April 3, 2023

By Maddie Vann

On Friday, March 30th, I sat down with our Network for Good CEO, Abby Ross, to discuss Network for Good’s strategic vision to “drive new models for providing durable capital for community-driven, sustainable outcomes in the social sector.” To test out that vision, we’ve decided to initially scope our work to the disaster giving space and see what experiments we might run to explore NFG’s best opportunities to add value in the space.

Here’s the transcript from our conversation:

Maddie: As our board and advisors know, Network for Good’s strategic vision is to pioneer new models for providing durable capital for community-driven sustainable outcomes in the social sector. After many calls that Abby and I have had with folks in the ecosystem, we’ve been repeatedly pointed toward disaster giving as a space that’s ripe for innovation. So that’s where we’ve decided to scope these initial experiments that Network for Good is pursuing right now. And I’m excited to talk to Abby today to summarize some of those learnings and the role we think Network for Good might be able to play in this space. So let’s dig in. Abby, let’s talk about disaster giving. Can you share a little bit about what’s drawn you toward this particular area of focus?

Abby: Sure, thanks, Maddie. So my interest in the disaster giving space was peaked in my first six weeks here at Network for Good, where I saw how our platform raised $12 million to support the people of Ukraine right after the war broke out. And then in digging through the 20 years of our past data, I saw a couple foundational trends. So one is the role we’ve played in the disaster giving space in the past. So raising money for Katrina in 2005, California wildfires in 2015, 2017, 2020, and Hurricane Harvey in 2017.

Maddie: So network for good’s role in this space and the disaster giving ecosystem isn’t new. We have a proven history of funneling dollars to these types of moments.

Abby: Yeah, exactly. And the other thing that was interesting was in looking at that data over the past 20 years, the spikes of the time of these crises were happening more and more frequently. So this has been a simmering question over the past year in the back of my mind: are we, both network for good and society, equipped to handle the increased scope and frequency of disasters?

Maddie: Can you talk about how we’re currently defining disasters? And then we can talk about the broader context.

Abby: Yeah. So even just the word “disaster” scope is pretty big. We are defining our focus as U.S.-based climate-driven disasters that cause a billion dollars or more in damage. And just from a scope standpoint, there were 18 of these in the U.S. last year costing about 165 billion in relief, recovery, and rebuilding. We thought about using a broader definition of disaster crisis that included things that frankly are caused directly from humans or policy failures like the Jackson Water crisis, mass shootings, the recent Ohio train derailment, oil spills. But for now, we’ve really decided to focus on the climate driven disasters as an anchor. And while disaster giving might feel narrow, it’s really related to so many other important issue areas like climate adaptivity, affordable housing, etc. So, this really provides, I think, an important springboard for where this can go.

Maddie: So with that springboard, with this area of focus, can you share some of the things that you and I have been learning so far about the current state of climate-driven disasters?

Abby: Yeah, so the most alarming thing is the frequency and urgency of this. Back-to-back hurricanes used to be super rare and now they’re becoming the norm. America experiences urban flooding every two to three days. And, oh, by the way, 72% of our flood insurance maps, that we use to determine who gets money back in coverage, are out of date because the floodlines are shifting so rapidly we can’t keep up. Take California wildfires in 2020 to 2021 (so in just two years) for example: there were eight fires and 3.8 million acres damaged. In just those two years that far surpassed the acreage that was burned from wildfires from the previous 87 years. So the damage in the past two years was greater than the damage across the past 87 so there’s a tremendous amount of frequency.

And in speaking with the Sonoma Community Foundation, communities are overwhelmed by this frequency. They can’t even enter the rebuilding and resilience phase before needing to gear up capital and efforts for when another fire hits. So, I mentioned there were eighteen $1 billion disasters in 2022, but what’s even more alarming than the quantity is the rapid pace that they’re growing each year. 20 years ago, there were an average of five $1 billion disasters per year. If we continue with this clip, we could see upwards of eighty five $1 billion disasters by 2035 here in the U.S.

