← This Week in Global Development
This Week in Global Development
Unpacking the UK's new aid strategy and the World Bank's approach to water
00:26:04
We dig intohttps://www.devex.com/news/philanthropy-in-aid-is-growing-and-it-s-billions-more-than-we-thought-112126 published by the https://www.devex.com/organizations/organisation-for-economic-co-operation-and-development-oecd-29872 on philanthropic...
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A
My name is Adva Saldinger and you're listening to this Week in Global Development hosted by myself, Rumby Chikamba and David Ainsworth. And I am very excited to be joined by my managing director, Anna Gavel, who happens to be joining us today on her birthday. So happy birthday, Anna.
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B
Thank you.
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C
Thank you very much.
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A
And we have a second guest joining us today who is a new face to the devex podcast podcast, Danielle K. Who recently joined us as a global development reporter here at devex. So, Danielle, welcome to the devex team. Welcome to this Week in Global Development.
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B
Thank you so much. It's great to be here.
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A
So Anna and Danielle and I are going to have a great discussion about some of the key themes in the news this week. We're going to kick off by talking a little bit about sort of the role of philanthropy. And I think in this era that we are experiencing, people are looking for alternate sources of finance to fill the gaps as official development assistance is declining. And I think one of the places people are looking to is what is the role of philanthropy? How is it changing? How can it potentially, it's not going to do it on a dollar for dollar basis, but how can it help fill in the gaps and what sort of role should it play? So to that end, the OECD put out a new report on philanthropy. And Danielle, you wrote a story on this report, so I'm hoping you can give us sort of your sort of top line takeaways. What did this report tell us? What sort of picture is it painting about what we know about philanthropy and what some of the challenges are?
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B
Thank you so much. Yeah, so, so this report did some have some interesting, I mean, we've, you know, got, we got various data sources on, you know, philanthropy for global development. But what really stood out initially is that sort of the top line figure in this OECD report was actually larger than we had been expecting. So this data goes back from, you know, tracks 2020 to 2023. So I will note it's a bit outdated at this point and a lot has changed, you know, in the past few years, as we know, but still gives us a snapsh, know how much money actually is going globally to global development both in terms of cross border funds and domestic foundations. And so the top line figure, 68.2 billion, you know, in philanthropic spending globally during that three year period is several, several billion larger than, you know, previous reports. You know, from the OECD's report five years prior, it was, it was much higher and a Lot of that can be attributed to the fact that OECD actually identified more foundations, especially domestic foundations in places like China, India and Mexico and sort of emerging econom, a lot more domestic foundations that are actually backing a number of development organizations that are leaning heavily on these domestic funding flows, even more so in some instances than cross border flows. So that sort of was one of the main takeaways. Big implications for organizations looking for funding right now and also signals that there may be a lot of foundations that we're not even tracking right now that could be, that are just falling through the cracks in a lot of these sort of broad data sets. So be interesting to see moving forward sort of how OECD and others, you know, other groups that really do gather data on philanthropy, you know, start identifying more domestic foundations. And another, another big takeaway is looking at the nature of a lot of this funding finding is that still, you know, in the leading up to 2023, a lot of philanthropic funding is earmarked sort of for specific projects, which can raise some hurdles for special local, especially local organizations, you know, that might need sort of broader types of support and the ability to adapt, you know, particularly in this climate where organizations are forced to kind of adapt their business models and their priorities is sort of geared towards specific projects can actually be a constraint to some extent. So something that you know, is just important to note when looking at the nature of this funding. And the last thing, the last thing I'll mention is just, you know, a lot of interesting data points here that point to hurdles when it comes to localization. You know, even we look at sort of, you know, co financing and collaborative giving. A lot of partnerships are still among, you know, the biggest foundations. We're not seeing as much partnership with some of, you know, smaller organizations. So various data points in this report do point to sort of the ongoing hurdles when it comes to actually turning that talk of localization into concrete investments in sort of local organizations.
