PHILANTHROPY TODAY, IMPACT TOMORROW. WHAT NEXT?

Facing our Greatest Immediate Challenge – The Role of Philanthropy

Magazine article

The definition of philanthropy as the altruistic love for mankind and its welfare has been around for centuries. And whilst its substance prevails, much has changed in the form of it. In a world that is increasingly enabled by technological advancements, yet challenged by changing societal and age demographics, concerns at a global level, such as environmental pressure and education (or lack of, in parts of the world, particularly for women), are urging us to adapt quicker and react by working collaboratively.

THE CHANGE IN WEALTH – THE CHANGE IN ATTITUDE

As they say, there is no time like the present, and at present, it is a fact that globally, the levels of wealth have increased dramatically, with the world’s ‘ultra-wealthy’ population now worth an estimated $32 trillion (Wealth-X Report, 2019). The good news is that a proportion of this is being earmarked to be given away and the rest is expected to transition to spouses and next generation (estimated at approx. $15 trillion by 2030, Wealth-X Report 2019). And whilst both the current wealth holders and the future ones are likely to give away, their motivations and means are likely to differ. The past few years have seen a shift away from traditional one-off donations to live communities, such as the Gifting Pledge set up in 2010 by the Gates family and Warren Buffet, and instead the proliferation of Donor Advised Funds (DAF), large crowdfunding campaigns, and a  impressive peak market capitalisation of half a trillion dollars achieved by the impact investment market (according to the Global Impact Investing Network (GIIN), 2019). Some of the main drivers at a macro level have been the evolution of Socially Responsible Investment (SRI) into today’s Environmental, Social and Governance (ESG), which pre-empted measures such as the rise in popularity of B Corps and pledge by large corporations to adhere to the United Nation’s Sustainability goals. Yet, is this enough?

OPTIONS FOR GIVING

The face of wealth is changing, individuals’ wealth is increasing, the environmental crisis is heightening, and cross-border mobility is now a given. These added dimensions are further complicating the already difficult choices that individuals are faced with around giving. When it comes to an individual’s impact journey, the conversation often starts with purpose and strategic direction. Whilst for some families, philanthropy is perceived as a soul-enriching, “feel good” activity, for others, it is at the core of their very being — the philanthropic ethos embedded within every aspect of the family’s lives, from how they run their households to the governance of their family businesses.

The question is often around what is the best way of giving and this depends on individual goals and profile. At the same time, one of the fundamental questions is how to split giving and allocate the right proportions to the right causes? With options ranging from one-off financial or time and skill donations to setting up an array of charitable structures or utilising DAFs, the right advice is knowing what works best in a particular set of circumstances. And then there is, of course, the question around how to do it for maximum net impact (as defined by the client).

Some families regard philanthropy in isolation and are keen to put their financial wealth to a good cause. Whether they do it during their lifetime or by leaving a large amount (or all of it in some cases) to charity in their wills, this is their preferred method. At the other end of the spectrum, there are those more keen to make an impact and receive a return at the same time. They might decide to donate time and expertise, and being involved in the decision-making of their selected charities goes without saying. Finally, there are some in the middle, who might decide to opt for a quasi-business angel investment route and only expect a return where the social enterprise performs well or perhaps only if the social enterprise generates ‘super’ returns.

THE CHALLENGE

No one method is the right one and it is perhaps within reason to say it is all for the greater good. However, if there was a right answer for tackling the issues society currently faces, what would it be? And who would decide that? It is likely that the answer lies around collaboration and alignment of resources to be deployed based on a thoroughly researched and informed strategy designed by those with expertise in the sector. There are always two edges to the sword and there are many examples ranging from the Gates Foundation to Bezos’s $10m commitment to environmental causes. These are all symptomatic of the wider question around disparityof wealth and net impact. And is it acceptable for mega-donors to set the trend on what causes are most urgent? Who are they to know? And if you believe not, then would the world be a better place without their donation? Whilst the wealthy can make a more substantial impact, we can all equally decide what happens with pension pots and ensure these are invested for maximum impact. Long gone are the days when there were no options for having a say. With businesses like small robo-advisors and pension aggregators allowing the choice for an ESG pension, one has almost no excuse. Finally, whilst there is no perfect answer, one thing is certain – there is an urgent need for action. The encouraging news is that humans are social beings, and therefore on the lookout for opportunities to collaborate. Climate change cannot be reversed. However, with initiatives from the many, it can be slowed down. Pure philanthropy has been working for years, yet a successful, impactful journey can act as a catalyst for further change. In truth, the answer
probably lies in a combination of the two.

CONCLUDING THOUGHTS

One thing is certain – we cannot change the world alone, but together we can try, and in trying we need consolidated advice. If we could solve the environmental crisis by educating ourselves and others, whilst solving the educational challenges by providing the right environment to learn, which one would come first?

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  • Philanthropy Advice
  • Philanthropy stats & trends
  • Promoting philanthropy