This is the first in a series of conversations between Stir to Action and representatives from philanthropic foundations about their role in democratising wealth in the UK. Stir to Action’s Daniel Stanley speaks to Emma Shaw, who works with the Joseph Rowntree Foundation’s Emerging Futures team.
Daniel: To begin with, could you tell us a little about your background and how you came to your current role with JRF?
Emma: My background for the last ten years has been as a social entrepreneur, and prior to that I did a degree in plant science and ecosystems, followed by a Masters in Systems Change. These things all came together when I co-founded a social enterprise called Library of Things in South London in 2014. That gave me a real, lived experience of the funding world.
About four years in, Library of Things was restructured into a steward ownership model (a model which decouples wealth and power and enables you to access investment without compromising the company’s long term mission or values). We then led five years of fundraising with that structure and, despite the barriers in raising this kind of patient, mission-aligned money from sources like charitable funds and venture capital, we nonetheless mobilised around £2.5M to £3M of blended capital into Library of Things – which, for instance, allowed us to build a technology platform and resource our team to grow the service across London. This experience of navigating the funding world from all sides, both as a purpose-first company and an all-female founding team, was really challenging. A year and a half ago, I stepped away from the day-to-day running of the business to be able to work with big funders and investors to move money into properly democratic, wealth building projects and regenerative organisations, who are currently not served by the funding system.
This led me to the work that JRF was starting with Emerging Futures. JRF is one of a handful of institutional philanthropic foundations committing to initially moving £100M of its £430M endowment into its ‘mission’, which has now been reorientated towards systems change. They went back to Joseph Rowntree’s original 1904 founding memorandum, which was about using wealth to tackle the underlying root causes of extreme inequality and poverty. The mission now is to ‘speed up and support the transition to a future free from poverty, in which people and planet can flourish.’ That spoke to me, and the fact that they have committed such a significant portion of their wealth into delivering that is bold and brave. In order to do this, JRF established a new programme – Emerging Futures – which would think critically about what it means to move a chunk of wealth in service of the mission. It was an initial two-year commitment and ranged from resourcing work around collective imagination practices, to ‘Pathfinder’ organisations demonstrating alternative, regenerative approaches to building organisations and a ‘Visionaries’ programme, through to the reimagining wealth and investment strand, which I joined a year ago. That culminated in October when we presented the trustees with a series of propositions to say how we think the first tranche of the £100M commitment should be moved. I led the proposition on Transforming Wealth as a system, which we now have a five-year, ten-million pound commitment to establish as a collaborative programme from 2025 onwards.
The trustees are also on a journey to align the wider endowment with the mission. And that’s very quietly radical. It has become commonplace in endowed foundations where there’s a pot of money invested in the market, that the endowment is there to preserve and/or grow the financial wealth (Kieron Boyle wrote about this very eloquently in the Financial Times earlier this year). Typically, a foundation spends around four percent of that to run the organisation, whether that’s for research, policy, grantmaking work, and so on. At JRF, there’s a clear conversation around what it means to move £100M of the carve-out into meaningful programmes that are going to advance this field in different ways; and longer term, to bring the main part of the endowment in line too.
This is all in a context of urgency and crisis, of course, but it’s also an interesting time with the anticipated ‘great wealth transfer’, with generational wealth changing hands from the baby boomers and the businesses and wealth that they hold, to the next generation that have, for the most part, different values.
Especially in the US, across Europe, and to a lesser extent in the UK, there has been a niche but noticeable move towards radical wealth planning and progressive wealth holding among wealthy organisations and individuals, coming to terms with the often uncomfortable ways in which their wealth has been made, and thinking about using that wealth in ways that are more aligned with their values. But, at the moment, many structural barriers are getting in the way of achieving more radical changes.
It seems as though there has been an identity crisis in the philanthropic sector, with many questioning why they have this wealth, how it is being used and invested. Some are spending out/down, others are taking different roles and actions. In the context of this recent trend or movement, what are your thoughts on the different ways and reasons that funders and foundations are reacting to this context?