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A
And I think that that's last piece, right, that collaboration that how and, and also the idea behind flexibility around giving is so important, especially in this environment where we're sort of trying to think through how does philanthropy one catalytic as possible because these are now, especially with the decline of official development assistance, some of the, in theory most flexible, willing to take risk funds that are out there that can really potentially plug gaps that for example, the private sector cannot or will not fund. And I think that that's, you know, obviously we're seeing a greater turn towards looking at private sector sources of Funding. But then you have to, I think, you know, I think there's a big push now to see how can philanthropy be more strategic. And so, Ann, I want to bring you in on this because we have a story that's coming out shortly from a DEVEX contributor. She looks at this issue of sort of new models of philanthropy and collaborative giving. And I'm hoping that you can sort of give us a picture into, you know, how that space is emerging and evolving and why you think it's sort of important in this moment that philanthropists are starting to look a little differently at how they're giving.
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C
Yeah, sure. So basically under collaborative giving, institutions and philanthropists pool their money to maximize impact. It's not necessarily a new thing. It's been around for, for quite some time. But as our reporting indicates, it is part of a growing philanthropic trend. And if you think about it, that makes sense. Just like you were saying, adva, everyone is trying to kind of think of ways to make up for this gap in the decline of traditional foreign assistance from donors. So. And I think just as aid organizations are trying to think, you know, outside the proverbial box, you have philanthropists, especially new generation of them, who are also trying to make the most of their money in this time of acute need. So basically, you know, what are the advantages? There are a number of advantages to collaborative giving. You know, for many high net worth individuals, it can be intimidating to set up your own foundation much easier. It comes with a lot of the know how because you're not just pooling money, you're pooling resources and knowledge from the various other philanthropists in the collective. As Jess Abrahams writes, it can encourage more risk taking because it kind of lowers the stake for, for each donor. And that's really important because philanthropy is still kind of a fairly risk averse sector overall. Supporters say it makes the money more, more effective. You get rid of some overhead duplication and so forth. So there's definitely a lot of positives. There are though, downsides, and I think the biggest one, from what I know is that issue of control. You know, especially high net worth individuals like to be in control of their money. Right.
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A
Downside for who? Right. It's the, it's the constraint to the philanthropist.
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Right, exactly. And you have, they may not be
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willing to see that control.
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Precisely. You know, you've got different people with very different agendas and you have to be the type of person that's comfortable giving up some level of control. Now there are all types of models out there, so some will give you more control of your money than, than others. But that does get to another challenge in that you've got all kinds of models. So, you know, Jess does a great job of breaking them down in the story, but suffice it to say, you still have to do your homework. You know, you have to figure out what model aligns with your strategy, with your vision. And as one expert in the story kind of put it, this is still a bit of the Wild West. There is not a lot of infrastructure around it and like I said, it's still not a huge part of philanthropic giving. It's, it's been around for a while, but it's definitely something to, to keep an eye on jumping in here.
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Anna, I, I think it's, it's interesting to note, you know, in the OECD's latest report, they actually, you know, put out a survey asking a number of foundations about their approaches to collaborative giving and co financing at this point. And it is interesting that they identified an uptick. I mean, it is a growing, there's a growing number of foundations are sort of leaning into these, these sort of co financing arrangements. But they did note that it was concentrated in very few sectors. I mean, water, sanitation and financial services were a couple that they identified. So I found that even in the, even in that report, you know, the fact that it is a growing trend, but that it still remains kind of, you know, focused on, on very few subsets of the broader sort of development landscape, I think points to some of the hurdles here and sort of really growing this, this kind of approach.