Maddie: Yeah, we’ve talked about that statistic. I just want to bring that home because it’s wild. It was five $1 billion disasters per year around 2000, then eighteen in the year 2022, and we’re looking at 85 disasters per year that cost $1 billion each, by the year 2035.

Abby: Exactly, we’re talking wildfires, winter storms, floods, tornadoes, hurricanes, and this isn’t just a specific part of the country either. Between 2011 and 2021, 90% of the counties here in the US experienced a climate-driven disaster that required a federal disaster declaration. And more than 700 counties have suffered five or more of those disasters.

Maddie: So there are a few things that we just talked about that you just shared. Number one, the widespread nature of disasters. This is affecting populations all across the U.S., not narrow regions. Two, the increasing frequency at which we’re experiencing disasters in the U.S. And three, the associated urgency that’s related just to the cost incurred and how well our country is equipped, and communities are equipped, to deal with this and be able to pay for them. So let’s talk about that piece, the costs you’ve mentioned. How are communities expected to pay for that recovery? What does the current funding landscape for disasters look like in the United States?

Abby: So the funding for disasters follow a very specific pattern. Money mobilizes very quickly. FEMA is actually pretty quick to earmark funds in times of disaster. And 90% of the philanthropic dollars are raised in the first six weeks. So it’s individual donations and grant money. And not surprising: a crisis hits, the news cycle happens, and moments of vulnerability incite people who want to help. And that’s kind of the definition of unleashing generosity. So in that bucket of philanthropic dollars, when they’re raised, that also follows a specific pattern: large non-profits — so the United Way, the Red Cross, the organizations that show up in times of disaster — they tend to capture about 80% of the total philanthropic dollars. And in several instances, they re-grant those dollars back to the community.

And one reason why they capture such a big share of it is they have the budget to advertise, to bring dollars in the door from individuals (something that a small nonprofit isn’t capitalized to do, or even has the capacity to spin up in a time of crisis). So very rarely will grassroots nonprofits be the recipient of philanthropy if it’s not through a lot of work that’s done from organizations like Center for Disaster for Philanthropy and Global Giving, that are feet on the ground building relationships with those communities. But those grassroots nonprofits are kind of left to help recover as a community in duress themselves, but they’re also strapped for funding, trying to deliver more services. And this is a trend that I think we saw well documented during COVID, for example.

But community foundations are a really natural home for raising funds because they’re dialed into the community. But the infrastructure and capacity of community foundations as a key player that we have to depend on in the time of crisis doesn’t support what’s being asked of them.

And so all this kind of being said, that’s how philanthropic dollars flow in. The majority of the capital stack in the times of disaster are weighted towards government and insurance dollars. And the percentage as a total recovery varies widely. On average, about 60% of total dollars come from federal funding. But in the case of Hurricane Sandy, it was 15%. In the case of Hurricane Maria, it was 80%. And then how that funding flows is money is allocated to individuals that need help and support, you know, SBA loans. Money goes to state and local organizations. And a lot of that money is then essentially contracted to local organizations to do that work.

Maddie: Local organizations like Community Foundations, other grassroots orgs, et cetera.

Abby: Bingo, bingo. And lastly, flood insurance and private insurance is another source of funding. But it’s really important to mention that that completely misses out on under or uninsured populations.

Maddie: So as we’ve learned about these things — the patterns of funding, the key players, some of the funding gaps in the disaster giving space — what have been some of the most surprising discoveries you’ve had?

Abby: So, it’s definitely a place that could use more capital, but the most surprising part is not necessarily how the capital flows in, but how the capital flows out. So kind of the deployment side of the capital curve. So again, 90% of the funds come in the first six weeks. And 90% of those funds are deployed in that acute relief phase. But the average timeline for recovery is six years. So there’s this mismatch between how capital comes in, how it goes out, and then what money is left to do that long-term recovery.

