Money, money, money.
Are charity investments doing more harm than their grants are doing good?
That sounds like a rude question to ask of a sector that is synonymous with good. The excesses of corporate capitalism are somehow more normalised.
But charity?
The first mistake is to imagine that charity and corporate capitalism are separate things. They almost never are.
If you’re a charity and have reserves in a bank, do you know what your bank is doing with your money?
If you’re a foundation and you have enough reserves to employ fund managers, do you really know where your money is invested? Do we, the people, know?
As systems thinkers, we’re really unhappy with the answers to these questions.
We’re fed up with how decisions get made about charity money.
And we’re just as fed-up with who decides.
We think both of those things are giving us a world none of us really wants.
It’s why we’re working on Democratic Money: a new imagination of who decides. And why we’re working with some friends on how decisions get made.
If you’re interested is who decides, you’re welcome to take a peek at our work on Democratic Money, or listen to our podcast chat with Jack Webb from BD Giving here. They’re about who decides.
But what about how ?
Surely the law, or regulators like the Charity Commission, have something to say about that?
Well, yes they do.
But it turns out charity law itself is tilted in favour of money, rather than mission or morality.
How so?
Well, in 1992, the Bishop of Oxford, Richard Harries, challenged the Church Commissioners’ investment policy because the Church of England had lots of its funds invested in apartheid South Africa.
You might think that it wouldn’t need a court of law to decide whether the moral teachings of the church weren’t aligned with its money being invested in one of the most morally bankrupt political systems in the world.
The thing is: Bishop Richard Harries lost.
And that has defined charity law ever since. The Church Commissioners argued, successfully as it turns out, that the best way a charity can further its purposes is to make as high a return on its investments as possible, so that it can spend them on its charitable objects.
30 years later, there seems so much wrong with this idea:
the fact that it takes a ‘charity begins at home’ approach, whereby it’s ok to profit from an oppressive regime ‘over there’, so long as it supports something good ‘over here’;
the fact that it locates the power to decided entirely with charity trustees, and not with its supporters, or beneficiaries, or society (and that drives behaviour into the dark because if you’re going to decide something that might look bad, it’s better not to be seen); and
because it cleanses decisions about money, of the need to consider morality.
In charities, the one place where you might expect morality to win, it turns out the score is money 1, morality 0.
Sure, that was 30 years ago. Times were different then. We’ve got more enlightened in our thinking now, right?
Not so fast!
The same issue came back around again in 2022, with the judgment in the case of Butler-Sloss and others, versus the Charity Commission.
Wait, did we just say versus the Charity Commission?
This time, it was a couple of foundations who wanted to make sure they could invest their money in line with the Paris Agreement: the legally binding treaty to try to prevent global climate breakdown. They wanted to make sure that they weren’t breaking the law if they chose climate over profit and maybe made a little less money by not setting the planet on fire.
And the Charity Commission was versus that?
The 2022 case is known as the Butler-Sloss case. It might as well be known as the déjà vu case because it essentially confirmed the law as it stands from the days of apartheid South Africa.
Charity trustees can invest their money in line with their charitable objects to avoid things like global climate breakdown, but if they make less money by doing so, they need to be able to defend the process that led them to that decision. If you’re a charity trustee, and you don’t want future scrutiny of something you might get wrong, the low-risk, legally-sanctioned, version of your choice is to choose money not morality.
Let’s pause a moment and think about whether the law, and regulators, can ever save us from ourselves.
Just a few whispers of names might give us a clue:Hillsborough; the Post Office Horizon IT scandal; Grenfell Tower; mid Staffs NHS; the infected blood scandal; Windrush; the 2008 financial crisis; the Deepwater Horizon gulf of Mexico oil spill; the Panama papers; the water industry’s pollution of…water
The water industry is a good bad example (!) Even in ancient Laodicea (modern day Türkiye) in 141 AD, we humans were better at this. The ‘water law’ inscribed on one of the blocks discovered by archaeologists in 2015 makes ancient regulation as clear the water it was designed to protect. The fine for damaging the water supply pipes or for illegal use was 5,000 denarius (something like £150,000 today). The penalty for overlooking illegal use (the part of the law that regulates the people who are the regulators) was 12,500 denarius (about £400,000). And the reward for whistle-blowing on any of those infringements was one-eighth of the penalty, so if you shopped the errant polluters or regulators, your whistle-blowers’ fee is equivalent to £50,000. Imagine if modern regulation had that in it? Or if it mandated that water companies’ inflows must come from downstream of their outflows, or the government, instead of trying to battle the water companies with legislation about how exactly to count discharge events into rivers, lakes and seas, just paid for a database and the lab testing kits, for any communities that want to test the rivers, lakes and seas they call their own? Citizen science, a fraction of the cost of bureaucracy, data that builds a national picture, and engagement from the public. It’s not even radical. It’s just transparency. Which, in the case of water, is literally what you want.
