Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

B-Corps-LG-Graphic-2016The B Corporation movement, which certifies companies that meet rigorous standards of social and environmental performance, has made enormous progress since its launch in 2006 by nonprofit B Lab.

Well-known brands that have embraced the B Corp label include Ben & Jerry’s, Patagonia, New Belgium, Seventh Generation, Warby Parker and Etsy. At last count, some 2,076 B Corps have been certified in 50 countries. That’s impressive.

But the B Corp movement is at a crossroads. If B Lab is to achieve its bold vision — “that one day all companies compete not only to be the best in the world, but the best for the world” — then publicly-traded, mainstream companies, the companies  that dominate the U.S. economy, need to become B Corps.

Otherwise, B Corporations will remain a niche, albeit a valuable niche, like the Fair Trade or Organic certifications, to which it is often compared. Less than 1 percent of US cropland was certified organic, as of 2011. Fair Trade is a blip in the global trade marketplace. Continue reading

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The Trump administration’s “combination of incompetence and malevolence has been breathtaking,” writes Harvard climate economist Robert Stavins. How bad is it?

Very bad, says Van Jones: Trump “may have just signed a death warrant for our planet” by ordering the rollback of the Obama administration’s Clean Power Plan.

Not as bad as most think, says Michael Bloomberg: The “depressing and widespread belief that the United States can no longer meet its commitment under the Paris climate change agreement” is mistaken.

But even if Bloomberg is right, merely meeting the short-term, non-binding Paris targets won’t protect the world from the worst impacts of global warming, scientists say. What’s required is more radical change. Stopping all sales of cars and trucks that burn gasoline by 2030, for example.

Either way, foundations must do more to address the climate crisis. As Larry Kramer, the president of the William and Flora Hewlett Foundation, wrote recently:

Less than 2 percent of philanthropic dollars are currently spent in the fight against climate change, much too little given the threat we face. Nor is it enough just to increase spending. Funders also need to collaborate more and better. We must pool our resources, intellectual as well as financial, to find the right organizations to support and the right way to support them if we are to avert the worst harms of a warming planet.

But which organizations? With what strategy? Should foundations stick with the usual suspects or try new approaches? Kramer offers ideas, all worthy, most focused on elites. (“Our most important role may be supporting experts to help financial institutions develop a shared methodology for valuing climate risk, so financial markets can allocate capital more efficiently.” Hmm.) Kramer deserves credit for sounding an alarm, as he and Carol Larson of the Packard Foundation did last year, before Trump, but my view is strategies focused on elites won’t get us where we need to go.

To address the climate crisis, we need a powerful, broad-based movement, akin to the anti-slavery, civil rights, women’s and gay marriage movements. While building that movement, foundations should also support advocacy for nuclear power, research into geoengineering and programs to address energy poverty. A big agenda, admittedly. Here are my six proposals for climate philanthropy:

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Amazon-Smile-LogoAmazonSmile brings to mind the observation of late great media critic A.J. Liebling about The New York Times’ fundraising campaigns on behalf of its Neediest Cases.  “Readers are invited to send in money,” Liebling wrote, “while the newspaper generously agrees to accept the thanks of the beneficiaries.”

AmazonSmile is bit like that. The website, created by Amazon.com in 2013, offers

the same products, prices, and shopping features as Amazon.com. The difference is that when you shop on AmazonSmile, the AmazonSmile Foundation will donate 0.5% of the purchase price of eligible products to the charitable organization of your choice.

Nice, right? Well, yes, but not nearly as a nice as it could be.

Two questions need to be asked about AmazonSmile.

First, what has it done to increase the quantity of charitable giving?

Second, what has it done to increase the quality of charitable giving?

The answer to both: Not much. Continue reading

Screen-Shot-2017-02-01-at-3.48.02-PM-750x300As a Peace Corps volunteer in the Dominican Republic in the early 1990s, Eleanor Allen lived with a family whose granddaughter, a child name Maria, died of diarrhea. That changed her life, she says—but not right away.

Trained as civil and environmental engineer, Allen spent 16 years rising through the ranks of CH2M, a big global engineering firm, working on projects around the world, notably the management of the infrastructure of the 2016 Rio Olympics. She worked for another two years as global water director of Arcadis, overseeing a $450m business for the engineering consultancy.

“I had no plan to do nonprofit. I had a great job. Made a lot of money,” Allen told me. Then she was  invited to apply for the job of CEO of Water For People, a nonprofit she knew well. It was her dream job, she said. She was hired in 2015, and has not looked back.