Maddie: And that long-term recovery timeline is six years, roughly. It’s mixed, but why is it taking so long?

Abby: So first and foremost, government funding — while it mobilizes quickly to be earmarked, it has an incredible lag time for when it actually gets to people. It could take up to two years to get in the hands of folks, which is devastating if you’re living paycheck to paycheck, or for a smaller local government that needs to start rebuilding infrastructure. Also can really impact a small business, if they can’t take the loss of both their store, the impact of their business operations.

The relief phase is beautifully chaotic and I’m so impressed about the pace that communities come together and get stuff done in such a stressful time. Organizations parachute in and do what has to get done for relief — like beds, tarps, tents, testing for water cleanliness, clearing out debris — but when the money comes in fast, the money gets spent fast and the transition between relief into recovery and then rebuilding shifts. And so taking an inventory of what resources are left can be insufficient to continue at the same velocity that that early relief work happened.

Maddie: That’s come up a lot in our internal conversations, and our conversations with FEMA and folks who have lived experience. A theme that I think is emerging is that it’s not just about the dollars that disappear, but some of the capacity and infrastructure.

Abby: Yeah, and the types of things that are required in that rebuilding phase are, so there’s a system called disaster case management that is basically used to coordinate individuals and connect them with both the funds and resources available to them. But then you think about affordable long-term temporary housing for folks that are displaced, or the wraparound services that the community needs after a disaster, like mental health resources for survivors.

And the fact is that some people in communities do recover quickly. Hurricane Harvey, for example, hit a large swath of southeast Texas in several affluent communities. And Houston rebuilt, and they rebuilt with resilience quickly. But there are also several counties in Beaumont, and Port Arthur that still have people displaced and businesses that haven’t reopened six years later.

Maddie: Yeah, and we keep hearing that, hearing about entire groups of people who have been left out of accessing insurance or government or other types of funding entirely.

Abby: Yeah, the money just straight up doesn’t go there, which ultimately perpetuates existing systemic inequalities and challenges for vulnerable populations.

Maddie: So our core takeaway from these interviews and these learnings is that the inbound capital curve is one thing, but the outbound deployment of dollars and how that aligns to the sustainable outcomes we’ve been talking about is completely mismatched. Do you have a hypothesis about the fundamental challenges underpinning why this is?

Abby: So, yeah, I think that’s a good question. One caveat is that I have tried to approach these spaces as researcher and observer, knowing that I’m fresh ears and I’m trying to soak in and triangulate common trends. So none of these thoughts are uniquely mine. It’s from listening to true experts in the space.

The first thing is the efficiency of spending is way off. So a dollar in preparedness or resilience can save $6 in relief, but relief is where all the money goes. And we know that preparedness, in what the industry calls blue skies days, pays off, but there’s no money going towards it. And this is true across individual donors, institutional philanthropy and the government. FEMA really only allocates a small budget to preparedness.

The other thing that we’ve really leaned into and learned about here is that recovery funds that are available are tough to access and they’re relatively inflexible which leads to a lot of money being left on the table. So how this manifests for individuals is that there’s tons of barriers to apply for financial aid. You need a level of digital literacy and computer access, this is a 24 page form to fill out, you need time off from work to meet with a case manager, and you have to be a citizen. And then there are the qualifications for who can get federal aid. Your income’s too low, no tax refund. Your income’s too high, no HUD money. If you have too low credit, you can’t get an SBA loan.

And there are stipulations on how to spend this money. And ultimately, an individual knows if they need a car to get to work over a home repair, but how they’re actually supposed to spend that money has some strings attached.

