What might persuade affluent 20- and 30-somethings to give to charity?
Charity Navigator, which millions of Americans use to guide their giving, is betting it has an answer to that vexing question for nonprofits: a new online platform that promotes giving to causes, not individual organizations. The ratings giant announced Tuesday its acquisition of Causeway, the start-up company behind the platform.
Causeway, which launched only last year in a test with about 100 donors, invites the charitably minded to make monthly recurring gifts to one of its cause funds — curated bundles of nonprofits rated as highly effective. The structure mimics that of a mutual or stock exchange fund, in which investors put money into a basket of publicly traded companies rather than individual stocks.
Charity Navigator aims to expand the Causeway model and boost giving, particularly among younger Americans, says CEO Michael Thatcher. Millennials and members of Generation X are often eager to, say, bring clean water to developing countries, Thatcher says. But they don’t care who gets it done. “They’re impatient with the brand and identity of individual organizations. They’re really just looking for results.”
Causeway co-founders Ben Horwitz and Reed Rosenbluth — tech entrepreneurs in their late 20s — created the platform after they saw many of their high-income friends sitting on idle donor-advised funds, paralyzed about how to give effectively. Others were “firing from the hip,” Horwitz says, without a plan or research.
Causeway, Horwitz says, seeks to simplify and spur giving. Its online format aims to replicate the digital experience of managing finances or stocks. “My generation wants to do this in three clicks and know that they’re getting the best possible organizations,” Horwitz says. There’s also a chance to build online communities around donors’ shared passion and commitment to a cause, he says.
Horwitz, who will join Charity Navigator, quit his job in business development at Facebook to start Causeway. Rosenbluth is a software engineer who previously worked at Ripple, a cryptocurrency exchange.
Research shows that younger Americans, while generous and philanthropically inclined, aren’t making financial donations at the same rates as baby boomers or older generations, says Woodrow Rosenbaum, chief data officer at GivingTuesday, which analyzes trends in giving. Millennials and Generation Z don’t have the same affinity for nonprofits and traditional charity, perhaps because organizations aren’t engaging with them.
“I have thought for a long time that there’s untapped opportunity for these kinds of curated cause funds,” Rosenbaum says.
So far, Causeway has established five cause funds through which it funnels donations to 25 nonprofits in animal welfare, climate change, global health, poverty alleviation, and racial equity. Donors also can add individual nonprofits outside the cause funds to their portfolio.
With a slogan of “donations that make a real difference,” Causeway promotes gifts to its funds as a way to get the most good for the charitable dollar. It says it has worked with philanthropy experts to select groups that it believes are cost effective, transparent, and in need of funding to ensure success.
Most notably, Causeway teamed with GiveWell, perhaps the pre-eminent name in charity evaluation. Started in 2007 by two former hedge-fund analysts, GiveWell relies on data and deep analysis in a search for top-performing organizations. Guided by the principles of effective altruism, it researches only groups whose work can improve the lives of the largest number of the global poor.
GiveWell also offers donors several funds through which it funnels gifts to a set of organizations, including its Top Charities Fund, which supports its top-rated charities that have the highest-priority funding needs. The four charities in Causeway’s global health fund are also organizations that have been recommended by GiveWell.
Other charity evaluators partnering with Causeway are: Animal Charity Evaluators, the Center for High Impact Philanthropy at the University of Pennsylvania, and Giving Green.
Causeway’s value proposition — that it can identify highly effective charities — hinges on the nascent, complicated, and expensive field of measuring and evaluating nonprofit performance. There’s no consensus as to what metrics define impact, and few nonprofits have the will or resources to rigorously evaluate their work.
GiveWell’s extensive analysis means it rates only a handful of organizations each year. Charity Navigator introduced an impact score to its ratings in 2020, but so far, it has such data for only 1,500 of the more than 200,000 groups in its database.
Most impact measures developed to date focus on an organization’s direct service — meals for people who are homeless, say, or surgeries for individuals who are blind. There’s no widely used and accepted means to estimate the impact of less tangible work, such as in the arts or advocacy.
“Collectively, we’re doing better and learning,” says Katherina Rosqueta, founding executive director of the Center for High Impact Philanthropy at the University of Pennsylvania. “But there will always be limitations. The search for the Holy Grail never ends.”
As Causeway expands, its system of evaluations will likely be imperfect, particularly in the early days, says George Mitchell, a City University of New York scholar who studies charity evaluation and ratings. But the promise that nonprofits in the fund are high performing “may create a belief — an unwarranted belief — that they found the best charities through some kind of comprehensive process.”
Nonprofits may also be worried to learn that Causeway has borrowed elements of donor-advised funds. Like DAF users, donors can direct Causeway to withhold their name and personal details from nonprofits in their cause funds. Indeed, Horwitz said that nearly everyone in last year’s test declined to share that information. Some complained about previously receiving hundreds of email gift solicitations or being asked for an additional donation immediately after contributing.
The introduction of a new gatekeeper to donors may frustrate charities. Giving dropped 10.5% after inflation in 2022, marking only the fourth time that donations have fallen since at least 1956. In response, charities are working hard to forge tighter connections with their supporters. Yet conceivably, Causeway’s three-clicks-to-give approach means some donors might give to a fund without even visiting the websites of its nonprofits.
Causeway groups likely will have an opportunity to connect with donors through a monthly “impact” report that it plans to send donors. That report hasn’t yet been designed, but it could be an ideal way for organizations to share their stories and inspire more giving by showing the good accomplished from earlier donations, says Rosenbaum of GivingTuesday.
“That information ultimately is going to have to come from the organizations that are generating that impact and outcome,” he says. “That storytelling component comes from the field.”
This article was provided to The Associated Press by the Chronicle of Philanthropy. Drew Lindsay is a senior writer at the Chronicle. Email: [email protected]. Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with the Chronicle and The Conversation US, with funding from Lilly Endowment Inc. The AP and the Chronicle are solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.