Philanthropy ImpactGuide to Giving

Guide to giving for new Donors/social investors

PHILANTHROPIC GIVING AND SOCIAL INVESTMENT - A FULFILLING PERSONAL JOURNEY; MAKING A DIFFERENCE

Wealthy individuals and their families are increasingly looking for opportunities to engage responsibly in order to make a difference. The opportunity to do this is broad, ranging from pure charitable giving to professional social or impact investing, and the journey can be very rewarding and fulfilling. The personal value proposition leads the decision-making process in choosing a suitable pathway.

There are typically three main approaches:

1. Pure philanthropic engagement – donating funds and not expecting a financial return;
2. Venture philanthropy – seeking to maximise some form of societal return and engaging your time and energy in a social venture; or
3. Intentional/social investment strategy – focused primarily on social enterprise and seeking to maximise societal return while receiving some financial return.

An additional approach to complement these is sustainable and impact investing, whereby an investor seeks to maximise their financial return as well as a societal or environmental return. The engagement or investment in these different ways is often value driven. People are motivated by their ambitions to do something beneficial for society or the environment based on their own values. A clear vision gives purpose and direction when embarking on this rewarding endeavour.

Pure Philanthropic Engagement

Some questions to ask yourself to get started could be:

• Have you already identified causes/what you want to support, or do you have no idea what you want to achieve?
• Are there family challenges you have faced and/or have your friends been through things that have seriously affected them?
• Are there articles in the news, either domestically or internationally, that concern you?
• Do you know which of your assets you are ready to give – is it purely financial or do you have other resources that could be of value to others?
• How long do you want to do this for?
• Do you want to do this on your own or collaborate with others?

Note, these questions do not need to be answered in this order. Identify which ones you already know the answer to, and shape your answers to the others around that.

The goal is to define your objectives, and then how you can action them and reach those goals.

Rockefeller Advisory Services’ Philanthropy Roadmap provides an excellent overview of how to plan your giving. They released a very detailed report, Reimagined Philanthropy: A Roadmap to More Just World about the questions and reflections that emerging philanthropists should consider.

There are also eight other questions that philanthropists should consider: Are you cognisant of the inequalities our philanthropic systems are built on?

• Are your short-term gains laced with long-term harms?
• Are communities being empowered to determine their own solutions?
• Have you done the work or are you taking shortcuts?
• Are you engaging with the grassroots and valuing them properly?
• Do those on your board reflect the communities you are serving?
• Is your philanthropy truly catalytic?
• In whose name is this being done?

LGT and Philanthropy Insight’s report provides a very useful framework to take donors through every stage of their journey.

If you are only just getting started and it is important to you that you fund topical projects that have urgent need, UBS’ Top Five Trends in Philanthropy 2023 is a valuable holistic vision of the current state of philanthropy sector.

A lot of donors choose for their donations to be restricted grants, which often need to be assessed and reported on and the charities need to demonstrate the funds have only been spent on an agreed project. Many do not like their grants to cover core costs but over the last few years, that mindset has been increasingly challenged. In his Ted Talk, Dan Pallotta presents a useful summary of why that is.

Darren Walker, President of the Ford Foundation and ex-Vice President at the Rockefeller Foundation released an insightful book in 2023, From Generosity to Justice: A New Gospel of Wealth. It reflects back on the vision of Andrew Carnegie, and how it relates to modern times.

For are also groups of philanthropists who come together to learn from their peers and develop, or improve their practice. Forward Global (previously named The Philanthropy Workshop), Toniic and the Global Impact Investing Network are the most well-known and for those that are inheriting their wealth and are concerned about where it came from, the Good Ancestor Movement is a group of that has been formed to help bring them together.

One approach that not many people take is educating young children about philanthropy. If you have young children who will be inheriting your wealth, it is useful to understand how children can be taught about giving, and also how the material they use can help, or hinder this approach. The Giving Machine and the Lilly Family School of Philanthropy also offer useful advice on this topic.

Your Total Portfolio Impact

It is important to get a broad sense of what your investment portfolio looks like; where and how your assets are invested, and whether this aligns with your values; and what you would like to achieve with your wealth. By looking at the table above, you can get an understanding of the spectrum of capital impact from traditionally managed investments all the way through to philanthropic funding. (Philanthropy Impact Spectrum).

Individuals, foundations and families alike are increasingly moving towards considering a “total portfolio impact approach”, which means aligning your investment portfolio with your values and your philanthropy. This strategic approach creates maximum positive impact and ensures investments do not cause harm. For example, it will ensure you do not invest in tobacco and alcohol at the same time as supporting cancer charities. This is an increasingly important consideration for Gen Z, Millennials and and women of wealth, who want to authentically engage with societal issues and address them through all channels.

With the growing awareness around ESG/impact and responsible investments, this is now easier to achieve. Your wealth managers and professional advisors are more likely to ask you early on, and when reviewing your investment criteria, if you wish for your portfolio to comprise responsible investments aligned with your values.

There are also more accessible “impact investments” being offered by asset managers, which can align with your philanthropic mission – and it might be worth considering such funds, which are often thematic, addressing areas such as health and wellbeing, biodiversity and clean energy.

If you really wish to have all your assets working towards your goals, you should take steps to work with your professional advisors to achieve this.

Typology of Sustainable Investments - Strategic Purpose of the Investment

SPECTRUM OF CAPITAL INVESTMENT-RETURN CONTINUUM

While donating to a good cause or investing in a social enterprise may seem simple, a lot can go wrong, particularly when significant amounts are being invested. Sophisticated advice, knowledge and learning are therefore essential to your success. Support from professional advisors may be helpful if you are embarking on a donor and social investment journey or reviewing your current approach.

In summary:

a. Be aware of your motivation. The following points outline the variety of reasons why wealthy individuals get involved with philanthropy:

• Responsibility: having created wealth, they feel a responsibility to give back to the individuals and society that helped them on their way. They wish to align their values with their money.
• Family values: they come from a family that gives, or they want to demonstrate to their children the importance of empathising with those who are less fortunate.
• Peer group: they are part of a community (often religious) that gives, and they continue in that tradition.
• Life changing event: whether selling a company or coming to terms with a tragic event, life changing events often change the priorities of individuals. They may have more time on their hands and want a new challenge, or they may have very personal reasons for focusing on a particular cause.
• Legacy: it is a cliché that the first half of life is about success and the second half is about significance. However, for some wealthy donors, the desire to leave traces of a well-led life is a powerful motivator.
• Restructuring for wealth and estate planning: others leave gifts to charities for estate-planning purposes, or because they don’t have children to whom they can pass on their wealth.

b. Agree the causes or issues you would like to address, in order to live your values and motivations. Use a modified version of investigation as if it were a business proposition, including research, developing a vision, strategy, business planning and risk analysis/mitigation.

c. Establish the level of involvement you and/or your family would like to have and are capable of commiting to. Be aware there are several different approaches to philanthropic giving, some of which are:

Values-based philanthropy

• Donors prioritise their values to help effectively channel donations.

Strategic philanthropy – predictive model

• Decide a clear goal, and design and implement how to achieve it/impact; strategy-based on evidence/data-driven strategies.

Transformative Philanthropy

• Turns the power of money into creative and decision-making power for many; donors are part of the process in direct contact with the supported group.

Emergent philanthropy

• Motivation to pioneer and disrupt, innovate and to make a significant difference. The approach combines elements of venture philanthropy and the application of an emergent strategy.
• Emergent strategy accepts that a realised strategy emerges over time as the initial intentions collide with, and accommodates to, a changing reality. The term “emergent” implies that an organisation is learning what works in practice.

Catalytic philanthropy

• Catalyses/mobilises a campaign that achieves measurable impact; focuses on issues to resolve, not on organisations to support.

Venture Philanthropy

• High-engagement and long-term approach whereby an investor for impact supports a social purpose organisation (spo) to help it maximise its social impact – funding and expertise.

d. Establish as part of ones planning an approach to evaluation – evaluating the process of implementation and then the outcomes and impact.

See more detailed information on the seven stages of giving.

Pure philanthropic funding is often a catalyst for transformation and has an important role to play in supporting charities to make change happen.

Some donors want to give practical support to causes which are close to their heart, while others are more interested in influencing complex societal issues. Personal philanthropic engagement can be very innovative and satisfying, and is more strategic than charity, which is an immediate response to an acute issue or disaster. Private philanthropy often takes a more explorative approach in order to tackle burning issues. Success stories can then be scaled up efficiently and translated to similar causes.

The entry points are taking a business-like approach, being strategic and utilising common sense – together with a curious and explorative mind-set.

United Nations Sustainable Development Goals

The United Nations Sustainable Development Goals (SDGs) are the blueprint for achieving a better and more sustainable future for all, and provide a great framework with which to align your activities. Agreed by 193 countries in 2015, the 17 SDGs underpinned by 169 targets and 244 indicators, are the world’s ‘to do’ list for the next 10 years. The SDGs make it clear that the global community relies heavily on the private sector to solve some of the most urgent problems the world is facing. Both companies and institutional investors are being asked to contribute to the SDGs through their business activities, asset allocation and investment decisions.