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A
Yeah, I think one of the things that strikes me is that there's an interesting opportunity to avoid, as Anna, I think you mentioned this, this duplication. Right. And I think that one of the ways to make philanthropy more effective or efficient is to avoid having to have more coordination around what pieces of things philanthropies are doing or those philanthropic funds are doing. I think there's some interesting examples like the, and sort of how philanthropic capital can come in alongside or on top of, you know, funding, for example, from the multilateral development banks. And I think an interesting example of this is the M300 initiative, which is a World Bank, African Development bank initiative to bring electricity power to 300 million Africans by 2030. And one of the things that's really interesting there is that you've seen Rockefeller come on as a really key partner and put up a significant amount of money. Between Rockefeller and the Global Energy alliance for People and Planet, they've put in about $100 million of their own capital. And they are using that capital to look at being first movers. And they're also bringing in other philanthropic capital. But the idea is that sometimes these MDBs are slow to move. So how can the philanthropy maybe go in first, lay the groundwork, and then let the, you know, big money from the MDBs come in behind them? But I think as we start to see some of these things where we're having more coordinated approaches, where you're using the right type of capital for sort of its best purpose, I think that will be really interesting. And we're moving towards a direction of that. And part of that is forced by changes in the broader picture. And so, and I wanted to bring you in to talk a little bit about what we've seen, particularly in the uk, because one of the things we've seen in the UK is, you know, the UK used to be a government that actually met this high benchmark of 0.7% of gross national income going to foreign aid. And we have seen that decline steadily over recent years. And just recently heard that in their latest strategy, it's going to go down to 0.3%, which is a really significant blow, I think, globally, and has raised some concerns, certainly in the UK as they're focusing on other things. But that was accompanied also by sort of a strategic shift. So what can you tell us about sort of, you know, your view on how UK aid is changing, how that official development assistant is declining and sort of as a result of that, how they're shifting, how they're going to focus their assistance?
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C
Yeah, I mean, as you said, it's been a very steady decline. And I think that's why, you know, we focus so much on the US decline, because it was so sudden. But the UK was kind of a development superstar. At 0.7% aid budget of gross national income, it went down to 0.5%. It went down 2.3% under the labor government, which many people advocates had thought would actually increase aid, but it lowered it. So now it's released this strategy of how it's going to use this diminished, you know, ODA this.03%. And one of the main pieces of it is that the UK is hoping to shift from being a traditional donor to being an investor to kind of mobilizing private sector investment, you know, along the lines of what you were talking about, of, you know, catalyzing this kind of the whole different private sector. So it will leverage some of its own institutions like British International Investment, the World bank and Other, you know, major institutions. But then that kind of leaves, you know, these humanitarian settings where private sector doesn't really have a big role to play. And I think so what they've said in terms of what's left over, if you will, is they're going to focus on fragile and conflict affected areas as well as violence against women and girls and health pandemics. I think those are the main three. But specifically when it comes to fragile and conflict affected states, they're going to focus primarily on, I believe it's Ukraine basically, you know, those. But the ones that I'm thinking of that are also very fragile, Afghanistan, Yemen, Somalia, South Sudan. It does not include those countries. So I think there are a lot of aid advocates who are like this, you know, is not really a well spread out strategy. According to some estimates by the one campaign that aid to Africa will actually decline by nearly 60%. It's a huge figure. The development minister, Jenny Chapman has disputed that figure, but one has stood by it either way. This is kind of just shows that there, there are going to be a lot of winners and losers as they are with any strategy. But aid advocates definitely have a problem with the 60%. I think it's like 57% or 56. And definitely this concept that private is going to be a cure all, a magic bullet, you know, again, for the most fragile settings, that's not the place for private investment. And that is where we're seeing a lot of lower ODA from the UK going so. And it's going only to specific, very specific areas. So there is a lot left out of the strategy.
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A
Foreign.
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The world is facing a range of health threats, from an increase in disease outbreaks to the health impacts of climate change. I'm Jenny Leigh Ravelo, senior global health reporter for devex. Every Thursday we bring you exclusive news and insights on how the health sector is finding solutions to these challenges in our free weekly newsletter, Devex Checkup. Visit devex.comnewsletters to subscribe.
