Can (and should) London become the hub for global philanthropy?
London acts as a meeting place for some of the western world’s greatest minds, bringing together experts in finance, education, science and culture.
But with the undeniable uncertainty that Brexit and wider geopolitical developments bring, can London capitalise on the rise of global philanthropy to become the international hub? Does it have the vision, infrastructure and resources? Or is it misdirected to even seek to make London a global hub for more sectors in this increasingly decentralised world?
The Wider Context
London is already a global hub for banking/finance, arts and culture, tourism, geopolitics, philanthropy and much more. The various colleges of the University of London and nearby Oxford and Cambridge are all leading universities in their own right, conducting pioneering academic and scientific research, including on philanthropy/social finance (e.g. CASS Business School and Said Business School), as well as being massive recipients of charitable giving.
Added to this is London’s geographical strength. Its time zone is well balanced between the mega-markets of the US and China, making it a pragmatic location to conduct international finance and, by extension, global philanthropy. Furthermore, its location on the western shore of Europe makes it a natural gateway to the continent, setting aside the possible changes to the regulatory environment created by Brexit.
This culmination of factors arguably makes London the most diverse city in the world, with 300 languages being spoken in local schools and a vibrant, if flawed, civil society ripe for international trends such as impact investing and diaspora giving.
The UK’s regulatory framework for philanthropy ‘engenders confidence without excessive control'. In particular, the UK is less restrictive when operating international development projects, offering tax incentives for money that is going overseas. The global benefits of having a philanthropic presence in London is evidenced by the huge variety of US and international foundations that have subsidiaries here and is strengthened even more by the wide and flexible definition of ‘charitable purposes’ under English Law.
London is where many philanthropists and pioneers of the impact investing market are most active and where a lot of innovation is taking place. But to make the most it Government needs to recognise this strength, in a similar way it recognises London for its global leadership in finance and professional services.
Private capital, in terms of philanthropy and impact investing, are essential if we are to address some of our hardest social problems, but we must also be careful that this doesn’t allow the Government to abdicate its crucial role in policy making, agenda setting and resourcing. I think the Government should use all its levers to identify and help find solutions to the biggest social issues but working closely with private capital on funding the most effective options.
Much more co-ordination is needed between the various stakeholders and the Government can help to bring these people together. Tapping into new sources of funding, strengthening civic philanthropy further and more focus on private and corporate philanthropy could be a way forward.
Domestic charitable activity is centred on London already. Forty-eight percent of the income of all registered charities and 70% of charitable assets are based in London.
The funder side of the equation shows a similar strength. Research indicates that the number of Londoners with more than £24.2 million in assets rose by 41 per cent between 2005 and 2015, showing a growing population of high net worth individuals (HNWI) and potential philanthropists (but there is a long way to go as the average giving rate amongst this group is very low).
Underlying all these factors is the regulatory environment in the UK that facilitates global philanthropy. And the Finance Act 2010 has even ‘extended UK charitable tax reliefs to certain organisations in the EU, Norway and Iceland that are equivalent to UK charities, enabling even more global philanthropy. Despite already exhibiting an enabling environment for civil society actors, a place-based giving movement has been gaining traction across London, signaling the change to a new model of philanthropy in the city.
One of these initiatives was born in 2014 with a pilot project called London’s Giving. Funded by City Bridge Trust, The City of London Corporation’s charitable arm, the project was delivered by a team of consultants, the London Funders, with the aim of energising local giving and civic philanthropy.
The project kick-started four Giving campaigns (Islington Giving, Hackney Giving, the Kensington & Chelsea Foundation and Love Kingston) which have helped raise over £2.8m and distributed £1.9m to projects and organisations supporting local people.
At the forefront of this place-based giving movement is Islington Giving, which has raised over £5m and engaged 4,000 volunteers since its launch in 2010.
Focusing on projects addressing social isolation and mental health among Islington residents, the group’s work has brought together charitable funders, businesses, residents and voluntary organisations and enabled them to pool resources to tackle deeply entrenched social inequalities.
But the question is, can all of this create enough of an enabling environment for London to become the global hub for philanthropy? It is important to consider the limitations.
The “Brexit” Factor
The lessons from Brexit will be debated for decades but one immediate finding is that our economy, media and the national conversation is too London-centric, with little focus on the surrounding regions. The core and periphery theory as it is known is dangerously strong in the UK and pushing London to be even more of a global hub will have negative side effects for the rest of the country and need to be accounted for and mitigated. Coupled with the potential domestic effect of Brexit, London could see a mass exodus of HNWI and their professional advisers who facilitate their activities to other countries.
Emerging contenders under this line of analysis are Paris because of the so called “Macron effect”, which has caused Paris to overtake London in terms of ultra high net worth individuals (UHNWI) and for a large number of asset managers to make applications to Ireland’s central bank for authorisation.
Across the Pond
London does certainly make a strong case for being the global philanthropy hub but it is unclear if this is enough to beat the likes of New York City. Despite London having a clear edge in areas such as academic institutions or social investment, NYC is better positioned to capitalise on the immense level of philanthropy within its domestic market.
Giving in the USA stands at about £293 billion per year compared the UK, where giving is healthy and stable, despite socio-economic shocks, but only stands at around £10 billion per year.
Furthermore, both London and NYC cities may be overtaken by San Francisco and the Bay Area in the coming decades as the tech oligopolies gain even more global power and seek to build their reputation with their grand philanthropic initiatives. However, this is definitely not a certainty due to the different ways Silicon Valley does philanthropy.
Decentralising Global Philanthropy
In many areas of London, the richest and poorest exist side by side, living entirely different lives.
Over a similar period that we saw the aforementioned 41% growth in HNWI, on average, real wages fell by 9%. Coupled with the further entrenchment of global inequality and increasingly criticised international finance, this begs the question, should we be seeking to create any more “global hubs”, especially ones that are not in the global south?
The UN’s Millennium Development Goals sought to focus on North-South cooperation for mutual benefit and international development, with the Sustainable Development Goals building on this progress by focusing on South-South cooperation.
This movement to shift the power to emerging economies might mean more resistance to the idea of London as the hub for global philanthropy.
Over the years, CAF has been working to build a global generosity movement, campaigning to bring about more equality, and change the dynamics of giving between the Global North and the Global South.
My colleague Michael Mapstone, Director of International at CAF, maintains that the aspiration to focus on the growth of philanthropy in the UK, and more specifically in London, should not be at the expense of growing economies around the world.
He said: “It is great that there is recognition of the strength of philanthropy in the UK and in London.
“We just hope that this doesn’t mean there will be an uneven shift of power that will be at the expense of existing efforts to grow local philanthropy abroad, which has to be strong in itself. We can’t concentrate all our efforts in one place, without first enabling an environment for philanthropic giving abroad.”
There is also something to be said about the opportunity to leverage international and domestic philanthropy to empower a culture of giving by strengthening local resources and local CSOs. According to CAF’s research, up to 2.4 billion people could enter the middle classes globally by 2030 and their spending could almost double from $34 trillion to $64 trillion over the same period.
If this new aspirant middle class were to dedicate just 0.5% of their spending (the UK equivalent) to charitable causes it would generate $319 billion a year in funds for CSOs.
It is hard to come to a definite conclusion on whether London has the capacity and assets to be the hub for global philanthropy, compared to New York, or whether it even should be the global hub, at the risk of hampering the progress of other regional “hubs”. However, what is clear is that London has the vision, history and regulatory environment to continue to lead the world in a multitude of sectors, including philanthropy, and help shape globalisation to make it more inclusive and equitable.