These can be categorised into four impact & investment themes:

Failure to achieve the SDGs will impact all countries and sectors and create macro financial risks. Universal owners’ portfolios are inevitably exposed to these growing and widespread economic risks – which are in large part caused by the companies and other entities in which they are invested.

Another way of looking at the SDGs is through biosphere, society and economy. This leads to a better understanding of how they might be applied and how a philanthropist and social impact investor can use them to set priorities. See chart below.

In a previous edition of our magazine, entitled What Kind of Society Do We Want To Build? there were 42 articles; the authors, their colleagues and their organisations proactively designing and implementing a ‘new normal’ – very inspirational, indicating the future holds promise.

Part 1 of this edition, SDGs – Driving Societal Priorities: Leading to a Just Society, addresses the issue in a number of ways. The editorial states:

Andrew McCormack asks the question: can the world achieve sustainable development? He says: "The world has the appetite and capacity for sustainable development. It has less than a decade to show the collective determination it needs to achieve its common goals."

Other articles outline how the SDGs applied in ESG impact investing can support the changes needed to achieve the SDGs, applying suitability criteria to enable investors to live their values and achieve their ambitions. To this end, Greg Davies explores the behavioural implications of impact on everything from philanthropic giving to impact investing.

Michael Alberg-Seberich address SDGs from another perspective – the challenge of measuring impact. As he says: "The SDGs are not perfect, but they open the door to intense client conversations about impact. The effect of the SDGs on the corporate discourse on impact targets is an indication for this."

International examples are explored in a number of articles from Russia to Asia to India; including a case history of an international philanthropist who is part of the Maverick Collective. The latter, Stasia Obremskey sums it up: “My motto these days is ‘yes, And.’ YES philanthropy AND impact investing, to have more influence on women’s lives. Yes, invest locally AND globally as the needs are great in both markets. YES mission AND financial returns to drive more investment capital into women’s health. YES, education AND more and better products that enable women to manage their fertility, allowing them to make their mark on the world. The world so needs the minds and voices of women, working with men, to solve our most pressing problems—from climate change, economic inequities and disparities in health, education, and well-being. Let’s invest in improvements in reproductive health and education for women and girls to make the world a better place.”

This is not just the beginning. There is a worldwide movement in support of achieving the SDGs, a momentum leading to a just society.

Just watch this space… as SDGers in multiple environments on a never-ending road create a sustainable world with healthy and sustainable economies, societies and biosphere.

Driving Investment Strategy

Achieving the SDGs will be a key driver of global economic growth, which any long-term investor will acknowledge as the main ultimate structural source of financial return over the long term. Economic growth is the fundamental driver of the growth in corporate revenues and earnings, which in turn drives returns from equities and other assets.

The SDGs aim to create a viable model for the future in which all economic growth is achieved without compromising our environment or placing unfair burdens on societies. Embracing the relationship with society, the environment and government creates a new strategic lens through which to view and judge business and investment success.

In the last 10 years, responsible and impact investment has evolved from being a primarily exclusionary approach to one focused on identifying companies that can effectively manage ESG risks and opportunities, while achieving impact. The challenges put forward by the SDGs reflect that there are very specific regulatory, ethical and operational risks which can be financially material across industries, companies, regions and countries. They provide a common way of referencing the move towards a more sustainable world, and can thus strengthen investors’ ESG risk frameworks as well as focus in on impact investment actively contributing to social and environmental solutions and transformations.

In many cases, investors and philanthropists are implicitly taking these factors into account already. The SDGs offer a common language with which to shape and articulate such investments and philanthropic strategies, as well as a sense within which to think about selecting charities.

The Role of Professional Advisors

An evaluation process for judging/selecting professional advisors and how to deal with those relationships.

To enjoy a successful and satisfying philanthropy, social investment or impact investing experience, a professional advisor is useful to help guide you. A professional advisor may be a private client advisor, and/or work in the wealth management, private banking, independent financial advice, tax or legal sectors.

A professional advisor can be particularly helpful when first getting started, when time is a constraint, when there is increasing complexity or when you are giving and investing significant amounts. A professional advisor can best support your giving practice – reducing risk when deploying money, increasing your knowledge and ultimately leading to a successful philanthropic engagement.

Keep in mind that, over their donor journey, a philanthropist may need 23 distinct services from multiple professional advisors. See below for examples.

Philanthropy advice has the same steps as other professional advice

Multiple advisors Act In Different Parts of the Advice Chain

How best to select an advisor? You might engage with several advisors along the way, for example, a lawyer to help set up a structure or a wealth manager to invest in charitable funds. They can also help guide you through social impact investing and its contribution to your philanthropic goals.

The following is some useful criteria for you to use in selecting a good advisor.

What Makes A Good advisor?

What Makes A Trusted advisor?

An evaluation process on how to judge/select philanthropic advisors and how to deal with those relationships.

What services can a philanthropic advisor provide?

(see A guide to working with Philanthropic Advisors, Fidelity Charitable)

• They can help design a strategy or plan for giving.
  Philanthropic advisors can help donors clarify their values, mission and goals. A philanthropic advisor will listen to donors’ charitable interests and priorities and work with them to document and define an approach that meets their needs. This support gives shape and brings clarity to a donor’s ideas and helps translate them to action.
• They can support and facilitate discussions among families.
  Giving together as a family can be a rewarding experience, but it’s not always easy. Philanthropic advisors give families the tools to examine individual family member’s interests and desires to participate in family philanthropy and then use that information to define each member’s role in the family’s philanthropy and to support them in deciding where and how they will focus their resources as a group and/or as individuals.
• They can identify giving opportunities and carry out plans.
  Some donors know what causes are important to them but still need assistance finding the right non-profits and giving opportunities. Philanthropic advisors use their expertise as well as their professional relationships to match a donor’s charitable vision with suitable organisations or projects — and they can help structure the funding agreements, too.
• They can evaluate the impact of donor grants.
  Results-oriented donors can rely on philanthropic advisors to help them understand how, and if, their giving is leading to the outcomes they hope to achieve.
• They can identify other aligned funders or learning partners.
  Philanthropic advisors can help donors who wish to make a bigger impact in a specific area to identify like-minded individuals with whom to meet and collaborate.
• They can coordinate with investment advisors and financial planning experts.
  Philanthropic advisors are less focused on tax and financial planning and more focused on matters related to the distribution of charitable assets. However, they may work with a donor’s financial advisor, tax attorney, estate planner and other experts who play important roles in helping an individual determine which assets to give to charity and when, which giving vehicles are most appropriate, and how best to integrate charitable giving goals into broader financial plans.

The Seven Stages of Giving

Our seven-stage framework will help you on your philanthropic and social investment journey. Click on each stage of the framework to see advice and case studies from other philanthropists who have addressed the issues you might now face. This is not a linear journey and any stage can be revisited at any time.

Guide to Giving for Current Donors/Social Investors

This guide is for existing philanthropists and social investors who wish for efficient, effective and impactful giving.

Wealthy individuals and their families are increasingly looking for opportunities to engage responsibly in order to make a difference. The opportunity to do this is broad, ranging from pure charitable giving to professional social or impact investing, and the journey can be very rewarding and fulfilling. The personal value proposition leads the decision-making process in choosing a suitable pathway.

There are typically three main approaches:

1. Pure philanthropic engagement – donating funds and not expecting a financial return;
2. Venture philanthropy – seeking to maximise some form of societal return and engaging your time and energy in a social venture; or
3. Intentional/social investment strategy – focused primarily on social enterprise and seeking to maximise societal return while receiving some financial return.

An additional approach to complement these is sustainable and impact investing, whereby an investor seeks to maximise their financial return as well as a societal or environmental return. The engagement or investment in these different ways is often value driven. People are motivated by their ambitions to do something beneficial for society or the environment based on their own values. A clear vision gives purpose and direction when embarking on this rewarding endeavour.

DEFINING A FOCUS

HIGHLIGHTS

• If you have already started your philanthropic journey, it might be time to reassess and refocus your giving. This will provide you with opportunities to learn more about the causes you care about, or discover new ones, and over time refine your giving to achieve maximum impact.
• Remember that it is often useful to combine three variables – your interests and passions, areas of need and ways you can help – to find your funding focus once you’ve thought about your objectives for giving.
• If you’re finding it difficult to re-identify your focus, it can be useful to narrow down causes under headings detailed below.

When you started your philanthropic journey, you may have identified specifically where you wanted to direct your donations. But many people find it hard to prioritise the range of pressing social and environmental needs – should I support children’s hospices, save a dying species or provide scholarships for rural Africans? There is no right or wrong answer, and many people choose to spread their giving across multiple issues. Perhaps you found it hard to focus on what it really was that was driving your giving forward. If you can reassess and define a clear focus for your giving, it will allow you to move from giving on an ad-hoc reactive basis to planned, strategic giving which aims to tackle specific issues close to your heart. Focused giving provides you with opportunities to learn more about the causes you care about, and over time refine your giving to achieve maximum impact.