If the law, and regulators, aren’t going to save us from ourselves, what else might?
Maybe some transparency might?
If everyone can see what’s going on, that might change the incentives in the system in a way that regulation can’t.
Speaking of systems, one of our favourite examples is from Dancing with Systems by Donella Meadows. She recalls:
“In July 1988 in the US, the first data on chemical emissions became available. The reported emissions were not illegal, but they didn’t look very good when they were published in local papers by enterprising reporters, who had a tendency to make lists of “the top 10 local polluters.
That’s all that happened.
There were no lawsuits, no required reductions, no fines, no penalties. But within two years, chemical emissions nationwide (at least as reported and presumably also in fact) had decreased by 40 percent. Some companies were launching policies to bring their emissions down by 90 percent, just because of the release of previously sequestered information.”
It's a good example of locating the power to decide in a different place. Regulation and the law mean the courts and the bureaucrats decide what is good or bad: transparency means we, the people, do.
Which would you prefer?
It’s not so different from the publication of NHS waiting times for the first time in 2006, instrumental in helping the government achieve its target for reduced waiting times two years later.
The institutions of corporate capitalism also typically argue that regulation stifles innovation and economic progress. Which is one reason why there was more in the way of transparency in the wake of the 2008 financial crisis; and a reason that the recently finalized European Digital Services Act (the one that tries to get big tech to behave better) is filled almost entirely with transparency requirements. Maybe that’s the role of the law and regulation in future: to insist on transparency.
The aim of transparency is not so much to reassure, or manufacture trust, but to improve behaviour by social means. A healthy dose of scepticism is still welcome. The mantra of transparency might well be ‘trust, but verify’.
As the Molly Rose Foundation, founded in memory of Molly Russell who took her own life as a result of harmful online content served up by unfeeling, unrelenting algorithms says in its manifesto: we need to “Require transparency, accountability and candour from Big Tech”. Social media platforms judged by social means.
A default-setting of transparency is very different to something like Freedom of Information (FoI), which requires public institutions to release information they have previously kept to themselves. FoI has come in for some criticism (by government) for being weaponised by journalists to criticise government, but it is set up to be weaponised. If you have to prise-open information that is not public by default, it makes you wonder why it isn’t. Maybe the critics were thinking of the 2009 MPs expenses scandal, which exploded after the publication of information we weren’t supposed to see, led to the resignation of the Speaker of the Commons, several government ministers, and the imprisonment of four MPs. Maybe if you have nothing to hide, you have nothing to fear.
And FoI doesn’t help itself by living in the shadows sometimes: the UK’s new technology agency ARIA, alongside the Royal Family, is not required to respond to FoI requests.
If regulation can be accused of stifling innovation and economic progress, transparency can be the opposite.
In our capital city, Transport for London (TfL) began some radical transparency in 2007 by opening its data on timetables, delays and the journeys taken by travellers. Five years after that, by the 2012 Olympics, there were around 4 million downloads of apps powered by TfL data, serving about 40% of Londoners. By 2017, TfL was releasing about 80 live feeds, including departures, disruption, and passenger numbers and, according to analysis by Deloitte, was saving travellers £100m a year in more efficient journeys. On top of that, some of the innovations built on this transparency, have become eye-catching exports: apps like CityMapper, which now has 50 million users in more than 100 cities worldwide.
The charity sector, which is where we started our story, has its own transparency success story: 360Giving. Founded by Fran Perrin, the Sainsbury family philanthropist, in 2015, it now holds a data base of 1 million grants made by public bodies, local authorities, lottery funders, and charitable trusts and foundations. 360Giving’s transparency has given all of us a window into who is funding who, for what, where, and when. It has helped the Curiosity Society turn the funding system inside-out: de-centring funders and re-centring charities, to re-imagine how funders could behave as a system. Its transparency helps us all see things we could not have seen before and, often, imagine things we could never have imagined before it existed.
Turning the funding system inside-out: a universe of funding: centring charities, not funders.
Glorious as 360Giving is, it only shines a light onto something like 5% of the capital of many funders: the grants that they make from the income on their investments.
The other 95% is hiding in the investment shadows.
Maybe we should call that bit 360Getting.
It’s that 95%, the investments, that might be doing more harm than the grants are doing good.
Or it might not.
And that’s the point: we, the people, don’t know. But we, the people, ought to know. We, the people, deserve, to know.
And we know that the law and regulators aren’t going to save us from ourselves.
Maybe what we need is transparency.