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A
And I think we are in an environment where, because there's this push to the private sector, there's a real question about financing humanitarian concerns and needs. And what do you do in countries that don't have fragile or conflict affected, et cetera, where they don't have the markets that can support the private sector to come in. And so I think that's why probably a lot of those concerns have, have been raised. I think it'll be, I know that bii, which is the UK dfi, obviously they're going to be a Big part of sort of this new strategy. They're, they're coming out with their own new strategy later this month. So I think we'll be looking at that closely to see, you know, where are they focusing given their sort of heightened profile. I think when we're talking about the shift to the private sector and where it's challenging, one of the areas where we've seen it really be challenging is in sectors where the sort of market case is harder. And one of those sectors is water. And I like to say water is sort of having a moment. I think it's quite popular. I'm here in D.C. and actually all three of us are going to be at the World Bank IMF meetings late in a couple of weeks. And one of the big themes this year at the World bank is going to be around water. And I think part of the reason that there's such a focus on water is because it really represents a critical challenge. You know, I think currently, I think three quarters of the world's population is living in countries that are classified as water insecure. So the scope of the challenge really is quite significant. And so the real need is to figure out, and there's a big financing gap to sort of figure out how to address water needs. And I think one of the challenges with bringing in private capital is that you have this sort of long standing debate where water is considered a human right. So how do you finance price water in a way that isn't exploitative, that allows people to still have access to this key.
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Right.
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But also in a way that helps develop these markets? And Danielle, I know you have spent some time looking into sort of the private sector investment landscape around water. And so I'd love if you could sort of tell us a little bit about what you learned. I think, I think your takeaways were that it's challenging. But what are some of those challenges and where are we starting to see models emerging that might sort of provide some of the answer?
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B
Yeah, definitely. Well, I think you sort of pointed out that the key tension here, which is, you know, that water needs to be affordable, they're sort of widely, widely recognized, that sort of widely recognized position. This is not, you know, this is an essential resource for, you know, you know, people around the world and you just can't. There's, because of that, there's just inherently a tension between sort of the, you know, investors search for, for higher margin investments and sort of the reality of this sector. That being said, though, there are a handful of initiatives out there. I mean, this is when, when you're looking, you know, broadly speaking at sort of the impact investing landscape. This is a fraction of sort of the, you know, broader dollars that are, that are going to, to impact investing right now. I mean global impact investing network. Their recent data showed that you know, capital allocated to water, sanitation and hygiene was just 1% of global impact capital. And that's all three of those. So. So for water it's even less. And so you know, given, given that sort of backdrop of this being sort of at the moment, kind of a drop in the bucket, that's what a lot of experts were telling me. There still are some initiatives here. You know, a couple I would point to are water equity. This is actually a group Matt Damon was the co founder of. You know they have this fund. It's actually drawn in some, some interest from, from major companies. I mean, you know, on the retail side you have Gap, that's been an investor, on the tech side, Microsoft. So you know there is some corporate interest in sort of investing in their funds that do support you institutions that then on lend to water service providers. You also have, you know, Catholic Relief, Relief Services, you know, some one of the larger US based INGOs that has a blended finance initiative, you know, that's, that's similarly aimed at sort of lending to water service providers. That being said, these, these initiatives are very few and far between at this point. And as you mentioned there are major hurdles. So you know, I think one is sort of the, the fact that these are relatively low margin returns. And even when you're looking at the impact investing space, investors who specifically want to use their capital for sort of social good, there are other sectors when you look at energy where there's just more infrastructure in place, you have sort of the carbon credit market, you just have more sort of precedent and more of a, of a system to generate returns. So even when you look at sort of the decisions impact investors are making about where to allocate their funds and relatively limited funds is not at the top of the list when you look at sort of the reality of sort of the low margin return. And you know, I would also say that, you know, one thing that CRS Catholic Relief Services had pointed out to me is sort of the technical element of this. There is sort of a degree of technical knowledge that you do need to really get into the water space given the complexities of sort of delivery and the infrastructure. And so you know, one thing that they had pointed out to me is that they do, you know, they've been working in this space in Central America for a while sort of have sort of the technical know how that's often needed to kind of set up these lending initiatives. And so that can be one major barrier. That's something that several experts have pointed out to me. And I think another is, as you mentioned, as this being a UN designated human right, there is sort of a sense that often grants might just be the best way, that there is just a fundamental misalignment with the private sector profit driven kind of approach. Just that that kind of conflict mixes. Maybe not just the investments, just might not be the right approach when it comes for certain projects. You know, even talking to, you know, there's a professor at IMD who's at IMD Business School who has sort of started this program for social entrepreneurs and in social innovation and does this sort of few week long sort of seminar. And a lot of the applicants she's gotten, her name is Benina Farber, a lot of applicants she's gotten actually have proposed water related projects. But after going through and are looking for investments, are looking to raise private capital, but after going through this whole process, they realize, you know what, grants are actually the right approach here. So I think that's just. Sometimes there is a fundamental misalignment depending on the project. Those are just some of the, some of the hurdles that, that folks have been telling me.