It is often useful to combine three variables to find your funding focus once you’ve thought through and reassessed about your objectives for giving. These variables are your interests and passions, areas of need (where can your support make the most difference), and the ways you can help (your available resources such as money, time, contacts, and skills). With the development of products such as social investment, responsible investment, impact investment, there are many new vehicles you can use to channel your resources. By combining these, you will find a focus that is both valuable and personally rewarding.

BENEFITS OF FOCUSED FUNDING

By re-focusing your funding, you can build up knowledge and expertise which is not possible when your funding covers a wide range of issues.

When you have a focus, either at the start of your giving or during it, you can research an issue to really understand the need and how to tackle it. For example, donors who want to support homelessness may find that there are adequate soup kitchens in their area, but identify a need for giving homeless people the skills and resources to help them into employment, so that eventually they can find their own accommodation. Donors may also find some types of work that are very valuable, but underfunded.

As you build experience in an area you will be in a better position to confidently select charities which align with your priorities and make a real difference. Over time you will develop an opinion on which interventions and charities are effective, and thereby take a strategic approach to achieving change and charitable impact. As you see the change that you’re making, giving becomes more rewarding and engaging.

There are practical advantages to defining, and redefining, a funding focus. It provides you with a clear funding identity and strategy to communicate to external partners. This is one way to discourage applications from unsuitable candidates: it is much easier to say no to projects which don’t fit with your focus. Having a clear funding focus also makes it easier to get to know other funders with similar interests who you can share expertise with.

WHERE TO RE-START

If you’re finding it difficult to re-identify your focus, it can be useful to start afresh, and narrow down causes under the headings of people (for example, children, women, specific ethnic groups etc), geography (for example your local community, city, country or group of developing countries etc), an issue (for example, mental health, human rights, poverty). However there is a balance between narrowing the focus too far and losing flexibility in your funding decisions, and stretching your resources too thinly across a range of projects.

In some cases you may find that the people involved in your funding (for example family members or company directors involved with corporate philanthropy) may not agree on one focus area. One way to bring together a range of interests and passions is to divide the overall amount you want to give into separate pots of a defined size, with different members deciding the focus for each. You may also want to keep a portion of your funding aside in a discretionary pot to react to requests or issues as they arise.

ASSESSING NEEDS

HIGHLIGHTS

• Assessing needs means understanding the key problems that need to be addressed and where funding gaps exist.
• Whether formal or informal a needs assessment should identify under-funded issues through a number of stages, suggested below.
• Needs analysis can be quite a complicated process, and daunting to undertake alone.

Assessing needs means understanding the key problems that need to be addressed and where funding gaps exist. It can be tempting to fund high-profile causes and organisations, but these are often already well served by other donors and/or statutory provision, and you may make a greater difference in underfunded areas.

A needs assessment should identify underfunded issues. Needs analyses take a variety of forms. An informal approach might involve reading some reports on the issue, talking to some experts and charities, and forming a view of what needs support. At the more formal end – for a large strategic foundation wanting to concentrate millions of pounds of donations on a specific issue (such as combating malaria), for instance – a full research study might be necessary. However you go about it, you need to be confident that you are meeting a need and not duplicating provision.

STAGES OF NEEDS ASSESSMENT

When conducting a needs analysis, you should aim to begin by understanding the size and nature of the need: how big the issue is, how many people are affected, and to what extent they are affected. You may identify some groups who are particularly badly affected by an issue. It can be complicated to conduct this research from scratch, so look out for existing research by think tanks, large charities in the field, other funders and government agencies.

The second stage is to discover what the public and private sectors are doing in this area. This will involve understanding provision from central government, in addition to local authorities, public health bodies and schools. You may find that existing support covers only a proportion of those affected by an issue or only some of their needs, or that services are being affected by spending cuts.

Next you should look to understand what work charities are undertaking in the area. Find out what the charities are hoping to achieve, how they address the issues and what interventions are most effective. It can be difficult to assess the impact of a charity, but look for information about the difference they make (i.e. changes in the lives of their beneficiaries), alongside detail of their activities (see charity impact evaluation). Finally investigate what other funders are doing in the area; it is important that you support an area where there is a real need for more funding. You can review the information provided by 360 Giving and Giving is Great which demonstrate what other funders are doing and how much they are distributing to a wide-range of charities.

DECIDING HOW TO ADDRESS NEED

When deciding where to dedicate resources, it can be helpful to think about the trade-offs you need to make between addressing the need in different ways. Projects that work directly with individuals (such as providing wheelchairs to disabled children) tend to have a greater certainty of outcome, and changes can be observed relatively rapidly. However these projects tend to be high intensity and therefore reach a relatively small number of people. Investment in policy or campaigning work (for example a campaigning project to tackle obesity) will have a much less certain outcome and it will take longer to see any change but success is likely to impact a huge number of people. Donors deciding how to address the needs they have identified can think about where they would like to fund along these three spectrums—breadth of reach, certainty of outcome, and time required to demonstrate impact. There are different questions you could consider when you are deciding how to address a variety of needs.

Much of the information needed can be found through desk research and through conversations with practitioners and experts. If you are already funding projects then it can be valuable to review any learning from your experience. Some donors decide up front to develop a ‘learning portfolio’ supporting charities that work at different points along the breadth, certainty and time ranges. This can be a short-term arrangement as you assess your preferred method of tackling the need, or it can be part of a long-term strategy to increase the impact of the funding by tackling the problem from many different levels.

Needs analysis can be quite a complicated process, and daunting to undertake alone. If you have a clear idea of where and how you want to fund, then the most important thing is to reassure yourself that your money goes towards a real need and doesn’t get lost in a well-funded area. If you’re less clear on how to make the most of your funding within a particular area and want to undertake a more thorough assessment of needs, you may find it more practical to get some support from experts.

If it is important to you to perhaps shift your thinking, and address more topical issues and adjust your approach to fit into the current method of philanthropic thinking, UBS’ Top Five Trends in Philanthropy 2023 is a valuable holistic vision of the current state of philanthropy sector.

A particularly valuable paper to read, to consider what you have done so far, what you have achieved or what challenges you have faced, and what other areas need to be taken into account that you have not thought about yet, is the Volume 2 of the Rockefeller Philanthropy Advisory Services’ Reimagined Philanthropy reports – Advanced Strategies for a More Just World.

There are also eight other questions that you can take into account when you are reflecting on the outcomes of what you have been doing so far: Are you cognisant of the inequalities our philanthropic systems are built on?

• Are your short-term gains laced with long-term harms?
• Are communities being empowered to determine their own solutions?
• Have you done the work or are you taking shortcuts?
• Are you engaging with the grassroots and valuing them properly?
• Do those on your board reflect the communities you are serving?
• Is your philanthropy truly catalytic?
• In whose name is this being done?

A lot of donors choose for their donations to be restricted grants, which often need to be assessed and reported on and the charities need to demonstrate the funds have only been spent on an agreed project. Many do not like their grants to cover core costs but over the last few years, that mindset has been increasingly challenged. In his Ted Talk, Dan Pallotta presents a useful summary of why that is.

Darren Walker, President of the Ford Foundation and ex-Vice President at the Rockefeller Foundation released an insightful book in 2023, From Generosity to Justice: A New Gospel of Wealth. It reflects back on the vision of Andrew Carnegie, and how it relates to modern times.

MacKenzie Scott, ex-wide of Amazon founder Jeff Bezos has been very open about her style of giving and has listed some of the charities who received some of her $2.1billion in 2023. There is a three-year report that is analysing the effectiveness of her unprecedented grant distribution process, which is to allocate large, unrestricted grants – Results from Year Two of Three-Year Study.

LGT and Philanthropy Insight’s report provides a very useful framework to take donors through every stage of their journey.

If the grants you have given have been restricted grants, consider that over the last few years, things like donors avoiding things like core costs have been challenged. In his Ted Talk, Dan Pallotta presents a useful summary of why that is.

Monitoring, evaluation and review

Activities for clients to consider

The quality and frequency of charity feedback and monitoring data should be taken into account as one criteria in the initial selection process. Feedback from charities is generally tailored, based upon the nature of the relationship and donor expectations.

Clients should acknowledge that the purpose and scale of their contribution will play a significant part in determining the information they receive. For example, for a £50 donation to Oxfam they probably could not expect regular reporting on its activities, shifts in priorities, setbacks, successes and so on. But if they had pledged £5 million to Médecins Sans Frontières to build and develop a humanitarian aid camp, it is reasonable to expect that the charity would deliver impact reporting to keep the benefactor abreast of major developments on the project.

MEASUREMENT OF TARGETS

Clients need to be clear from the outset of a relationship with a charity exactly what they are expecting in return. They should ask the individual or department managing their contribution what processes the charity follows, and discuss any perceived shortcomings.

