Embedding DEI in grantmaking due diligence

What does it mean to be a diverse, equitable and inclusive funder? The Black Lives Matter movement led to more money going to minority-led charities, including specifically targeted funds. Yet minority-led organisations continue to report that they are struggling to access these and other non-targeted funds. They are therefore more likely to remain small and under-resourced as existing funding processes perpetuate unhealthy power dynamics.

At NPC we’re helping funders improve their due diligence processes to ensure their funds are equally accessible for ethnic minority-led charities and the people they serve.

What do we mean by diversity, equity, and inclusion in grantmaking?

Diversity, equity, and inclusion is very broad, and funders should think about how it applies to how they make decisions:

• Diversity is about recognising, respecting, and valuing each other’s differences, such as race, ethnicity, gender, sexual orientation, socio-economic status, age, health, geographic location, neurodiversity, religious beliefs, political beliefs, or other ideologies.
• Equity is about ensuring fair access by acknowledging that different groups and communities don’t all start from the same place. Fair outcomes require processes to be tailored to different needs.
• Inclusion is about everyone feeling valued and welcomed within a given setting. Inclusive approaches to grantmaking seek to overcome power dynamics and barriers that may exclude people.

Whilst diversity, equity, and inclusion are all significant concepts in their own right, the three terms are interconnected, so you should work on achieving all three together. Using the famous party metaphor of long-time DEI educator Verna Myers, ‘diversity’ is being asked to the party, ‘inclusion’ is being asked to dance, and ‘equity’ is having an accessibility ramp to the door.

Why is embedding diversity, equity, and inclusion in due diligence important for the sector?

We know from the work of many organisations, including the Baobab Foundation, Future Foundations UK, Ubele Initiative, and Funders for Racial Equality Alliance, that minority-led organisations (in particular those led by racial and ethnic minorities) have a vital role to play in helping communities to rebuild and regenerate our social and economic infrastructure as we emerge from the pandemic. Yet, many funders are still failing to fully recognise their crucial contribution and prioritise funding for these groups.

Valuing the Black Philanthropic Pound found that Black-led charitable organisations are often overlooked or even excluded from applying for large pots of funding. Ten Years’ Time found that, despite minority ethnic groups being around 14% of the UK population, independent funders – such as trusts and foundations – still fail to give a fair share of grants to these groups. As a result, minority-led micro and small voluntary sector organisations often do not have sufficient funds to survive over the long-term.

The challenges minority-led charities face in accessing funding is often linked to due diligence processes across the sector not being equitable or inclusive. Due diligence is the process through which a grantmaker learns more about a charity to help them decide whether to award a grant or not. The process typically involves gathering information and engaging with the charity to understand how well it would fit with the grantmaker’s goals and funding criteria. Due diligence is a core part of the grantmaking cycle, which determines who gets funded – and by extension how resources are distributed across the charity sector.

Due diligence checks often don’t consider the challenges some minority-led organisations may face in meeting specific funding criteria (in relation for example to their finances, governance, and strategy) without further investment in their capacity building. The lack of understanding by funders of such needs makes it more likely that minority-led organisations will be disadvantaged and under-resourced. This can reduce the impact and reach of their work, and even threaten their very survival.

One barrier to a more equitable funding eco-system is that the leadership in funding institutions often isn’t representative of minoritised communities, meaning their decision-making lacks lived experience. Although many funders are becoming increasingly aware of their biases and are exploring ways to include the communities they serve in their grantmaking processes (such as through participatory grantmaking), current attempts to address these problems are often extractive and place even more burdens on already under-resourced communities.

How can funders be more equitable and inclusive?

If you’re serious about incorporating DEI into your grantmaking and want to do this well, then you must recognise the power dynamics and barriers that may exclude people from accessing your funding. Having a diverse funding portfolio is crucial, but this demands a genuine commitment to reflecting the needs of a diverse range of organisations and groups – including those that do vital work in supporting communities on the ground but routinely miss out on funding because they don’t meet the criteria.

Applications need to be simple and accessible so that every charity has a real opportunity to make a case for support. You should revise your due diligence processes and the criteria you use to select and assess grantees to apply a DEI lens to level the playing field and increase the chances of your funding reaching beyond the ‘usual suspects’ to where there is a need.

What is NPC doing?

At NPC we are working on a new project with charities and funders to explore the opportunities and challenges for embedding diversity, equity, and inclusion into grantmaking due diligence.

We’re working alongside Civil Society Consulting to review how we (and funders more broadly) conduct due diligence, with a view to uncovering implicit assumptions, cultural biases, and mental models that stand in the way of a more diverse, equitable and inclusive grantmaking. This has involved one-to-one interviews and workshops with charities and funders. We intend to use what we find to develop recommendations for the funding sector that stop due diligence being an unfair barrier to minority-led organisations.

To find out more about NPC’s work, or to take part in further conversations about the topic, please do get in touch with cristina.andreatta@thinknpc.org. We look forward to hearing from you!