In terms of the ‘why’, a significant part is that extreme wealth inequality is growing. But in our public narratives and discourse, the link between extreme wealth – the accumulation of which is not just legalised but often celebrated and glamorised – is not always connected to the experiences of most people, and particularly on the sharper end, those living in growing poverty. What is the role of philanthropy in this context? From the ‘crisis side’ the need has never been greater, but I also think that from an ‘opportunity side’, there is energy, especially in entrepreneurial spaces, around building wholly different kinds of organisations that incorporate equity and justice into their DNA and ways of operating. There are similar movements in the civic sphere, too, but the scarcity of philanthropic resources just doesn't match the need.
So what do you do about the slow reckoning of realising that the origins of wealth are uncomfortable, have often exploited people and planet, and may have contributed to the very challenges that today philanthropy is trying to remedy? I agree that there is an identity crisis, although it looks different in different cultural contexts. Having a very important conversation around equity and justice, especially racial justice, in philanthropy, sometimes only gains the attention it needs at certain flash points. I know that in the US context, the murder of George Floyd was a huge catalyst in bringing that to light.
In certain contexts, the decision by wealth holders – such as family wealth, trusts, and institutional philanthropy – to spend down their wealth is appropriate. That being said, and this is a personal view, I don’t think this is appropriate in all situations. Someone recently described this behaviour to me very critically as ‘panic philanthropy’, and there is something in that for me. If all the self-aware foundations doing the internal work they need to and should be doing to step into their role as responsible wealth holders were to release all their assets, that will serve some degree of reparation, but who’s left holding that space, pushing for meaningful social change in philanthropy? And I don't think it goes far enough in stopping the repatterning of what made us get here in the first place. What is it that enabled this very small minority of individuals and organisations to accumulate wealth at the expense of people and planet, both structurally and systemically? A wholesale spend-down is not going to stop that from happening again, unless things significantly change across the financial sector. On a very practical level, in the case of JRF, the founding memorandum also commits them to supporting the Joseph Rowntree Housing Trust for the long term, which provides vital social housing and care services in Yorkshire.
So there is work that needs to happen, but not on the level of the funding; rather, on the deeper governance level, to think about where power is held, whose voices are heard, and who gets to decide. And those have to be different voices; they have to be voices who have lived experience of the challenges that a particular philanthropic organisation declares it’s there to solve. Otherwise, I don't think we can move into a different pattern. Beyond the short term, a more meaningful reaction is to get serious about the power, the accountability structures, and the governance. And that might lead to spending down and redistribution of funds, but looking at it just from a funding point of view isn't the right question. It’s about who gets to decide; and then I think money flows where it needs to go. But that’s difficult work because of incumbent power structures, trusteeship, and fiduciary duty and how that’s understood.
What are some examples of that new way of operating that you think are exciting?
The hotspot of innovation I’m most excited by is in the private wealth space, within individuals and families. For example, the next generation inheritors of family trust funds are, in some cases, blowing up those trust structures because they do not subscribe to the model of preserving and growing wealth for future generations. They are learning and modelling how to dismantle some of these legacy power structures, and they organise in groups like Resource Justice and Resource Generation. In Europe and the US, there are groups such as Generation Pledge and The ImPact, bringing together networks of families around the world who want to move their money differently. Private wealth and philanthropy are not enough in itself, but are helping to bridge these approaches into more mainstream finance and investment practice.
In the UK, the Butler-Sloss judgement in 2022 ruled that the trustees of two charitable trusts should be able to use their powers to exclude investments that were in violation of the Paris Climate Agreement. Those kinds of case law examples do help. Once you demonstrate case law, it can have an important ripple effect to shift behaviours. If you have swathes of professionals who see their role as needing to grow and preserve financial value so they can do good things with the excess, that takes a lot of mindset and behavioural change.
On the one hand, you have philanthropic wealth holders and endowment funds thinking about how to spend money in a more impactful way, and on the other hand, you’re trying to attract private capital into this space. Have you encountered any conflict or common between these two types of efforts?