It is important that charities are not set unrealistically ambitious targets, but rather outcomes that are achievable and that can be measured. They should not focus simply on measuring success in achieving end-goals, but also be open to periodic changes that improve mission delivery. Targets are important – helping supporters to understand quantitative and qualitative achievements – but not to the extent that they drown donors in detail.

Funding a measurement for an impact monitoring process can be expensive, but is justified in some cases.

A HELPFUL MODEL

To help you assess the effectiveness of an investment, the following model can be used. Some stages relate closely to monitoring (i.e. activity, process, inputs and outputs) while others support reviewing and evaluation (outcomes and impact).

• Activity – is the project actually taking place?
• Process – is the project progressing according to plan?
• Inputs – what are the available resources and how effectively are they being managed?
• Strategies – are the strategies clearly defined?
• Outputs – what is the project producing in terms of concrete data?
• Outcomes – has the project delivered the desired outcomes in terms of tangible results?
• Impact – what is the project’s impact on the broader challenge in the larger community?
• Effectiveness – do the outcomes and impact justify the resources allocated to the project?

GIVING LOCALLY

HIGHLIGHTS

• Local giving can mean different things. In all senses, it’s focusing your giving around a particular geography that matters to you.
• Local charities make up a large proportion of the charity sector and often operate on tiny budgets; 85% of registered charities in the uk have an annual income of less than £100,000 and thousands more community groups operate informally.

There are a range of challenges facing every local community, providing abundant opportunities for donors of all types to make a difference to their local residents or neighbourhoods.

Donors choose to give locally for a range of reasons; their desire to improve their local area or tackle inequality, a personal experience (for example supporting their local hospital), a wish for hands-on involvement in the community, or a belief that supporting small local organisations can have great impact. It is one of the easiest ways to really see what difference your money or time is making and can therefore be incredibly rewarding, and often a good place to start for donors daunted by the range of charities to support.

Local giving can mean different things. For some donors, it can represent supporting a place close to their home or work, and that place can be a village, a borough, a city or even a whole country. For others, it may mean giving back to the community in which they grew up, or where their family originally came from. But in all senses, it is focusing your giving around a particular geography that matters to you.

REASONS TO GIVE LOCALLY

Local charities make up a large proportion of the charity sector. In March 2023, there were nearly 170,000 charities in England and Wales alone. In 2020/21, there were 77,295 charities whose income band was less that £10,000 and 54,431 whose income band was between £10,000 - £100,000. On top of this, thousands more community groups are not registered with the Charity Commission and operate informally. Local charities tend to be badly affected by cuts during financial downturns at a time when they usually face higher demand for their support. This was particularly evident throughout the Covid-19 pandemic and has had long-term effects on these organisations having the capacity to regenerated their funding, and therefore for their survival. Donations to relatively small organisations can make a real difference to the issues they are addressing and enable philanthropists to see the impact of their gift up close.

Local charities also know their local issues well, having the knowledge, expertise and networks that would be hard for national organisations to come by.

GET TO KNOW LOCAL NEED

One of the best ways to get to know your local area is simply to walk or drive around, visit community centres and local groups, and talk to community leaders. Check local press and websites to find out about organisations, events, and forums where you can find out what’s going on, or try talking to the local branch of a national organisation. Most areas have voluntary sector infrastructure organisations such as a volunteer centre or council for voluntary services which can explain the local context and suggest projects you may wish to support.

Local Trust and Do Something Good provide useful information about projects that are happening in local communities.

WORKING WITH PARTNERS

If you want to fund locally but don’t have much time to dedicate to researching local needs, consider funding through a community foundation. UK Community Foundations is a network of foundations who are geographically focused charities which aim to identify local needs and link philanthropists to projects which will improve the life of their community. They provide a range of vehicles for giving time, money and expertise. If you’d like to retain more involvement in your giving consider connecting with other local funders through a regional funding network.

REMINDER: QUESTIONS WHEN ASSESSING A CHARITY

To qualify as a charity, an organisation must have purposes which are exclusively charitable. It cannot have some which are charitable and some which are not. A charitable purpose must be one of the 13 listed in the Charities Act 2011.

CHARITIES ACT 2011: CHARITABLE PURPOSES

1. The prevention or relief of poverty.
2. The advancement of education.
3. The advancement of religion.
4. The advancement of health or the saving of lives.
5. The advancement of citizenship or community development.
6. The advancement of the arts, culture, heritage or science.
7. The advancement of amateur sport.
8. The advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity.
9. The advancement of environmental protection or improvement.
10. The relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage.
11. The advancement of animal
12. The promotion of the efficiency of the armed forces of the Crown or of the police, fire and rescue services or ambulance services.
13. Other purposes currently recognised as charitable and any new charitable purpose which are similar to another charitable purpose and must be for the public The nature of the benefit provided to the public may look very different depending on what the charity was set out to achieve.

Charities in England and Wales with expected annual income of over £5,000 must register with the Charity Commission.

Below are some basic questions and procedures to keep in mind when assessing a charity. As always, it is important to start with the donor’s intentions.

1. What is the vision of the donor and what values do they live by?
2. What impact do they wish to accomplish?
3. How long is the commitment and what is the amount to be donated?
4. How is the distribution to be measured?
5. Collect the following information:
   1. Name of charity, its history, its purpose, services, size, governance including committees, leadership team/staffing/ volunteer numbers, and impact
   2. Contact details including charity registration number
   3. Project/activity/post to be donated to – restricted or unrestricted
6. Undertake desk research on the charity
7. Establish details of other foundations/funders and charities in the sector, and any particular/important comments/findings; if available comparison of impact
8. Collect and review documentation g. annual report and accounts (filed with the Charity Commission), vision statement, strategy documents and plans, risk analysis and management, staff performance evaluation, evaluation reports, management accounts, internal strategy, evaluation documents, information on the charity’s impact, current funders, and strategic alliances and accreditation.
9. Conduct key stakeholder interviews, including key people from the charity:
   1. Discussing items from 8
   2. Detailing the culture the management team want to foster, and how they plan to influence this.
   3. Assessing whether the management team’s vision aligns with how the staff and beneficiaries view the charity.
10. Review and assess financials:
    1. Review budget, P&L, balance sheet, cash flow, reserve/restricted and unrestricted funds, assets and how they are invested (impact investment/etc? – harms vs. good), controls and money managing.
    2. Establish whether the income of the charity covers its expenditure.
    3. Assess use of data and business intelligence, and organisational and service evaluation.
    4. Review risks/safeguarding areas and how they were managed.

11. Investigate measuring efficiencies and programme effectiveness.

Programme Evaluation, or Assessing Impact

The generic purpose of evaluation is ensure accountability by measuring process (formative evaluation) and outcomes (summative evaluation) to see whether the programme was effective and efficient; seeking ways to improve programme delivery, making it more responsive to meeting client needs.

Programme evaluation should address the following:

1. What will be evaluated and how, including the purpose of the evaluation/questions to be answered, who the evaluation is directed at, the ways the evaluation results will be used and themethodology.
   1. What aspects of the programme will be considered when judging performance?
   2. What standards/type or level of performance must be reached to be judged successful?
   3. What evidence will be used to judge performance and where will it be sourced (individuals/ documents/etc.)?
   4. What quality control approaches will be used to ensure reliability and validity?
   5. How will stakeholders be engaged in the process?
2. What is/was the programme and its intended results?
   1. Mission, programme goals and strategies, capacity to bring about change.
   2. Programme description includes need, outcomes, activities, resources utilised, context within which it will operate, and change steps.
3. Were the intended results/outcomes of the programme achieved? To answer this question the evaluation will need to determine:
   1. What were the underlying assumptions and the intended outcomes?
   2. What are the antecedent conditions?
      1. Prior state/characteristics of the organisation as possible factors impacting outcomes.
      2. Original position to measure change from.
      3. Intervening conditions/circumstances arising during the process that may have impacted the process.

4. Intervention/set of activities/steps mounted to achieve agreed upon objectives/impact.
   1. Key steps/How ideas are implemented?
   2. Objectives at each key What were the key indicators and were the objectives/outcomes achieved at each step?
   3. Underlying assumptions at each step. Did they hold true? What other things took place instead of or in addition to the underlying assumptions?
   4. Were they implemented in the prescribed manner?
   5. Did the manner in which they were implemented affect the results?
   6. Cost of each intervention.
   7. What is the most cost effective way of operating the programme?
5. Was each step/activity effective/efficient?
6. Key Issues:
   1. Barriers/inhibitors identified throughout the process.
   2. Risks that have to be managed.
7. Outcomes/impact/interpretation:
   1. Final conditions/position to measure change relative to.
      1. Objectives:
         1. Underlying assumptions.
         2. Stated ends/key indicators.
         3. Were the ends met?
         4. Did the assumptions hold true?
      2. Outputs – increased number of activities/ sessions etc.
         1. Were the outcomes achieved?
         2. Did the programme produce the measured results?
         3. Effects – unintended consequences:
            1. Were there any unintended outcomes, good or bad?
         4. What is the evidence?

8. What lessons were learned? To answer this question the evaluation will need to:
   1. Clarify the processes that lead to the outcomes.
   2. Identify which processes worked, which ones did not work.
   3. Outline how the processes could be changed to improve the outcomes.
   4. See what processes led to the unexpected outcomes and how they should be used, adapted or changed in the future.
9. To what extent are the process and results generalisable to other situations?
   1. Suggested improvements.
   2. Recommendations re: the programme:
      1. Did it achieve its objectives and should it be replicated?
      2. Future approaches to evaluation.

The overall intention of the above points is to identify whether the charity’s mission is clear and to establish whether it ensures its activities and outcomes remain aligned to that mission. Clients need to understand how closely the charity’s mission/strategy/ programmes are aligned with their own goals and if the culture is results-orientated and will achieve sustainable change.

Clients need to know what qualitative and quantitative evidence charities report, how solid and diverse their income streams are, that their financial reporting is not erratic and that their income is not dependent on one source of funding alone.

It important to establish that there is strong leadership in the charity, that there is not a fast staff turnover and that staff work together as a team to makes things happen.

How much a philanthropist is contributing and the impact they intend to make affects the amount and depth of questions it is appropriate for them to ask. Below are guidelines for questions to ask depending on the size of the charity/grant applicant.

GIVING INTERNATIONALLY

Overview

Donating resources on an international scale means your opportunities are so vast it can be a daunting. There can be several complexities in this form of giving: the structures, processes and cultures of civil society are different in other countries, there are language barriers, dissimilar tax incentives for cross-border giving, and you may have less direct access and interaction with the projects you fund, so may feel less-informed about the impact of your funds.

If you are interested in giving on a global scale, the core questions to ask are four-fold:

1. Are there areas you have funded locally that you think would have value if the outcomes are spread out on a much wider scale, and how do I reach them?
2. Are there any current global issues that concern you?
3. Are there other funders who are funding global areas that interest you?
4. How can you keep track of giving that has many levels to go through before it reaches the key beneficiary?

Ways to do it

If you have donated to a specific project that is based in the UK, ask the people who are doing the work on the ground if they know if there is similar work in other places around the world. If they don’t know of any similar work, reach out to intermediaries such as Global Giving, Charities Aid Foundation or New Philanthropic Trust, as they have offices in the UK and will have already identified and vetted organisations who address needs on a global scale. From a practical and financial point of view, giving money directly to charities based outside the UK does not carry tax benefits. However, Give Directly provides information about how you can give directly, or via other intermediaries.

Global issues

What global issues are concerning you? If it is climate change, Greenpeace, Climate Outreach, Friends of the Earth focus on these areas and the Climate Coalition is a collection of all of the main climate change charities. There are currently 100+ global conflicts which are inflicting an enormous number of challenges around the world, and if you are interested in this area, be cautious of the political, economic and social context. How are NGOs and their activities viewed in the country, and what are the implications of this? How volatile is the environment and how might the country and local context change, and what effect would this have on your donation? The Disasters Emergency Committee and the International Rescue Committee are useful channels of funding for these areas. Or is it poverty, sanitation and/or education of children in low-income disadvantaged communities? If you don’t know where to start, research the UN SDGs. Unfortunately, we are way behind meeting the target date of 2023, so stepping back and reading about these goals that apply globally, and what projects have – or have not – been successful, could open your eyes to areas you had not even considered. The RELX SDG Resource Centre provides very useful information about this area.

Other funders

The most well-known donors who support international projects are the Bill and Melinda Gates Foundation, MacKenzie Scott, Ford Foundation, Comic Relief, Global Fund for Children. Look at where – and how – they are funding international projects and see which ones connect with you. Reaching out to charities that have already been funded by such well-resourced individuals suggests they have already been well-vetted.

Monitoring and Evaluation

Any monitoring arrangements should be agreed with the beneficiary NGO in advance of the grant to ensure that the organisation can provide the required monitoring information in a cost effective and timely way. This could include some fairly simple measures – such as progress milestones, to more elaborate impact measurement arrangements for large grants. Funds for NGOs provide insight into how charities shape their monitoring and evaluation strategies. Your level of measurement and reporting should be proportionate to the size of your grant and the capacity of the organisation. Professional advisors can help you to design a monitoring and/or impact measurement framework and to collect and analyse the data.

VENTURE PHILANTHROPY

Overview

Venture Philanthropy (VP) consists of an investment approach, the process including having an investment strategy, finding and screening investment opportunities, due diligence, agreeing the deal, monitoring the deal and agreed impact, exit as appropriate and evaluation.

A Practical Guide To Venture Philanthropy and Social Impact Investment is a useful framework to understand how VP functions.

VP is an approach that adapts some principles of venture capital, such as detailed evaluation (‘due diligence’), a medium-term horizon (3 – 5 years) and hands-on support, to organisations that provide public benefit, such as charities and social enterprises. As VP spreads globally, specific practices may be adapted to local conditions, yet it maintains a set of widely accepted, key characteristics:

• High-engagement between parties
• Tailored financing
• Multi-year support
• Provision of non-financial support
• Organisational capacity building
• Performance measurement

Interest in VP is growing around the world. The European Venture Philanthropy Association, EVPA (which has been renamed Impact Europe) was established in 2004 to provide a platform for the VP movement, and is now the leading organisation in this field. VP networks have started to develop; the Asian Venture Philanthropy Network replicated the work of what was EVPA. It is based in Singapore and working to build a social investment community across Asia.

Even though it was written in 2006, ‘Venture Philanthropy: The Evolution of High Engagement Philanthropy in Europe’ provides some useful information about the growth of this area.

An academic reflection of the development of ‘Venture Capital Network’ (rather than Venture Philanthropy), written in 2022, provides some useful insight into how networks in these groups come about.

Individual philanthropists, such as Sir Tom Hunter, find the VP approach aligns with their own entrepreneurial spirit, and deepens their experience of giving.

Ways to do it

Impact Europe and Philanthropy Impact offer online and in-person VP resources for donors. EVPA’s member directory, freely available on its website, includes case studies of all its ‘Full’ members.

VP funds can make their resources go further if others are prepared to co-invest with them. This offers the donor a taste of the VP model while limiting their level of personal involvement – an appealing prospect for time-poor executives.

You may be in a position to donate time and money to a VP operation. Being part of a team that engages with a small charity to help solve problems or strategise can be immensely rewarding. For some who run companies, there may be opportunities to partner with an existing VP fund to provide pro bono services to a portfolio of charities.

Venture philanthropy investors

• Impetus Trust:First general purpose VP fund in the UK.
• Children’s Investment Fund Foundation: Linked to a high-performing hedge fund, CIFF has strategic grant-making programmes in Africa and India.
• UnLtd Ventures: The VP arm of UnLtd, which supports social entrepreneurs.

• Social Business Trust: A partnership of seven leading companies that provides VP investment to social enterprises looking to scale up.


SOCIAL ENTERPRISE

Overview

Social enterprises are businesses which trade for a social or environmental purpose. They use the profits of the business to benefit people and the planet. There are different forms of social enterprises which are structured slightly differently.

Big Society Capital (BSC) is the wholesale investor for social investment and works to connect socially minded investors with charities and social enterprises. It was kickstarted by the government, Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland and launched in 2011 as a financial institution, funded by £400million of dormant account money. There are a range of intermediaries in this area, such as Good Finance, Access, Social Investment Forum, and of course Social Enterprise UK, and Fusion 21. There is an understandable crossover when people talk about social investment v social enterprises but the driving force is about using investments for make positive change.

In its simplest definition, a social entrepreneur is someone who applies entrepreneurial traits and abilities for social benefit, and shapes their businesses according the objectives of a social enterprise. A social entrepreneur identifies and implements practical solutions to social problems through innovation, resourcefulness, persistence and pragmatism. Measurement and evaluation is central to the success of social entrepreneurs.

Whilst not a panacea for every social issue, social entrepreneurship can play a significant role in creating sustainable social change if combined with access to finance, and tailored support. Philanthropists can play an important role in supporting social entrepreneurs through funding, mentoring, and brokering contacts and networks.

There are many examples of social entrepreneurs who have been very successful in their achievements. They can translate their successes through vehicles in civil society, the public sector or private sector.

Ways to do it

The obvious way for philanthropists to get involved is to identify social entrepreneurs working in the areas that interests them, and invest in their work. Though more risky than giving to a larger, more established charity, the potential for tangible impact is also that much greater, as is the excitement from being involved in something at an earlier stage. Investing in social entrepreneurs in this manner allows philanthropists to work directly with individuals with innovative ideas. Philanthropists who take this route should become accustomed to the Social Return of Investment as this is an important element to the success of their work.

Alongside funding, support over the long-term is crucial to the social entrepreneur, and philanthropists can play a role in helping put this in place, both directly (through funding support or acting as a mentor) and indirectly (through brokering contacts and networks). Some people like to include the support of individuals in the portfolio of their charitable giving. Making a difference to individual lives is one of the most rewarding aspects of philanthropy, and the specific support of individuals among the most satisfying donations.

