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Leveraging Philanthropy for Business-Driven Solutions and Impact
Philanthropy has historically played a critical role in supporting positive social change. Moving forward there is growing potential to broaden the impact of charity through innovative grant making and investments in cross-sector initiatives and opportunities. It is crucial for the charitable sector to more fully engage in projects that layer capital to have greater and more sustainable impact, especially given that philanthropy, alone, cannot adequately address the magnitude of increasingly diverse and complex issues.
In the United States, charitable giving totals over $300 billion each year, with over $45 billion from foundations – 2.1% and 0.3%, respectively, of the $14.7 trillion total Gross Domestic Product in 2010. In comparison, government spending in 2010 was $5.3 trillion, 36.0% of GDP. While there has been a historical flow of funding and support between nonprofits and foundations, governments, and corporations –most often in the form of government and business support of nonprofits—the last few years have seen a rise in particularly innovative models in which capital is leveraged across the sectors for community-based initiatives focused on providing economic and employment hubs in low-income communities. Specifically, foundations are increasingly finding ways to provide support to mission-focused for-profits that operate in alignment with nonprofits and provide market-driven solutions to chronic issues such as unemployment. Through a variety of different giving vehicles, philanthropic dollars can be directed to for-profits, as long as the funding is designated for charitable or educational purposes. Thus, foundations can play a large role in supporting cutting edge research and development in early stage companies, as well as positioning them for additional public and private funding to implement and scale their products. A prime example of this opportunity can be found in the story of the Evergreen Cooperatives of Cleveland.
In 2006 The Cleveland Foundation started the Greater University Circle Initiative, a strategy supporting collaboration among the area’s major anchor institutions and the surrounding communities to stimulate economic development among the 43,000 residents. Recognizing that job development and training, wealth and asset building, and robust community economies were all necessary to addressing poverty where the median household income was less than $18,500 and where there was over 25% unemployment, the Foundation and other Initiative partners established the Evergreen Cooperative Development Fund. The Fund provides low-interest, long-term financing to start up cooperative businesses that are based on worker ownership and provide employment, training and services to local residents, and focus on economic and environmental sustainability. The Fund has helped launch two businesses, Evergreen Laundry and Ohio Cooperative Solar, and is funding a third, Green City Growers, currently in planning stages. The Fund expects to create up to ten cooperative businesses and 350 to 500 new jobs, resulting in employee holdings of $25 to $30 million.
Philanthropic support played a significant role by providing seed funding that Evergreen Cooperatives has leveraged, including a $1.5 million loan from the Cleveland Department of Economic Development to Evergreen Cooperative Laundry, a $3 million Federal Energy Tax Credit for Ohio Cooperative Solar, and an $8 million Housing and Urban Development Section 108 Loan for Green City Growers. Due to early success other foundations are looking to finance expansions in Cleveland as well as replications in other communities such as Youngstown, Atlanta, Detroit, Pittsburgh, and Buffalo which are all studying ways to implement the Evergreen Cooperatives model locally. So while charitable giving may only represent a small slice of the national marketplace, philanthropy has an essential role to play in mobilizing greater resources from all sectors to fund effective, community-focused initiatives and bring them to scale.
For more information about Evergreen Cooperatives, read the full report from Capital Institute:
