Center for Global Development — General Support 2016

The Center for Global Development (CGD) is a think tank that conducts research on and promotes improvements to rich-world policies that affect the global poor. We have generally been impressed with CGD’s work, and view the organization (which we have funded before) as being highly aligned with our values.

Following previous grants, CGD approached us about increasing our level of general operating support. CGD outlined its overall funding situation—including a gap between its current and desired level of unrestricted funding—and a set of activities that it would potentially use new unrestricted funding to support, which generally struck us as promising.

We reviewed CGD’s track record by examining several of its largest and most concrete claimed successes in somewhat more detail, and based on our review, we would guess that there have been multiple occasions in which CGD’s work had a causal impact on decisions involving billions of dollars aimed at helping the global poor. It is difficult to trace the impact of CGD’s involvement through to clear humanitarian outcomes, but we guess that it has had a positive impact many times its total spending.

We see a strong case for providing a high level of general operating support to a well-aligned group with a compelling track record and promising-seeming plans for what to do with further funding. Accordingly, the Open Philanthropy Project decided to recommend a $3 million grant to CGD in general operating support, paid out annually over the next three years.

1. Rationale for the grant

1.1 Background

The Center for Global Development (CGD) is a think tank based in Washington, D.C. that conducts research on and promotes improvements to rich-world policies that affect the global poor.¹ CGD’s work fits into several different cause areas we have investigated, including advocacy for improved or increased U.S. foreign aid, immigration policy, and infrastructure in Sub-Saharan Africa.² We have generally been impressed with CGD’s focus on evidence-based and effectiveness-focused development, and with its commitment to transparency.³

We have previously made grants to CGD to support its work on labor mobility and the Millions Saved project, as well as a smaller grant for general operating support.

We see CGD as the leading US think tank focused on global development and as being highly aligned with our values.

1.2 Grant timeline and proposed activities

We decided to grant CGD a total of $3 million for general operating support, to be paid out in installments of $1 million per year over the next three years. We decided to make an unrestricted grant, rather than restricting our funding to specific programs or activities, because we see ourselves as well aligned with CGD, and we believe that it can make better decisions about what activities to pursue than we can.

To give us some sense of what our funding might support, CGD shared the following list of potential activities, which generally seem promising to us:

• Conducting additional research on the use of mobile phone surveys in developing countries
• Conducting additional research on the use of biometrics in developing countries
• Hiring a consultant for a Middle East roundtable
• Hiring a new Institutional Advancement associate to monitor progress on existing grants and programs
• Hiring a coordinator for a women’s conference series
• Launching a working group on cash transfers
• Conducting additional research on tobacco policy
• Funding a senior fellow’s research on taxation and/or environmental issues
• Hiring a new policy outreach associate
• Creating a modest fund for hiring consultants for policy outreach
• Extending and expanding a visiting fellowship exchange program for US policymakers and CGD researchers

CGD emphasized that the above list of activities is provisional, and that the primary benefit of unrestricted funding is the flexibility to pursue opportunities as they arise.⁴

1.3 Track record

Our impression is that the overall policy impacts of think tanks are usually driven by a small number of large successes, so when we wanted to learn more about CGD’s track record, we looked for potential “hits.” We picked four cases from CGD’s list of claimed successes to investigate, on the basis of apparent humanitarian impact and clarity of CGD’s claimed impact, plus one more recent case (Power Africa).⁵ For each case study, we wanted to learn what we easily could about:

• The degree of CGD’s causal influence
• The size of the humanitarian benefit attributable to the victory

1.3.1 Popping the rice price bubble

CGD claims that its research and policy outreach directly led to the deflation of a rice price bubble in 2008, reducing rice shortages in some countries and benefiting poor rice consumers.⁶ It seems clear to us that CGD’s research directly influenced the US government’s decision to allow Japan to re-export stockpiled rice, but we are uncertain about whether Japan’s announcement was the principal cause of price deflation between June and August 2008.⁷ Rather than being responsible for deflating the entire price bubble, it seems more likely to us that, if it had any impact at all, Japan’s announcement shortened the period of extremely high rice prices by a few weeks. However, even the short-term reduction of rice prices could have saved global rice consumers something on the order of a billion dollars (at proportional costs to rice producers).⁸

1.3.2 Nigerian debt relief

CGD argues that it led efforts to change Nigeria’s World Bank classification in order to make Nigeria eligible for a Paris Club debt buyback. After a discounted debt buyback, Nigeria’s debt was reduced by $30 billion.⁹ Overall, we think it is unlikely that a debt buyback deal would have occurred at the time without CGD’s involvement.¹⁰ The elimination of Nigeria’s debt to the Paris Club freed up around $1 billion per year that Nigeria had been paying in debt service, and seems to have increased rates of foreign direct investment and improved Nigeria’s credit ratings.¹¹ Assuming that a debt relief deal would not have happened for five years without CGD’s actions, our best guess is that the deal might have delivered benefits on the order of a billion dollars to Nigeria.¹²