SUPPORTING INDIVIDUALS

Some people like to include the support of individuals in the portfolio of their charitable giving. Making a difference to individual lives is one of the most rewarding aspects of philanthropy, and the specific support of individuals among the most satisfying donations.

Supporting individuals might include subsidising doctors from developing countries to train for a year in the UK, or funding young sportspeople — usually those involved in activities in which the donor also has an interest. The provision of scholarships at schools and universities is a traditional area of funding, and support of the arts is a frequent focus.

FINDING INDIVIDUALS TO SUPPORT

In virtually every case, money is not donated directly to individuals without the intervention of an intermediary organisation that helps identify and select potential beneficiaries and monitors how the money is spent and accounted for. In some cases, the donor will have no influence on the choice of recipient, but in other cases the donor may be provided with a list of possibilities and be able to choose a project that fires his or her imagination. In a few cases, the donor may initiate the process and help select recipients, as a panel member

Some cultural organisations, usually in the performing arts, encourage the involvement of individual donors by associating them with the training of young artists or the support of established musicians – whether singers or players. Examples include the Chair Sponsorship scheme at the Orchestra of the Age of Enlightenment, which links donors, individual players and the orchestra as a whole, promoting strong networks between donors who enjoy sharing a passion for the orchestra and the music it performs.

Some donors may never meet the beneficiaries of their philanthropy. There is the example of child sponsorship schemes, such as that run by ActionAid, in which the money given is pooled for the benefit of the community as a whole, and the child is essentially an ambassador or representative of that community.

SUPPORTING INDIVIDUAL ENTERPRISE

Another way to change the lives not only of individuals but also of whole communities is to support social entrepreneurs – extraordinary individuals with unprecedented ideas for change in their communities. An example is Ashoka, which identifies and supports Fellows who are ‘practical visionaries’ committed to systemic social change in their field. Such entrepreneurs provide new opportunities and better lives for their fellow citizens.

In the UK The Prince's Trust, a provides a wide range of opportunities for disadvantaged youngsters. One element is the support of young people through microfinance and associated business expertise. Another example is the website Prowess, a network of organisations and individuals throughout the country who provide financial and non-financial support to disadvantaged women seeking to start their own businesses.

Microfinance, or microcredit, is also seen as a major tool in international development. Programmes provide credit and other financial assistance, as well as business training and networking opportunities, to economically active poor people. Such people typically are outside the banking system and at the mercy of moneylenders who charge exorbitant rates. Average loan sizes from microfinance organisations are small (sometimes as little as £50) and repayment rates as high as 97 per cent. Most clients are women. Such loans create jobs and, crucially, help people to help themselves. Many international NGOs have such programmes. An example in this field is Opportunity International.

BENEVOLENT FUNDS

For nearly every profession there is an associated benevolent fund that provides help to individuals who have fallen on hard times. Such funds may be supported by those who have done well in the profession, such as the law (e.g., the Barristers’ Benevolent Association), or by those who have enjoyed the pleasure of the sport (e.g., the Injured Jockeys Fund) or the art form (e.g., the Musicians Benevolent Fund).

A version of this article, written by Theresa Lloyd, was published in a previous edition of A Guide to Giving (2008).

SOCIAL INVESTMENT

By John Kingston

HIGHLIGHTS

• The main ambition of a social investor is to build the capacity of the charity in order to achieve greater social impact. They seek to generate some financial return, even if that means aiming only to recoup some or all of the sum originally invested.
• Charities and social enterprises have similar financial needs to small and medium-sized businesses but find it harder to access capital.
• Social investment is not designed to replace grants, or mainstream financial investments.  
• Over the past 10 years the social investment market in the UK has grown rapidly from almost nothing to an estimated £165m in 2011 (but of which only 5% is high risk capital – the rest is secured loans).

What is social investment?

Charities and social enterprises need income to provide services, to pay staff and to pay rent. They also need access to capital to manage cash flow, to acquire property and other fixed assets, and to invest in order to grow and develop. Social investment provides such capital as loans, underwriting or equity. Social investment therefore complements the use of grants and earned income.

The main ambition of a social investor is to build the capacity of the charity in order to achieve greater social impact. Social investments are distinct from mainstream financial investment because they seek to generate a social return. They are also distinct from grants because they seek to generate some financial return, even if that means aiming only to recoup some or all of the sum originally invested.

Why do charities and social enterprises need it?

Charities and social enterprises have similar financial needs to small and medium-sized businesses but find it harder to access capital. Three common requirements are:

BUILDING CAPACITY: A mental health charity that provides counselling sessions to vulnerable adults has won a new contract to support 50 additional users. However, the contract doesn’t start for another six months, and in the meantime the charity needs to recruit and train additional counsellors to meet this demand. Social investment could provide the charity with a loan to plug the gap, with the investment repaid with interest once the contract starts.

GROWTH CAPITAL: A social enterprise wants to invest in new machinery to improve productivity. The upfront cost of this is significant and cannot be met from the limited balance sheet reserves. However, the projected increase in income as a result of the investment makes this a good proposition. A loan repayable monthly over four years is set up at an interest rate of 6 per cent per annum.

Property: A charity is struggling to pay the increased rent charged for its local shop and is forced to consider moving. However, a good location is essential in order to secure local footfall. When another building on the street comes up for sale, a social investor is able to purchase it and lease it back to the charity at lower than full market rent, which still affords him a steady rental income.

This diagram shows types of investment and their associated risks. There is a greater requirement for the riskier forms of financing that cannot be accessed through traditional means.

WHAT DOES IT OFFER THE PHILANTHROPIST?

Philanthropists may have various reasons prompting them to explore social investment. Firstly, the investor is meeting a real need: charities need access to capital. Secondly, rather than a one-off grant, the social investor can expect their money to be re-cycled and have impact a number of times. Thirdly, investors aim to build the capacity of charities – resulting in a longer-term increase in social impact.

Social investment is not designed to replace grants or mainstream financial investments – it is a “third category” between the two extremes. Many philanthropists decide to divert some of their funds into social investment and accept lower than market financial returns, considering this to be offset by the social impact generated.

WIDER CONTEXT

Over the past 10 years, the social investment market in the UK has grown rapidly from almost nothing to an estimated £165m in 2011 (but of which only 5 per cent is high-risk capital – the rest is secured loans). The Government has made a public commitment to supporting the development of the social investment marketplace, most notably through the launch of Big Society Capital, with its projected £600m balance sheet.

Two organisations blazing the trail since 2002 are CAF Venturesome and Bridges Fund Management, who provide financial support to charities and social enterprises, as well as businesses in socially disadvantaged areas. In 2010, the first Social Impact Bond (SIB) was launched at HMP Peterborough, which took an innovative approach to reducing re-offending by funding “through the gate” comprehensive support for prisoners upon release. The SIB model has attracted huge interest throughout the world, with similar schemes in progress or development elsewhere.

The growth of social enterprise is leading to more opportunities for investors to generate a social impact as well as a financial return.

CASE STUDY: SOCIAL IMPACT BOND

Social Impact Bonds (SIBs) are a form of outcomes-based contract in which public sector commissioners commit to pay for significant improvement in social outcomes (such as a reduction in offending rates, or in the number of people being admitted to hospital) for a defined population.

Private investment is used to pay for interventions, which are delivered by service providers with a proven track record. Financial returns to investors are made by the public sector on the basis of improved social outcomes.

Jonathan Bruce had £100k he wanted to invest through his personal charitable foundation into a social cause he was passionate about. He chose to invest in a Social Impact Bond that was funding an innovative service to support young adolescents on the edge of entering the care system.

The Essex Edge of Care Social Impact Bond was a five-year programme that ran between 2013 and 2018, and was successful in its aims:

• It achieved a 43-percentage-pointreduction in care days from the baseline of 55% to 11.92%, significantly reducing the time spent in care against the counterfactual expectations.
• 386 children were out of care, with their family, at the end of the tracking period.
• 85% completion rate

Social investors received a return of 1.45 times committed capital of £3.1 million.

These outcomes were sustained:

• While 91% of the cohort had social care provision in the two years prior to MST, only 41 young people (11%) had provision in the year post-MST. 41 young people (11% of cases) were in care 28 months after MST provision finished.

Jonathan was aware that this was perhaps more risky than a mainstream investment, but the attraction was that he could identify the project his money was funding, and would receive regular updates on the impact being achieved.

MICROFINANCE

Overview

Microfinance models provide financial services to people on low-incomes who do not have access to credit and other financial services. Many are unable to open a bank account, negotiate a loan to start a business or buy insurance. Microfinance services are primarily loans to local individuals who use these loans to work their ways out of poverty, whose work positively impacts others in their local communities. There are various intermediaries and funds through which individuals can invest in microfinance.

It was the work of Nobel Laureate Professor Muhammed Yunus through his establishment of the Grameen Foundation in the US, that inspired this whole movement to take place. Although there have been recent challenges with the long-term processes that have been established through the systems he established, his mission to use businesses to make a positive impact on society stays alive.

