959 million at March
2011, although it is unclear whether some of this sum is included
within the £1.5 billion figure for 2011-2015. Source: National
Audit Office, Briefing to support the International Development
Committee's inquiry into the Department for International Development's
Annual Report and Accounts 2010-11 and Business Plan 2011-15 (October
2011), p.10. Online at http://www.nao.org.uk/publications/1012/dfid_annual_report.aspx?lang=en-gb Back
33
'GAVI Alliance pledging conference - Key outcomes' table, online
at: http://www.gavialliance.org/funding/donor-contributions-pledges/ Back
34
Proposals included: a financial transaction tax; a tobacco tax;
and a G20 infrastructure fund ('Innovation with Impact: Financing
21st Century Development: a report by Bill Gates to
G20 leaders', Cannes Summit, November 2011) Back
35
Ev 45 Back
36
Ev 43 Back
37
Robert Marten and Jan Martin Witte, 'Transforming Development?
The role of philanthropic foundations in international development
co-operation' (Global Public Policy Institute Research Paper Series
No.10, 2008), p.24. Back
38
Q 59 Back
39
In 2005, almost all major donors signed the Paris Declaration,
aimed at improving aid effectiveness through improved co-ordination,
harmonisation and efficiency. Back
40
Busan Partnership for Effective Development Cooperation, 1 December
2011, para 10 , online at www.busanhlf4.org Back
41
Robert Picciotto, Briefing Summary, 'Evaluating Development Philanthropy
in a Changing World',commissioned paper for the Bellagio Initiative,
November 2011, p.1 Back
42
Q 10 Back
43
Ev w24 Back
44
Ev w26 Back
45
Ev w27 Back
46
Ev 58 Back
47
Matthew Bishop and Michael Green, Philanthrocapitalism: How
the Rich Can save the World and Why We Should Let Them (London:
A&C Black, 2008) Back
48
Ev w24 Back
49
Ev w25 Back
50
Ev w25 Back
51
Ev w25 Back
52
Q 127 Back
53
Robert Marten and Jan Martin Witte, 'Transforming Development?
The role of philanthropic foundations in international development
co-operation' (Global Public Policy Institute Research Paper Series
No.10, 2008), p.20 Back
54
Ev 60 Back
55
Ev 36 Back
56
Q 134 Back
57
Ev 37 Back
58
Ev w25 Back
59
Ev w25 Back
60
Ev 43 Back
61
Ev 54 Back
62
Q 133 Back
|