1.3.3 Advance Market Commitments for Vaccines

One of CGD’s working groups designed Advance Market Commitments (AMCs), an approach to incentivize vaccine development for diseases affecting developing countries. Donors participating in an AMC agree to co-fund vaccines for specified diseases in the future at a guaranteed price if a pharmaceutical company develops the vaccine.¹³ In 2009, five countries and the Bill and Melinda Gates Foundation committed $1.5 billion to an AMC for the development of a new vaccine protecting against strains of pneumococcal bacteria prevalent in developing countries.¹⁴

It is clear that CGD designed the AMC concept, and we do not think the pneumococcal AMC would have occurred without CGD.¹⁵

However, we are uncertain whether the pneumococcal AMC has delivered benefits commensurate with its costs. Several critics have pointed out that existing pneumococcal vaccines only needed slight modifications to offer protection against the strains of pneumococcal bacteria common in developing countries, and that pharmaceutical companies would have likely made these vaccines in the near future without $1.5 billion in subsidies from donors.¹⁶ We would guess that the donor subsidies have led the pneumococcal vaccine to be scaled up somewhat faster than it would have been otherwise, but we don’t have a sense of how this use of donor funds compares with the counterfactual.

We were unable to find any other examples of vaccine AMCs undertaken based on the example set by the pneumococcal vaccine AMC, but it may be too soon to expect others to have been established. Examples of further AMCs inspired by the pneumococcal vaccine AMC could fundamentally change our picture of the ultimate benefits of CGD’s work in this case.

1.3.4 African Development Bank reform

In 2006, CGD issued a report calling on the African Development Bank to focus on infrastructure development in order to build up its credibility and competency. CGD claims that the African Development Bank adopted some of CGD’s recommendations, and has since increased the proportion of its infrastructure investments.¹⁷ The African Development Bank’s strategy documents describe a shift to a greater focus on infrastructure after 2006, and infrastructure investment actually did increase by low billions of dollars per year.¹⁸

We find it plausible that CGD’s report had a significant impact on the African Development Bank’s decision to prioritize infrastructure, but we couldn’t verify it independently. The President of the African Development Bank has specifically mentioned that CGD’s paper was influential, and we have not seen evidence of other organizations making similar arguments around 2006.¹⁹

We don’t know how to assess the humanitarian impact of the African Development Bank’s increased focus on infrastructure, because we don’t know how infrastructure funding compares to other areas, or how the African Development Bank compares to the counterfactual destination of funds invested in it.²⁰

1.3.5 Power Africa

Several US government agencies, including USAID, the Overseas Private Investment Corporation (OPIC), and the Export-Import Bank, have committed several billion dollars to the Power Africa initiative, which intends to increase access to electricity in Sub-Saharan Africa.²¹ CGD has told us it provided input and early ideas to the White House on the initiative, and that some of those ideas were adopted.²²

Although we believe that CGD played a meaningful role in shaping the initiative, we are uncertain about what humanitarian impacts to expect from the initiative, for two main reasons:

• The pledged funds may not ultimately be available or used as predicted. For instance, the Export-Import Bank, which had committed $5 billion of the $7 billion total from US agencies, was de-authorized for five months since the Power Africa announcement and only recently re-authorized. This and other obstacles to actually ensuring that funds are spent in accordance with the public commitments leaves us uncertain about the impacts on actual funding streams.
• We’re not sure how to model the counterfactual for funds that are eventually spent in accordance with the Power Africa pledge. For instance, it seems likely that USAID will meet or exceed its financing pledge, but our understanding is that USAID is using funding budgeted for economic development for its contributions to Power Africa.²³ We do not know whether Power Africa is better, from a humanitarian perspective, than other economic growth projects that USAID would have funded in the absence of Power Africa. On the other hand, OPIC, which also seems likely to meet or exceed its financing pledge, has a large underutilized supply of capital, so it seems more plausible that OPIC’s contributions to Power Africa will be net increases. But OPIC’s commitments are much less concessionary than USAID’s, so the ultimate humanitarian impacts remain fairly unclear to us.²⁴

1.3.6 Our conclusions

We consider these case studies to provide relatively strong evidence that CGD’s research and communications have had a causal impact on decision-makers in multiple cases with multi-billion-dollar stakes for poor people. We are generally less certain about the size of the humanitarian impacts of these interventions, but we see our uncertainty as largely a result of the inherent difficulty of evaluating these sorts of changes, rather than any issue with CGD itself.