Water For People is not as well known as charity: water or Matt Damon’s water.org but people who know the WASH sector — WASH stands for water, sanitation and hygiene — tell me that it is one of the very best water charities. Water For People stands out in a crowded arena for several reasons: It has a clear and achievable strategy, it focuses on a limited number of countries, it measures its performance transparently and, importantly, it seeks feedback from those it aims to serve.

Water for People has been around since 1991. For twenty years, it operated much like many water charities –installing wells or taps, working in many places (40 countries!), often not asking for much from the communities where it worked and paying scant attention to what happened after a project was built. This approach, which remains all too common today, bred failure.

In Africa alone, an estimated 50,000 rural water points are broken and US$215-360m of investment has been wasted because of poor programming and careless implementation, according to Rethinking Hydro-Philanthropy, an influential 2010 manifesto from Ned Breslin, who then led Water for People. “Africa, Asia and Latin America have become wastelands for broken water and sanitation infrastructure,” Breslin wrote, vowing to build “a new culture of accountability and transparency that transcends the nonsense that currently masquerades as reporting in the sector.” (For more, see my 2015 post, Water taps and information gaps.)

Today, Water for People is focused. That’s smart: most effective organizations do only a few things well. The NGO  aims to provide safe water and sanitation, i.e., toilets to four million people in nine countries–the ones they thought had the best chance of success, based on the strength of their government partners–by 2020. Time-based goals are important; without them, it’s hard to hold nonprofits accountable.

Ultimately, the global WASH crisis–which kills an estimated 840,000 people a year, many of them children — will have to be solved by governments. An estimated 1.8 billion people around the world don’t have safe water to drink and another 2.4 billion lack access to adequate sanitation. But philanthropy can help show the way, and that’s what Water for People aims to do. Continue reading

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Investment bankers: They are not delivering value to foundations

With a collective $800 billion in assets under management, America’s big foundations spend vast sums of money to buy investment advice. They’re getting little, if anything, of value in return.

Their own investment offices, and the Wall Street banks, hedge funds, private equity firms and consultants they hire, when taken together, deliver investment returns that lag behind market indexes, all evidence indicates.

These foundations would do better to call an 800 number at Vanguard or Schwab and buy a diversified set of low-cost index funds.

So, at least, argues Warren Buffett, one of the great investors of our time. In his latest letter to investors in Berkshire Hathaway, Buffett writes:

When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

The limited data available about foundation endowments bears him out.

It’s not possible to prove that Buffett’s advice would enable foundations to improve their returns–and thus have more money to devote to their grant-making. Most foundations don’t disclose the financial performance of their endowments.

Of the 10 largest grant-making foundations in the US, only two — the MacArthur Foundation and the W.K. Kellogg Foundation — publish investment returns on their websites. MacArthur’s disclosure is exemplary. (So is its performance, perhaps not coincidentally.) I emailed all ten and got nowhere with the rest.

The best evidence about how foundations are managing their endowments comes from an annual study published by the Council on Foundations and Commonfund, a nonprofit asset management fund that serves foundations, colleges and nonprofits. Their most recent survey, which covers the 10-year period from 2006 through 2015, found that returns averaged 5.5 percent per year for 130 private foundations and 5.2 percent per year for 98 community foundations.

Further insight can be gleaned from Cambridge Associates, an investment firm whose clients include foundations, universities and wealthy families. Cambridge tracked the performance of 445 of its endowment and foundation clients and found they generated average annualized returns of 4.97 percent for the 10-year period ending June 30, 2016. (These returns should not be considered Cambridge’s performance track record, a spokesman told me.)

By contrast, Vanguard’s model portfolio for institutional investors, a mix of passively invested index funds, with 70 percent invested in stocks and the rest in fixed income securities, delivered 5.81 percent over the 10-year-period through 2015, and 6.1 percent for the 10-year period ending on June 30, 2016, according to Chris Philips, head of institutional advisory services at Vanguard. (All figures for investment returns are net of fees, meaning fees are taken into account.)

That may appear to be a small edge for Vanguard. But when institutions are investing hundreds of millions, or billions of dollars, small gains compounded over time add up to big money. Money, again, that could be better spent on programs.

Actually, it’s worse, because the figures reported by the Council on Foundations and CommonFund do not include the salaries that foundations pay to their in-house investment offices. The chief investment officers are often the highest-paid executives at foundations, and their deputies do well, too.