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C
I think it was. I'm just going to chime in real quick with the quote that we've used and this comes to your argument, Danielle, of, of the debate within the water community of is it a human right or is it an economic commodity? And I forget the person who said it, but it was, you know, food is a human right as well, but that doesn't mean you don't pay a few dollars for it, you know, so maybe there is some potential. But like you outlined, Danielle, you know, it's low margins, there's a lack of technical know how the returns are on water. Investments can take years, can take decades. So there's, there's huge barriers and I think that that's really interesting that it's going to take a lot more. This is I think definitely one of these areas, these sectors where private investment we can increase it to a degree. But I mean, I think you pointed out in your article it currently makes up like 1.7% of funding for water annually. You know, so few and far between I think is a good way to
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A
describe it because maybe part of it is that there has to be a fundamental shift in how people Think about water, but it's not without complexity. Like 20 years ago, I spent a few months in South Africa while I was in university working for a South African newspaper called City Press. And one of the stories I worked on was about water in Soweto. And they had set up a water program where people prepaid for their water.
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C
Right.
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A
So how do you ensure that people will pay? People prepaid for water. When you run out, you have to go pay more to top up your water. What happens when there's a fire? And so I think there are complexities in this issue of water around safety, around access, that, that definitely make all the economics around it more complicated. One of the things that we've seen is also the World bank shifting its water strategy came out with a new water strategy a couple of months ago, really shifting how they're sort of looking at water rather than being sort of solely focused on infrastructure. And I think that that's interesting because the World bank can play an important piece in helping governments plan water systems, et cetera, and also to help mobilize private capital into, into the water space. So Anna, I'm wondering if you can tell us a little bit about what we learned in this new water strategy that people might want to know, especially going into the meetings in a couple of weeks where this is going to be a key issue.
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C
Yeah, and we'll be covering it, my shameless plug, all week long. And we've got our own two day summit as well during the meetings. But basically just to give you a brief outline, it's, it's called Water Forward. And I think the key aspect of it is that it's trying to really rally a whole bunch of actors together. So not just the private sector, that the private sector is included. Governments, philanthropies, other MDBs, UN agencies. And it's got a goal of shared target of making sure 1 billion people are water secure. So it's very ambitious. It is like you said, kind of along these lines of Mission 300 for electricity. There's a big food initiative as well. It's kind of, you know, again, bringing together different stakeholders and trying to create this enabling environment for finance. And again, I think that gets back to, you know, you need help to finance water. Private actors are not necessarily going to come in on their own. And this is where MDBs traditionally will come in to help leverage their, you know, portfolio. So that's kind of the crux of it. And we'll see. Exactly. They haven't released a lot of specifics as is often the case before the meetings as they kind of want to wait to make a big splash, pardon the pun. I couldn't resist it. But. But, yeah, I mean, it's definitely a huge issue we've got in the UN as well. They'll be covering it at the end of the year. You know, water security, huge issue to begin with, but also you're looking at climate change. You're looking at more conflict, conflict that results because of water scarcity, governments struggling to maintain the infrastructure for water or to create the infrastructure for water. So it's more important than ever. But it is also the statistics on it are pretty, pretty dire. So it's going to take a lot to move the needle, I think.
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A
Definitely an issue that's worth sort of watching and paying more attention to also because of its sort of direct ties to so many other critical things from health care to education. Right. So it's really, water can underpin so much. And I think that that's, you know, partly this World bank approach is more, you know, it's not just building pipes and the water infrastructure, but a more integrated approach where you're thinking about sort of how to manage a system to serve all these different needs. Unfortunately, I think we've run out of time. But I do want to thank you both, Anna and Danielle, so much for joining me today. And Danielle, hopefully we'll hear your voice a lot more frequently on our podcast than this has been this week in global development. Sam.