As Federal Dollars Flow, How Is Philanthropy Responding to a $4 Trillion Opportunity?

The federal government is in the process of spending an estimated $4 trillion on infrastructure, research and development, manufacturing and much more, thanks to four bills passed over the past few years. That includes the nation’s largest investments to date in climate action, with funding spanning clean energy to urban greenery.

Much of the work this federal spending will unlock will be carried out by nonprofits, presenting a huge opportunity for groups on the ground — if they have the capacity to plan relevant projects and access funding. That means they’re going to need a lot of backup from private funders, for whom many say this is a once-in-a-generation opportunity for leverage. So how is philanthropy responding?

Well, it’s impossible to summarize the sector’s efforts, or at least that’s the conclusion I came to after more than a half-dozen conversations with leaders from foundations, intermediaries and philanthropic support organizations, many but not all focused on climate philanthropy.

But those discussions did leave me with a wide range of takeaways on actions the sector is taking, particularly across environmental philanthropy, to make the most of the money unleashed by the American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act and the Inflation Reduction Act.

Here’s some of the things that stuck with me.

Vast opportunity, but some foundations are still getting up to speed

Environmental Grantmakers Association represents about 220 members, ranging from multibillion-dollar institutions to small family foundations. When I spoke to her in August, President Tamara Toles O'Laughlin said she was still coming across funders, whether in her network or outside of it, who were just realizing that the bills are relevant to their grantmaking.

“There are some folks that are like, ‘I had no idea that this applies to me. What do you mean? I fund only this species, I fund only this geography,’” she said at the time.

She no longer encounters such funders, but the work to mobilize philanthropy continues. Toles O'Laughlin sees a “tapestry of opportunities” for grantmakers within the four bills and the funding they authorize. She said EGA has been trying to categorize and share those options, while also conveying the need for philanthropic assistance to allow groups to access this moment’s transformative potential.

“There are things that government money just doesn't do in any universe,” she said. “There are opportunities that will come to people who have never had enough staff to accomplish the kind of bureaucratic Olympics that it will take.”

Action today helps define what’s possible tomorrow

Melanie Allen, codirector of the Hive Fund, said philanthropy can play a key role in preparing groups and building connections within communities, whether to get ready for the arrival of federal dollars, or to work effectively together once funding has arrived.

“I think philanthropy may be underestimating what it's going to take, and the importance of this moment and early money,” she said. “Early money really sets the context for what we're able to do or be able to do well.”

COVID-era dollars are still available

Remember the American Rescue Plan? Passed in 2021, the $1.9 trillion law aimed to provide an economic jolt to an economy flatlined by COVID. Two years later, there is still money available, but time is running out. One important slice of the bill — State and Local Fiscal Recovery Funds — must be obligated by the end of 2024.

“It’s important to not lose that opportunity,” said Prithi Trivedi, special initiatives director at the David and Lucile Packard Foundation, which has granted $20 million to nonprofits for ARPA implementation.

That reality reflects the dual nature of the challenge facing philanthropy today. Funders must move quickly, perhaps even more quickly than they have to date, while also remaining aware that the transition to a climate resilient and inclusive future will take years, said Don Howard, president and CEO of the Irvine Foundation.

“It's gonna be a long game,” he said. “While it feels sometimes like we're behind, I also realize that we're gearing up for continued funding.”

Philanthropy will need to make up for historic inequities

Toles O'Laughlin tells funders that the challenge community groups face in completing the dozens of hours of applications necessary to receive federal funding is “not a skills gap.” It’s the result of inequitable historic funding flows.

“This is a not-being-called-into-the-conversation, not-being-given-resources-to-practice-with, and not-being-invited-into-the-solution-circle-until-just-now problem,” she said.

Similarly, Allen at the Hive Fund is concerned that philanthropic funding, like water, will follow a well-worn path, with money going solely to the most well-funded, well-established organizations, unless there is intervention. “What we're trying to do is shift that flow of funding,” she said.

Howard sees grantmakers’ role as making sure communities have a voice in the decision-making on how dollars are spent in their neighborhoods.

“Those resources can come from philanthropy because they’re just not going to come from the public sector resources,” he said. “So we see that as super important.”

With four bills and $4 trillion, even big funders need to focus

Packard is an $8 billion foundation that granted more than $440 million in 2022, and it’s long been one of the top 10 environmental funders.

Yet Packard does not have the resources to fund all the national opportunities presented by this historic moment, Trivedi said. Thus, the foundation has focused, in part, on specific geographies, which she believes is a useful approach for any funder.

“One really thoughtful way to anchor in this work is place and location,” Trivedi said. “These funding bills are separate, but actually, in the end, come together in a location.”

For instance, Packard supports the Children's Defense Fund in expanding broadband access in rural areas across Mississippi. The foundation also funds Hope Enterprise to help cities and communities in Louisiana and Alabama access federal funds.

Funding a move from “shovel-worthy to shovel-ready”

When large amounts of federal money suddenly become available, communities and organizations with already-drafted plans tend to benefit, and those without the resources to prepare tend to be left behind.

With an estimaed $4 trillion now being spent, Allen sees philanthropy’s role as “helping organizations move from shovel-worthy to shovel-ready.” Doing so is part of addressing historic gaps, particularly those for organizations in disinvested communities.

Martha Roskowski, principal at Further Strategies and a longtime transportation advocate, said the discretionary funding currently available for transportation favors new ideas, but most communities — again, particularly historically disadvantaged areas — need support to do the community conversations and planning work necessary to draft such plans.

“They are asking for innovative, creative projects and agencies don’t have those on the shelf,” she said. “That’s the place where philanthropy could really lean in.”

Most are not going it alone

This year, Hive has had a lot of conversations with its grantees about the ecosystems that make their work possible. It has found that both the organizations it funds and the coalitions in which they participate are increasing working across sectors, such as exploring how efforts on transportation and energy efficiency can fit together.

“There’s going to be a role for everyone in making sure this just transition actually happens,” she said. “You don't just have one project, but you have a suite of projects that are moving forward and really kind of transformational.”

Trivedi sees a similar impulse among grantmakers to collaborate and coordinate to maximize impact. Earlier this year, Packard contributed $25 million to one of the largest pooled funds, Invest in Our Future, which it launched with four other major climate grantmakers. And there are many smaller efforts.

“No matter what topic you sort of pick on, there’s a set of funders coming together to explore it,” she said. “We work with a ton of folks and partners that are exploring implementation, but in really different ways.”

This article has been updated to reflect that my conversation with Tamara Toles-O’Laughlin occurred in August and represented her experience at that time.

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