There remains an inherent tension between microfinance’s social goals (inclusion for the poor) and its financial ones. The need to balance the two is what makes microfinance such a powerful example of a social business – creating social benefits while also generating a financial return on investment. The tension between these dual objectives has generally been good for the sector and has spurred innovation and more efficient delivery models.

Ways to do it

Microfinance loans can be structured about smaller loans from organisations such as the Microloan Foundation, or larger scale investments from socially minded investors through the Tridos Bank. There are smaller organisations, such as Five Talents, Habitat for Humanity and Care International’s Lend with Care which have grown incredibly well and made a significant difference to the lives of low-income communities.

Kiva is also a well-known, well-established organisation whose projects target low-income areas around the world.

Each of them have shared examples of their success stories:

• Five Talents
• Habitat for Humanity
• Lend with Care
• Kiva

Innovative solutions in the areas of mobile money and branchless banking are expected to lead to lower operating costs, and should contribute to the establishment of new banks and the growth of established players. There is still huge unmet demand for inclusive financial services and the microfinance industry plays a pivotal role in trying to address it.

TRUSTEESHIP

HIGHLIGHTS

• Trustees have a duty to ensure that charities are well run, solvent, legally compliant and working towards the charitable purpose for which they were established.
• Trusteeship is an important and highly rewarding way to support an organisation. 

Trustees are the people who are ultimately responsible for a charity’s actions and its direction and strategy. They have a duty to ensure that charities are well run, solvent, legally compliant and working towards the charitable purpose for which they were established.

In 2020 there were 940,453 trustee positions in England and Wales held by approximately 700,000 people (Charity Commission, 2020). Trusteeship is an important and a highly rewarding way to support an organisation.

Trustees form the governing board of an organisation and are sometimes known by other names, including directors, board members, governors and management committee members. With some limited restrictions, trustees give their time on a voluntary basis. The particular role of trustees is to maintain a strategic overview of the charity’s position and activities to ensure it responds to the needs of beneficiaries and continues to deliver on its mission.

REASONS TO BE A TRUSTEE

Many people see trusteeship as a valuable way to really understand and get involved in the organisations they have already chosen to support financially.

For individuals with valuable skills, it can be a high-impact way of giving to a cause they have benefited from personally, or more generally to give back to society. Professional, legal and financial skills are highly valuable, but so too are marketing and social media skills, soft skills and relationship building, and representation of the views of beneficiaries.

For people early in their career, trusteeship is a great way to develop leadership skills, build their CV, and gain experience at board level. Charity trustees need to be involved in the charity’s budget and strategic direction, so trusteeship can enhance decision-making, project management and strategic thinking skills. For those later in their career, trusteeship provides an interest outside of work: a way to develop new expertise, meet interesting people and apply skills to a new and challenging area.

The Director of Social Change lists five reasons why becoming a trustee could be the best decision you have ever made:

1. It’s never been easier to be a great trustee
2. Turbo-charged experience
3. It’s awesome practice
4. Trustees are just people who are about the same things
5. You can make a real difference

COMMITMENTS OF TRUSTEESHIP

Trustees have mandatory responsibilities which include ensuring the charity complies with regulation, acts with integrity, avoids conflicts of interest, monitors risk and does not misuse funds. They also have optional responsibilities which include:

• Helping the charity to follow good practice, including setting the strategy
• Agreeing clear roles and responsibilities for trustees and the charity’s staff
• Supporting senior management
• Attending regular board and subcommittee meetings
• Taking the time to stay up-to-date with the charity’s work and the environment in which it operates
• Reviewing board performance

The trustee level of commitment required varies depending on the type of charity, but usually requires some dedication of time beyond attendance at meetings. Trustees of very small charities may find the organisation needs support on operational issues such as fundraising, management of staff and volunteers, administration of campaigns and so on. For the trustee, the challenge is always to balance their support of operational demands with the need to step back and take a strategic view.

As the legal custodians of a charity, trustees have liability for ensuring that the organisation acts in accordance with its defined purposes and uses money appropriately to further these purposes. Trustees can have personal liability in situations where appropriate practices are not followed, however the charity commission is clear that the “conscientious and committed trustee need have few worries about personal liability”. Trustee liability is limited if the charity is incorporated (i.e. registered as a charitable company limited by guarantee), and trustees can be further protected through trustee liability insurance.

Getting on Board is the most well-known site which provides detailed information about becoming a trustee.

FINDING A TRUSTEE VACANCY

Many trustee appointments occur informally through individuals making a greater commitment to organisations they are already involved with, or finding out about available trustee positions through networks and contacts. In an Institute for Philanthropy survey of 100 UK charity chairs and chief executives in 2010, only 20% of respondents reported outside advertising as their primary means of recruitment.

A number of organisations advertise trustee vacancies or match-make between charities and potential trustees. These organisations will do different levels of due diligence on the charities they feature, so it is important to spend some time researching the charity yourself and, before committing to a trustee position, make sure you understand:

• The charity’s financial position
• The responsibilities and duties that they expect of you
• How the charity engages with and supports its trustees
• The risks the charity faces

It is important to find a charity which closely matches your interests, where the board is fit for purpose and which, overall, you have confidence in.

CHARITY EVENTS

Many charities raise money by running special events. The type of event a charity may engage with has grown immensely in the past few years. Attending or participating in charity events can be a tax-efficient and fun way of supporting organisations.

The type of event a charity may engage with has grown immensely and now covers fundraising auctions and dinners, walks, runs, team activities, overseas volunteering and hikes, buckets of water being poured over people’s heads, bike rides and even sky dives. The list is as vast as a charity fundraisers’ imagination. Attending or participating in charity events can be a tax-efficient and fun way of supporting organisations.

The part of the event ticket that is a donation can be given tax-efficiently, whether by a Gift Aid donation or a donation from your allocated charity account (for example, via your donor advised fund). The larger the percentage of the ticket cost that is a donation, and the more efficient the charity is at making the most of the tax relief, the higher the proceeds for the charity. So, if the charity manages to have all of the costs of putting on an event met directly or as gifts in kind, the entire ticket cost is a donation.

Challenge Events

Challenge events are a fun and interactive way of raising funds for your chosen cause and can bring you into contact with like-minded people. Jeremy Gane and Simon Albert, the founding directors of Charity Challenge, met during a charity trek up Kilimanjaro and have created a well-established infrastructure for running numerous and varied group adventure travel expeditions.

Through Charity Challenge, you can choose a range of exciting events, such as trekking the Himalayas, or the Sahara, Petra, Machu Piccu, or even Iceland. Or you can walk through London’s Royal Parks, Lake District, or see Ben Nevis at night.

Doitforcharity.com works over 1,000 charities and has raised millions of pounds over its 16 years. An online portal, it links potential participants to thousands of charity events every year including abseiling, zip sliding, knockout, trekking and dragon boat races. Also, if you would like to host your own event to raise money for your chosen charity, you can create your own site through Just Giving.

CHARITABLE TRUSTS

A charitable trust or foundation is a legal organisation which can be set up by anyone who has decided to set aside some of their assets or income for charitable causes. They are registered charities.

A charitable trust may be suitable if you want to give regularly to a number of causes, if you want to give a reasonable amount as a one-off gift from time to time, or if you want to ask others to contribute to the trust’s funds. Setting up your own trust provides a framework for planning your charitable giving in a systematic and thoughtful way.

SETTING UP A TRUST

To set up a trust, you will need:

• A donor or 'settlor', which may be you, your family or your business
• Trustees, who could be you and members of your family, as well as someone outside the family such as your lawyer or a family friend
• Charitable purposes, which set out the type of causes the trust can support
• A trust deed (which forms the trust's constitution)

The trustees hold and control the trust's assets. They decide how the income and capital (assets) of the trust should be distributed, and make sure that this is in line with the charitable purposes of the trust. Many people involve their family, or friends and colleagues, and find it an enjoyable and constructive way of developing a shared commitment to giving. After the founder’s death, the trustees will continue to distribute funds according to the guidelines set out in your constitution, and in this way you can make sure that your favourite causes continue to benefit.

The charitable purposes form part of the trust deed and describe the sort of causes that the trust can support. These can be worded in quite a general way so the trustees can keep their options open, or they can be very specific to ensure that the funds are distributed for the purpose intended by the donor. The charitable purposes must be for public benefit within the purposes that the law regards as charitable (guidance on public benefit can be found on the regulators’ websites).

The trust deed is the constitution of the charitable trust. It sets out the framework within which the trustees must operate. A trust deed will generally describe:

• The powers and responsibilities of trustees
• How they are appointed and removed
• The approach to investment
• How the constitution (but usually not the charitable purposes) can be altered
• What will happen after the death of the settlor

The Charity Commission has a set of simple model trust deeds available on their website as a good example of what you will need to think about.