Based on our case studies, we think it is likely that at least one or two of CGD’s initiatives have produced a few billion dollars of value for people in low-income countries. (We focused on the few cases that seemed to have the clearest and largest impact because our impression is that the overall policy impacts of think tanks are usually driven disproportionately by a small number of large successes, but we also think it is likely that CGD has produced smaller humanitarian benefits through numerous other projects.) Given that CGD has spent on the order of $150 million during its 15-year history, it seems reasonable to us to estimate that CGD has produced at least 10 times as much value for the global poor as it has spent, though we consider this more of a rough lower bound than an accurate estimate. Although we are far from certain whether our grant funding will enable CGD to have a similar impact in the future, we think that CGD’s fairly long track record of plausibly producing big wins for the global poor is a good reason to believe that additional unrestricted funding could help produce similar results in the future.

1.4 Room for more funding and fungibility

CGD is funded by several other foundations, and our understanding is that it is actively seeking funding from other sources.²⁵ Much of this funding is restricted to specific programs or projects.²⁶ CGD has told us that some donors providing program- and project-restricted funding are increasingly requesting specific deliverables and work products. This type of funding can limit the flexibility program staff have to allocate their time between topics in the way that they believe is best, or to work on the types of communication pieces they may want to produce. Additionally, project-restricted funding usually includes higher costs in terms of management time and support services, which are not typically associated with unrestricted funding. CGD seeks to increase the proportion of unrestricted funding in its budget to one-third. With an additional $1 million in annual unrestricted funding, CGD estimates that it would forego around $300,000 in annual program- and project-restricted funding. This would allow its researchers the funding and flexibility to explore other areas that might not be fully funded by external sources, or to dive deeper into issue areas they are already working on. In effect, we expect that a $1 million annual unrestricted grant would raise CGD’s budget by about $700,000 (~$13.75 million to ~14.5 million) and increase its proportion of unrestricted funding from around 23% to around 30%. (These are in expectation over several years, rather than a binding commitment for any particular time period.)²⁷

CGD has also told us that the maximum amount of annual funding it would want from a single donor is $2 million, to keep with fundraising standards and best practices. The Hewlett Foundation currently provides the largest single source of unrestricted funding for CGD, at $1.2 million per year. This grant expires in summer 2016 and CGD is preparing for renewal conversations.

1.5 Considerations in favor of and against the grant

We see our unrestricted grant to CGD as a way to support an organization with values closely aligned with ours. We think it is likely that CGD has produced a great deal more value for the global poor than it has spent as an organization, and the potential future activities that CGD has shared to date generally strike us as promising, so we see further unrestricted funding as an attractive grant opportunity.

As is fairly typical of our policy grants, our modal guess is that this grant will have limited, if any, humanitarian impact, but that there is a sufficient probability of a very large positive impact to justify the grant. Our biggest reservation in this particular case is that CGD is already a fairly large and well-established institution, and that a marginal increase in its budget might not have a meaningful impact on its work over the next few years. We expect CGD to be able to tell us about how our funds are actually spent, but we anticipate that it will be difficult to assess the ultimate humanitarian impact of this grant, especially after only two and a half years, at which point we plan to conduct a formal review.

2. Plans for learning and follow-up

2.1 Plans for updates on the grant

We plan to check in with CGD roughly every three months, with public notes if the conversation warrants it. We also plan to conduct a more thorough and formal review after two and a half years in order to decide whether we will renew the grant.

2.2 Key questions for follow-up

Questions we hope to answer in our follow-ups include:

• What activities or functions did CGD use our funding to support?
• Are there any clear cases of short-term impact of these activities?
• To what extent has CGD been able to increase its policy outreach capacity?
• Has CGD had any other “big wins” of the sort we describe in the case studies above?

3. Our process

In mid-2014, as part of our follow-up on previous grants, we told CGD that we were interested in funding more policy outreach work. In October 2014, CGD sent us a proposal for a $2.3 million grant to create a “Do Fund”, which would support policy outreach work for three years. In follow-up conversations, CGD told us that it would prefer unrestricted funding, and we shifted to considering that.

In response to our questions about how additional unrestricted funding would be used, CGD sent us an outline of some hypothetical activities that it might undertake with different levels of additional unrestricted funding, as well as describing how it would expect its overall budget to evolve with additional unrestricted funding.

Before reaching a decision, we investigated the case studies summarized above to improve our understanding of CGD’s track record.

4. Sources