The other thing that’s really interesting is just how communities face barriers in accessing federal funding. Funds come in a lot of times with a requirement to match. It could be a 10% match and some communities just aren’t capitalized to do this. They don’t have the reserves to be able to put up a match. And this was the case in Eastern Kentucky, where roughly about $60 million was essentially left on the table because they couldn’t pull together enough funding to match that 10% of what they needed for FEMA dollars. And so there’s kind of barriers to accessing the capital, the efficiency curve, but one of the things (without trying to get too much into the solution here) that keeps coming up is just there’s an overall lack of coordination and ongoing capacity, because we’re under investing in preparedness. The local capacity, for where these disasters hit, to coordinate and manage during and after a crisis, widely varies. And the dollars to mobilize only happen post disaster, which brings people into action, but without that strategic planning, they essentially prioritize the relief and response over long-term resilience.

Maddie: So again, the dollars are arriving quickly, then they’re expected to deploy with equal urgency, but that doesn’t work currently.

Abby: Yeah, and some of the dollars come in with that relief ear-mark, but without the foresight to be able to deploy them, the process falters without an equitable system for deployment. And this is what’s leaving long-term recovery underfunded. So communities struggle to rebuild. And that recovery process is drawn out over that long period of time.

Maddie: Yeah, so the money isn’t getting to all the places it needs to go and there’s this overall lack of coordination. Can you talk a little bit more about what the system for deployment looks like today?

Abby: Yeah, so I mentioned the centralized system for aggregating need is what’s called disaster case management. It connects individuals with resources. At the center of that system of how funds are allocated, comes back to the phrase of “being made whole,” which basically means that if you own a $500,000 home that is destroyed, you can recoup $500,000 across the various funding sources. But overall policies are problematic and wrought with inequity.

So first, it doesn’t include any of the wraparound services that are needed following the trauma of a disaster in a community. Second, it doesn’t have any equity or impact perspective on what gets funded. So for example, like rebuilding and recovering ten $1 million homes is the same as one hundred $100,000 homes. (Source)

Maddie: You mean with projects that the Army Corps of Engineers would look at — like which community to build a levy in, based on the economic impact of if one neighborhood or the other were to flood?

Abby: Exactly. Yeah. The other thing is this policy leaves no room for resilience funding to build back better. So if we know the next fire and hurricane is coming like the data tells us, there’s basically no financing to help mitigate future damage. In California, hardscaping is more expensive than landscaping and can be one of the ways to stop wildfires from spreading. But a policy says that’s not covered in being made whole. And then lastly, and really important to highlight, baked into this is systemic racial inequity. Completely misses the equity lens of systemic inequities that are there before a disaster.

Even FEMA’s own advisory council released a 2020 report showing the major problems with how FEMA assesses damage and makes payouts and this causes basically them to under-compensate low asset households. There’s a recent report that determined that white Americans living in a county that experienced $10 billion in damage or more after storms gained a net worth of about $126,000 on average during that period while black Americans in the same area lost $27,000 on average. (Source)

Maddie: So deep systems of inequity are among the many challenges we’re learning about in this space. Can you talk about some of the opportunities that these and other challenges present and how it’s starting to look like Network for Good might be able to play a role?

Abby: So we’ve really been investigating the question of: how do we make the capital more durable? And how do we make sure that the capital flows to what will get at a more aligned and sustainable outcome? And that’s kind of what led to this big takeaway, which is, the dollars that come in aren’t met with an equitable system for deployment. All this money comes in and then immediately goes out and therefore is not durable enough to do what’s required for true rebuilding and moving into critical resilience work that we know will be a more efficient use of money. So basically I’m kind of resigned to how the capital comes in, you know it’s human behavior again kind of that it’s unleashing generosity. The money is gonna come in when the disaster happens, let’s just accept that. So taking a step back I see opportunities when I think about the high-level requirements for the value chain in a disaster cycle. So how can we mobilize the moment? If this is how the capital comes in, how do we best mobilize? And then really, really importantly, how do we aggregate that demand for what’s needed in aligning outcomes? So meaning like, how do we understand and organize the forecasted needs so that the available resources can be appropriately matched? We, network for good, are not experts in this, but plenty of people are. This is also a space that requires tremendous change management, collaboration, coalition building. So I don’t yet know how we show up here, but I know it’s an important part. And then that then leads into that equitable system of deployment — how can we optimize the resource distribution to match the equitable community-aligned response that’s required.

