DFAT develops a mechanism to engage private philanthropy in Australia’s development program.
Philanthropy is big business. Globally, philanthropic donations averaged $10.6 billion USD a year between 2016 and 2019, according to the OECD. Domestically, the Australian Philanthropy 50 list was valued at some $942 million in 2021 — this figure represents about one-fifth of the country’s development budget.
This is both a growing field and one with potential levels of resources that are significant multiplying factors for both charitable giving and the official overseas development program. However, in Australia, there are barriers to philanthropic giving for development projects.
Creates a coordination point inside Government. Philanthropic money is complementing — and in some sectors overtaking — the impact generated by official development programs. The Bill & Melinda Gates Foundation, for example, is often now outspending ODA in various countries and in some sectors.
Matching that money with initiatives is a relatively straightforward matter thanks to peak bodies such as Philanthropy Australia and project match-making services for not-for-profit investments. There is also DFAT’s partnership with the Australian Council for International Development (ACFID) that allows the Government to better work with NGOs. However, for philanthropists wanting to invest in high-impact international development in the region, there is no such landing point in Australia, either in Government or elsewhere, to connect funders with projects.
Remedying this would likely open up a significant source of funding for development. Given the limitations our development program faces, both in terms of financing and capability, it makes sense to look at how we can better harness these significant outlays.
Establishes opportunities for philanthropic investments to complement Government investments (and vice versa). Prominent Australian-based groups such as Minderoo Foundation and the Oil Search Foundation are working in areas that intersect and overlap with the development program such as education, health and the environment. The Australian International Development Network (AIDN) – an umbrella group of Australian philanthropists – assesses there is an undercounting of philanthropic donations because of flaws in data collection methodologies.
Can harness additional finance and impact beyond what Government is capable of alone. Better coordination of philanthropic efforts and development goals would also address so-called ‘isolated impact’, where good work and innovative solutions don’t ‘scale up’ because they exist in isolation. The net effect of such fragmentation is that assistance ends up being less than the sum of its parts.
Never have we seen as much interest in alternative forms of financing development as we are right now. DFAT has launched its Development Finance Review, which is looking at “new forms of development finance to support Australia’s foreign policy, trade, security and development objectives”.
Pragmatically, it is also a case of need’s must. The government has made it clear that the development budget is unlikely to increase significantly in the short- to medium-term. That is not surprising given the outlook for economic growth and spending pressures on the federal budget coming from various areas such as health, education and defence. In that context, private financing could help. As ACFID has noted, the $4.2 trillion estimated to be required to meet the Sustainable Development Goals constitutes just 1.1 per cent of the money held in banks and other financial institutions.
There is already some partnership taking place between the development program and the private sector at a country level. In the highlands of Papua New Guinea, for example, ExxonMobil provides funding support to an Australian law and justice program, which allows the program’s geographic reach to be expanded, with goals more likely to be reached.
Moreover, joining government together better with philanthropy parallels international trends. The OECD’s 2021 Private Philanthropy for Development report suggested the donor community should be more open-minded, systematic and structured in engaging with foundations. Among its recommendations were that governments should involve foundations in monitoring and evaluation efforts, while foundations should share data to better identify funding gaps and should provide robust evidence on program effectiveness.
Elsewhere, USAID is open to engaging with philanthropic organisations to use their comparative advantage and is setting up a Philanthropy Unit. Conversely, one of the dominant critiques of the U.K.’s 2022 International Development Strategy was that it failed to mention the potential of philanthropic giving.
A carrot in the form of a matched funding initiative for philanthropic donations aimed at international development would be a low-hanging fruit for the Government.
Ensure the current Development Finance Review examines philanthropic potential
Ensure the report includes recommendations for simple first steps for the department when it comes to philanthropy, such as appointing a departmental officer to meet with key philanthropies, examine areas of alignment etc.
Understand the scale and location of Australian philanthropy
Before we can better engage with the philanthropic sector, we need to understand the sector’s scale and reach in areas where Australia’s development program is prominent. However, previous efforts at quantifying this ran aground on the shoals of unreliable data. The AIDN’s suggestion of a survey – using the OECD DAC’s framework of transaction-based indicators – of “institutional, corporate, and philanthropic donors to gather detailed data about investment flows, projects and future intentions” is a good starting point.
Learning from who does it well
The U.S. has a deep culture of homegrown philanthropy, which extends into international development with large organisations such as the Bill & Melinda Gates Foundation, the Ford Foundation and the Clinton Foundation. USAID also has a Private Sector Engagement Hub (PSE), while the State Department has an Office on Global Partnerships. Through these offices, the U.S. Government maintains sustained engagement and partnership with large philanthropies in the U.S. and beyond. Australia could look for lessons here, as the U.S. development program is rumoured to be establishing a specific philanthropy strategy.
A central point of contact for philanthropic investment
DFAT already works with the private sector through the business partnerships platform, Emerging Markets Investments etc, but the engagement is decentralised, with no obvious connecting point for philanthropists. A central point of contact with the Government, such as DFAT has with charities and NGOs, would make it easier for interested philanthropic donors to engage with the development program and be less freeform than it currently is. It would also give individuals and organisations a ‘seat at the table’ they currently lack. This has the dual benefit of raising their profile with the Government, while also allowing for greater alignment of their investments with development outcomes.
Integrating philanthropy into planning
The next step from this is to more formally integrate philanthropic endeavours and goals into development planning, management and monitoring at the country and/or sector level.
A joint support agency between partners
Joint planning is important but not sufficient — joint action is needed. Bringing plans to life requires what John Kania and Mark Kramer call having a “backbone” — that is, a support organisation providing coordination support between the various parties. This is separate from the participating organisations themselves who typically lack the capacity to handle the “myriad logistical and administrative details needed for the initiative to function smoothly”. According to Kania and Kramer, leaving such coordination to the participating organisations frequently leads to failure. Successful partnership initiatives in the U.S. use a joint action model, although it has rarely been tried in an international development construct. That’s no reason not to try.
The most appealing feature of philanthropy is its in-built potential for faster pace. Governments move slowly, while philanthropic programs have fewer approvals to navigate and can be nimbler. They also have arguably more continuity because their initiatives are not buffeted so much by budgetary winds.
Engaging more could also build greater understanding of (and support for) the cause of development within the corporate sector, potentially unlocking a much more significant quantum of resources.
Of course, this is not a new idea. Engaging the private sector was a prominent leitmotif during Julie Bishop’s tenure as Foreign Minister. However, it proved difficult to get the idea off the ground partly because conceptually the private sector and its philanthropic off-shoots were conceived more as additional “service providers” to Government rather than equals in a shared enterprise.
If there is to be better engagement with the philanthropic sector, the Government needs to be prepared to coordinate, harmonise and engage with private sector partners on equal footings. This will require humility on the part of senior officials and their recognition that Government is not the dominant partner in the relationship.
The Australian International Development Network’s 2020 Sector Report on Australian International Development Philanthropy & Impact Investing is a treasure trove of insights into the scale of philanthropic giving, and how it can be better utilised.
For background reading on philanthropic giving in Australia, check out the 2021 annual report from the sector’s peak body, Philanthropy Australia.
And for an inspiring, Government-philanthropy partnership from an ally see this report from the U.S. State Department.