Everything Must Go: Spending Down on Purpose
Tell us what Spending Down means for your organization.
Spend-down: When we say “spend down” what we mean is that our foundation has an expiration date; everything about the organization won’t exist in 10 years.
How do you do your funding? Please describe your organization’s approach and process, explaining how it is different from conventional philanthropy.
There are a lot of ways that we are different from conventional philanthropy. In terms of the spend-down aspect of it, most foundations are intended to be institutions that last beyond the lifetimes of the founders. But the intention with Chorus from the beginning was that we would sunset, closing doors by the time I retired. Also, I wanted to create a vehicle that would give me the opportunity to be engaged in redistributing wealth. So the idea from the beginning was to do things differently than the norm. Because we focus on climate change, given the urgency of this issue, we concluded that it would be irresponsible of us not to move resources as quickly as possible. We decided that a 10-year spend down would allow us to make good informed goals and decisions, and accomplish our work quickly and effectively.
How did The Chorus Foundation come to practice philanthropy in this way? Were you influenced by another organization, model, or funding philosophy?
I think it was two moments of inspiration from looking at what others had done. Both of these were other individuals who had set up foundations, the Gill Foundation and Beldon Fund. Tim Gill is a family friend, so he’s been a big influence on me since the beginning. The Gill Foundation was also the first time I ever heard the word “sunset” apply to a philanthropic enterprise. He didn’t want to make an institution, he wanted to make the biggest impact that he could within his own lifetime. For me personally that made a lot of sense, so that was sort of in the DNA of the Chorus foundation from the very beginning. The second aha moment was meeting the folks from Beldon Fund when they had literally just finished spending out. My first introduction to Beldon founder John Hunting was at a conference where we were both in the audience during a panel discussion. Someone on the panel mentioned him from the stage, and he stood up to say a few words about his spend down, and I thought, “I gotta go talk to that guy,” because it seemed like he had done something similar to what I was thinking of doing. John was the first person I heard advocate for spending down as quickly as possible as the proper philanthropic response to the urgency of the climate crisis. After that it was inevitable that we were going to do something in this way, it was just a matter of speaking to my board and figuring out the details.
Have you ever been met with resistance or criticism when using this type of funding? What specifically were the concerns, and how did you respond?
One grantee candidly said to me, “(I understand what you are doing)… but I have been doing this work for 40 years, the guy before me had done it for 40 years, the person after me will do it for 40 years… this work isn’t going away, and there is a need for ongoing funding.”
We need to be responsive to this concern. We’re committed to moving our resources on a certain timeline, but there is more than one way to do that. If you are only going to be around as a resourcing organization for so many years, you have a responsibility to find other resources for those organizations in the years to come, hopefully at a higher level of funding. It’s sort of a leave the campsite cleaner ethos. We are trying to thread a needle of balancing urgency with long-term stability, so I don’t think there is an easy solution.
Describe the challenge you feel has the most lessons for other funders, and what those lessons were.
Investing from a depleting endowment makes the concept of investment more complicated. Folks in the investment community often think about designing portfolios for 15 to 25 years, which balances the risk. We are saying no, we have to be out the door in 10 years, so it changes the kind of investments we can make and how we think about the work that we do. We have to manage the funding by creating a curve. We needed to ramp it up, and then we will need to ramp it down at the end. We don’t want to be funding at full level and then be gone. It’s still an idea that is unfolding for us.
Overall, we tend to think of investment quite differently from most other foundations. We think about money as a tool, and essentially try to solve human problems with money – as weird as that may sound. We define an investment as a funding scenario where we might possibly see some of the money back. However, we have a higher standard for the social impact than the financial return on investment. We can’t have endless growth on a finite planet; we can’t fix our natural resource crises with wall street logic.
What can you achieve through this type of funding that might not be possible using conventional philanthropic funding models?
I think it frees us of constraints that other foundations have. During the recession we saw other foundations reduce their giving because their investments were doing poorly. At a point of economic crisis, foundations should be giving more. We are free to do so because we don’t feel the restraints of having an endowment that must grow a certain amount each year or drive our bottom line.
It’s funny to me that in conventional funding they talk about risk, but are, in general, averse to it, which makes grantees avoid risk in their work. We can afford to fund projects that are a shot in the dark, and truly support the risk in their work. You can’t really hold a ruler up to most social change projects or measure how they meet expectations. We are committing to picking some ideas and communities and really sticking to them, so that later we can point to them and say, “Look what we are doing just with a 10-year game plan,” and then organize a larger set of strategies into the future.
What’s the best piece of advice you’d give to a funder curious about doing something similar?
I would really encourage folks to look at money as a tool for social change, and take a step back from any expectations about what you are supposed to do with it. Thinking about profit-oriented conservation of wealth is where a lot of our problems originate. Take a step back and think about the problem that we are actually trying to solve. How can we change the problems if we don’t change the fundamentals of how we think about resourcing and moving money around?
There becomes a mythology about a certain way that money needs to be spent. It’s bullshit that we are all fed, and it’s challenging to cut through it. Why not be the foundation or donor that puts a flag in the ground all the way to the left, all the way to the most radical way of doing things? I think it’s possible, and one of the things that I’m trying to do with the Chorus Foundation is to show that it’s possible.
Why does Indie Philanthropy matter to you and your organization?
It’s important to me because it seems like the most authentic, whole response to the circumstances. My father as an entrepreneur made a lot of money doing what he did, and I don’t think he should have been able to make that much money in that way. He knows I feel this way. I think there should have been policies in place or something, but here we are on a big pile of consolidated wealth. It has been important for me to not feel that I am living in the shadow of that. I don’t want to keep it around because of fear. I don’t want to be constrained by that logic. Spending out has been one of the things that has really helped me have clarity. Each decision has helped me find clarity for the next decision about how to deal with class difference, financial privilege and those kinds of things.
The author of this story is Farhad Ebrahimi – Founder and Trustee Chair for The Chorus Foundation