Why, then, do foundations continue to pay high salaries and high fees in the pursuit of market-beating returns, when so many fail?

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Thanks to the good people in the animal welfare movement, pigs are being liberated from gestation crates and laying hens are being freed from cages. These animals will suffer less because people care about them, and don’t want them to be harmed; governments and corporations have responded.

Why, then, after a nearly a decade of declining meat consumption, are Americans once again eating more meat, nearly all of which comes from so-called factory farms?

And why, more broadly, do Americans who adore their dogs and cats blithely go on consuming meat products that cause needless suffering to pigs, cows and chickens?

The first question has a simple answer: Beef, pork and chicken prices all fell. Shoppers responded.

The second question remains a bit of a puzzle, says Kristie Middleton, as senior food policy director at The Humane Society of the United States.  Merely talking to meat eaters about what’s on their plate — it’s the flesh of dead animals, folks — is hard. Changing behavior is harder.

“Food is cultural, it’s about family, it’s tradition,” Middleton says. “It’s very difficult to even to talk about our diet choices because there are so many sensitivities surrounding them.”

That hasn’t stopped Middleton from trying. Her new book, Meat-less: Transform the Way You Eat and Live–One Meal at a Time, reflects her belief that gradual shifts in diet might do more good than an all-or-nothing approach. If you want to go meatless, fine, but if you choose to eat less meat, she’s OK with that, too. She doesn’t pull any punches, but her tone is kind and gentle, more likely to spur conversations among friends than to leave people feeling pressures to become vegetarians or vegans.

“I want to give people permission to take positive steps, rather than pressuring them into going 100 percent,” she told me.  “It’s about progress, not perfection.” The book mixes storytelling, sound advice about nutrition, food shopping tips and recipes, including for meat-free versions of pepper “steak” and “chicken” pot pie.
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Jacob Lawrence’s “The migrants arrived in great numbers” (1940-41)

People have migrated for millennia, mostly to escape poverty. Between 1880 and 1930, more than 27 million immigrants entered the US, most from Europe. Some six million blacks left the rural south for cities in the north and midwest between 1910 and 1970, in what’s known as The Great Migration. More recently, Hurricane Katrina prompted one of the biggest resettlements in American history.

Migration is “the simplest and most effective antipoverty program. Pretty much everyone wins,” says Nancy Birdsall, the founder and former president of the Center for Global Development, a Washington think tank.*

And yet, when governments, foundations and nonprofits talk about alleviating poverty, they typically don’t talk about migration. The UN has produced many thousands of words about its sustainable development goals, mentioning migration only in passing.

This is an enormous missed opportunity, argues Michael Clemens, a Harvard-educated economist and a senior fellow at the Center for Global Development. Clemens has been making that argument for more than a decade, notably in an insightful 2010 paper called A Labor Mobility Agenda for Development. He writes:

The globalization of labor—greater mobility for workers across borders—quickly and massively raises migrants’ living standards toward those of rich countries…No known schooling intervention, road project, anti-sweatshop campaign, microcredit program, investment facility, export promotion agency, or any other in situ [in place] development program can surely and immediately raise the earning power of a large group of very poor people to anywhere near this degree.

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Michael Clemens

To his credit, Clemens has been doing more than opining. Working with Sarah Williamson, the executive director of a small NGO called Protect the People and the nonprofit US Association for International Migration, and with funding from the Open Philanthropy Project, Clemens guided and then studied a small-scale effort to bring Haitian farmworkers to the US on temporary visas. It enabled the Haitians to rapidly and dramatically increase their earnings.

“Migration does something that’s almost magical,” Clemens told me. “It immediately transforms the economic productivity of a person.”

Last year, some workers stayed in the US long enough to bring home $5,000 to $20,000, according to Williamson. Some invested that money in school fees for their children. Others had new homes built for their families.

Our program built more houses in Haiti than the Red Cross,” Williamson says.

Alas, after two years, funding has dried up for the Haiti project. That, it seems to me, reflects a dismal lack of imagination among philanthropists, who have poured many millions of dollars into Haiti and don’t have a lot to show for it. (See this and this and this.) Temporary migration, by contrast, has delivered benefits not only to Haitian farmworkers but also to the US economy –and, importantly, it has the potential to sustain itself after reaching scale. Yet its backers struggle to raise money. What’s wrong with this picture? Continue reading