Maddie: So as we talk about all of these opportunities, we have this goal this year to run about four experiments (as we’re calling them) to validate our strategic vision. We have a lot of ideas emerging for those. Can you talk about some of what those are starting to look like?

Abby: So we need to get a bit smarter on this, but the conversations with partners have been really helpful to think about solutions and needs. Like, Maddie, you’ve said this, we keep finding concept notes that people have written that they believe are the biggest lever. So asking the Center for Disaster Philanthropy or folks at FEMA or people that are doing really awesome work with what they want to run and do, that’s been really fun as a way we think about themes across the problem set. If I think about what mobilizing the moment could mean, it’s how can we maximize the dollars captured when a disaster hits and has people’s attention? And how can we think about the opportunities to direct those dollars into higher efficiency spends, like helping Kentucky put up the funds they need to unlock the FEMA dollars?

Or how do we direct money towards the resilience projects that federal insurance dollars aren’t covering? I think what’s exciting about this is that there are opportunities with our existing model and partnerships that we can start impacting the $1 billion disasters that we know are on the way this year. So I have a level of urgency to dig in here due to the proximity of where we already operate.

Maddie: I like these categories we’ve started forming around the value chain, as you put it. So those are sort of our “mobilize the moment” ideas. What about the opportunities we’re exploring now in the “aggregate demand” category to align outcomes after a crisis?

Abby: So exploring some opportunities around the role of elevating, around how we might elevate the role of community foundations, learning more about the role of disaster case management through our work with Center for Disaster, philanthropy. There’s this really cool organization called Resilient Cities Catalyst that’s working in the Gulf Coast and in California that they have a model to bring local community leaders together after a crisis to align on outcomes funding for resilience and climate adaptivity. So there are the experts that are doing the work, trying to figure out how we can work alongside that. And yeah, like I said, super interesting and you get into the space of trust and coalition building. So really thinking about how we elevate the voices that are doing the work and the communities there and kind of how we can step back and add value. The real space though that has my brain just buzzing is in the equitable system for deployment. We are all over the board here, but I’m really excited to learn about, from the existing pilots that a lot of innovative orgs are cropping up with new financing structures for the problem that we saw. We’ve found three or four organizations that said, hey, we want to build this financial product that we know will help finance the disaster recovery space. So we’re trying to figure out how can we participate in putting these financial products together — is there a type of digital infrastructure, digital financial infrastructure that is needed to bring those to market in the space? I think that aligns with kind of how we show up today and the role we might play in the future.

Maddie: Yeah, lots of exciting opportunities there. So as we think about all that, what would you say is next?

Abby: We’re going deeper into this problem set. We’re going to spend some cycles on the specifics of what types of experiments and partnerships we want to get into.

Maddie: And I think we’re getting close there to identifying sort of who else we need to start working with on some of this.

Abby: Yeah, both partners and specific people filling roles here at Network for Good. So I’m excited to bring in more brains, more experience, more voices. And the speed of learning and partnership building has been incredible. I’m excited to use this recording in this format to have a forum to reflect on our findings out in the wild.

Maddie: Yeah, and this has been fun. It’s a little less polished than a deck. But that’s kind of the phase we’re in right now! So hopefully helpful.

Abby: Yeah, and I frankly fully expect to look back at these when we’re a little bit smarter and possibly cringe or laugh at some of our early thoughts. But I appreciate the opportunity to be wrong in public and have our advisors and supporters push back and bring up new ideas. So consider this an open call for feedback for disagreement. And thank you to Maddie for giving me the space and sounding board.

Maddie: Thanks for talking with me, Abby. We have these conversations all the time, but it’s fun to get it recorded and share with the advisors and supporters who aren’t always in these conversations with us. And I hope it’s useful and I’m looking forward to seeing how these conversations evolve.

Resources for further learning:

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