The thing that's noticeable is that these fields are so binary – whether you're an organisation looking for funding or whether you're holding funds, you either show up as a philanthropist providing a grant with no returns, or as an investor with the expectation of a maximising ‘risk-adjusted’ market return (whatever that means). I think that's the bit that needs to be broken down, to move towards a less binary, more pluralistic, blended spectrum of capital. I don’t think the mental shift is about whether it makes a financial return or not; it’s about the kind of capital we need to move into an organisation, movement, or initiative. Who decides, how does it flow, how is risk shared, what does the reward look like? That's the more meaningful thing to look at. I think the thing that keeps us stuck in this binary is looking at wealth through a solely financial lens.
As well as ensuring distributed power and accountability, part of the value of democratic structures is that they protect against wealth: without external shareholders, a democratic organisation is not subject to the same pressures that drive so many businesses to be more extractive.
Do democratic institutions and structures have a role to play in this transition?
JRF, as an endowed foundation, differs from philanthropic structures in which the organisation needs to raise funds every year from donors. It is complicit in the wider finance and investment system. Some critics have described these kinds of foundations as ‘hedge funds with small giving on the side’. It’s important to acknowledge where money is held and what it’s doing, and yet it’s not a given that trustees or representatives of a foundation will be wholly aware of where the money is held and where it’s distributed – such is the complex nature of the finance and investment system in which money moves.
Then comes doing something about it. There are examples of foundations – such as the Heron Foundation in the US – that have moved all their endowment in service of their mission. In doing that, you realise the structural barriers that exist. Where is the ecosystem of progressive fund managers? Impact investment is one approach, but it takes a market-first approach, and we do need to go beyond that and look at what's aligned with, and contributing positively to, the mission. There are also governance structures that keep the finance-first investment model locked in. It is the legal responsibility of trustees in an endowed foundation to steward the wealth, and the responsibility of investment committees to implement that.
In the case of JRF, what most people know them for is really brilliant research, campaigns, and influencing in the political and wider market, normally to do with issues around poverty, housing, and care, but increasingly they will step into their role as a wealth holder to influence the wider environment around wealth. That could look like proposals around taxation, maybe working with the FCA and other regulatory bodies.
If you were to try to pinpoint what's keeping the extractive investment model locked in, there’s something really interesting about the business model of fund management. Whether it’s pensions, sovereign bonds, or public and private equities, for the most part, the model is the ‘two and twenty’: fund managers take a 2% fee and a 20% share, called ‘the carry’, of the profit of the fund they’re managing. Their job is basically to maximise the return on the financial assets – and their salary depends on it. The origin of the profit share, the ‘carry’, has its roots in the 16th century shipping trade. It was the reward paid to ship captains for transporting cargo over risky oceans, and we can infer that cargo may have been people. There are also legacy tax issues in the UK whereby millions of pounds are paid in carry to only a handful of fund managers every year, but it’s not taxed as income; instead, it is taxed as Capital Gains – 23 per cent rather than 40 – even though it makes up the lion share of their salaries. Unless you change that, how are you ever going to shift behaviour in that industry towards de-prioritising financial growth at all costs over social wellbeing and environmental care?
The work JRF is doing is interesting because it spans all of this work across the wealth system: they are a wealth holder, holding investments in the market, and they know from their own practice what it means to try and change that. They have a platform to campaign for changes in policy and shifts in public narrative. And through the Emerging Futures work, which is the ‘innovation’ arm of the foundation, they’re tuned into what the wider systemic barriers are and can intervene in various ways around that.
Emma Shaw is an External Consultant for JRF’s Emerging Futures team, focused on reimagining wealth and investment to influence how we mobilise the capital required to support and speed up the transition to more equitable and just futures, where people and planet can thrive.
Daniel Stanley is Executive Director at nonprofit research initiative Future Narratives Lab, a co-owner of Stir to Action, and Strategy Associate at the Centre for Democratic Business. He has a background in community organising and social psychology, and writes and lectures on framing, narrative, and social change strategy.