TAX EFFICIENCY

Because a charitable trust is a charity, it can receive money tax-free using Gift Aid or payroll giving. If you are employed, and your employer has a scheme where they will match your donations to charity, you may be able to take advantage of this to make your trust even larger. The trust can continue after your death, and may be the beneficiary of a legacy from your estate which will also be tax-free. See lifetime and legacy giving.

Apart from the tax relief on your own donations, the trust will not pay tax on its investment income. It will not pay corporation tax or inheritance tax. If it eventually runs its own office, the trust will not need to pay business rates (there is mandatory relief against business rates at 80 per cent and a further 20 per cent on a discretionary basis). Also, the trust is unlikely to have to register for VAT.

RUNNING A TRUST

Setting up a charitable trust is relatively easy, but you may need some help at the start. Running costs can be paid for out of the trust's income. If there is a significant lump sum, there may also be investment management fees to ensure the best return on your investment. Running costs are generally not high, but some trusts are large enough to make it necessary to employ their own staff.

It is not possible to give an exact estimate of set up or running costs but, as a guideline only, if you ask your lawyer to help you to set up a simple trust, it might cost up to £1,500 plus VAT. Also, yearly fees from your accountant might be up to £1,000 plus VAT. If there is a significant lump sum, there may also be investment management fees to ensure the best return on your investment.

As legally registered charities, trusts are subject to the charity regulators, such as the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator or the Northern Ireland Charity Commission. Registered trusts need to submit a formal annual report and accounts to the appropriate regulator, but as long as the trust stays within its own rules and is properly administered, the regulators will leave trustees to run the trust as they see fit.

A version of this article, written by the Association of Charitable Foundations (ACF), was published in a previous edition of A Guide to Giving (2008). 

COMMUNITY FOUNDATIONS

Overview

A community foundation supports local charities in place-based areas. The UK Community Foundation has been registered with the Charity Commission as an entity itself and encourages both fundraising and the allocation grants to a particular geographical region. It has formed a large network of 47 accredited community foundations based in the UK. There is an interesting history that lies behind community foundations, which reflects how it started and how it has grown around the world.

Different governments often indicate community foundations can be used to address the needs of localised areas, however the funding the governments allocate to these organisations is limited at best. In 2023, the Conservative government allocated £2.1bn to the Levelling Up Fund, however the outcomes and impact of this fund did not take into account improving existing structures but instead created new ones.

Setting up a community foundation

A community foundation is set up by a group of people, who raise money from local people to fund local causes. It is set up as a charity, but the management of the organisation and its charitable objectives need to demonstrate its place-based intentions. Some local people are content to donate funds directly to the community foundation itself, others prefer to set up their own fund through their local community foundation, as this takes away the administrative costs.

If you are interested in setting up a community foundation in an area which does not already benefit from localised giving, contact UK Community Foundations to ask for their advice before you start applying through the Charity Commission.

DONOR-ADVISED FUNDS

HIGHLIGHTS

• Donor-Advised Funds (DAFs) are vehicles for individual, family or business charitable giving, administered by a third party, and designed as an alternative to direct giving or setting up a charitable foundation.
• Donor Advised Funds are easy to set-up and use, and there are a variety of schemes available which suit most donors’ needs.
• They can be funded through cash donations, through payroll giving or by gifts of shares.

Donor-advised funds (DAFs) are structured in a similar way to charitable trusts, but because they are operated centrally by others, they remove the need for a donor to find his or her own trustees or deal with administrative aspects.

HOW DAFs WORK

DAFs tend to fall into two categories: named funds at community foundations or other host organisations (such as Prism or The Bulldog Trust) and charity accounts. In both cases, the donor decides how much to give and pays it into the fund. The host organisation offers grant-making expertise and monitoring and reporting processes, and deals with the administration and distribution of funds.

DAFs are a tax-efficient way of giving to charity, as they can claim back the tax on Gift Aid donations and add it to the amount in your account. If you are a higher-rate taxpayer, the periodic statements you will receive provide a useful record of your giving and will help you make your personal tax claim on your Self Assessment tax return.

COMMUNITY FOUNDATIONS

Community foundations are pioneers of the DAF, which provides many of the same benefits as a private family charitable trust (including all tax reliefs) but allows philanthropists to make use of the community foundation's grant-making, due diligence, monitoring and reporting processes. Once a fund is established, the trustees of the community foundation take legal responsibility for the fund. Donors are guided through a variety of options, reflecting whether they have a lump sum immediately available or whether they plan to build an endowed fund (usually of at least £25,000) over a longer period.

Once the fund is up and running, it is up to the donor to determine their level of involvement with funding decisions, as the foundation uses its local knowledge to support organisations and projects that have been assessed for their value to the community. Donors can, if they wish, engage more closely with the causes they care about by giving time and other resources.

The community foundation will continue to monitor recipients of grants on behalf of donors and keep them informed of their progress. Meanwhile, professional investment managers will be applying their expertise to build the value of the fund.

CHARITY ACCOUNTS

Charity accounts with intermediaries such as Charities Aid Foundation and Stewardship, are a type of DAF and are similar to bank accounts, designed especially for charitable giving with all the relevant tax benefits. There are many ways to give to your chosen charities through a charity account: generally, donations can be made online, with charity cheque books, via debit cards or vouchers, or by telephone, post or standing order.

REASONS NOT TO USE DAFS

If you are giving relatively few donations of larger amounts, or if you use payroll giving and want to benefit a particular charity regularly, it may be less expensive (and not much more complicated) to give directly to your chosen causes. You would save the administration charges, and because no interest is paid on your charity account, there could be a sizeable cost if you maintain a significant balance in your account.

For more in-depth information, please view the DAF section.

Start your own charity

Overview

Before setting up a new charity, it is vital to gain an understanding of the wider charity context and assess the existing charities working in the field. There are nearly 170,000 registered charities in England and Wales, with numerous working in each field. These charities compete for funds, pay separate set-up and administration costs, and each must find dedicated trustees. It is usually more efficient to pursue your charitable aims by working with existing organisations rather than creating duplication. If they are well established and regarded with an effective programme of work and good trustees, you may feel you can achieve your aims by funding a specific project within that charity.

Three easy ways to find existing charities are either through the Charity Commission, Giving is Great or 360 Giving websites. You can filter down your choices on all three sites and the charities listed on the last two will have already gone through the vetting process by other funders.

You should think carefully about your own commitment of time and resources, as a new charity is likely to need your dedicated attention over a long period. It is important to think about whether the charity will be sufficiently funded to make a difference to its core purposes, and sustainably funded in the long term. If you do not plan to fully fund the charity in perpetuity, it is essential to plan your fundraising approach early, and be confident that the cause will continue to receive the level of funding it deserves.

Once registered, charities must operate as public organisations and publish accounts which are displayed on the Charity Commission website. The trustees have a legal duty to take decisions which best achieve the charity’s stated purposes, and the views of the board may not always be congruent with those of the founder. Some founders find it difficult to defer to the collective views of trustees on the organisation’s strategy and use of funds.

With limited exceptions, founders and trustees cannot be paid for their time, and there are strict limitations on activities a charity can undertake which do not fall within its charitable purposes, even if these are designed to subsidise charitable activities. If these issues present a problem, you may wish to investigate alternative legal forms - such as the community interest company (CIC) - as a vehicle to achieve your social aims.

Ways to do it

If your charity will have an income of at least £5,000 per year, or if it is a charitable incorporated organisation, it will need to be registered by the appropriate regulators.

Before you register your charity, consider whether you expect your charity to remain relatively small with few commitments. If the charity is likely to incur liabilities through employing staff, investing in assets or fundraising, it is important for trustees to limit their liability by registering both as a charity and as a company limited by guarantee. It is always best to consult an experienced lawyer or accountant, who can go through the process with you.

Steps to take to register your charity if it will be based in England or Wales:

• Find trustees
• Agree on the charitable purpose of the organisation as its ‘charitable purposes must be for the public benefit’. There are 13 descriptions of what is classed as a ‘purpose’.
• Choose a name for your charity
• Choose a structure for your charity. Examples:
  • Charity/Trust/Foundation – Whether you are setting up charity, trust or foundation, you need to follow similar processes. The trustees hold and control the trust's assets. They decide how the income and capital (assets) of the trust should be distributed, and make sure that this is in line with the charitable purposes of the trust. Setting up a trust or a foundation are terms people often use when they are talking about families setting up a charity, and when there are substantial assets to distribute but there is minimal day-to-day running or operations and does not employ a whole team of staff that need to be managed. It is often the establishment of a group of trustees to manage the family’s wealth, both to reflect the family’s charitable intentions and also for tax-efficiency purposes. Alternatively, large solicitor and law firms usually have in-house staff who can set up charitable trusts and can administer its functions behind the scenes. Running costs can be paid for out of the trust's income. If there is a significant lump sum, there may also be investment management fees to ensure the best return on your investment.
  • Charitable Incorporated Organisation (CIO) or charitable company (limited by guarantee). These charities employ paid staff, deliver contracted charitable services, and can own other properties. Its trustees are not usually personably liable for its outcomes.
  • Unincorporated Charitable Association - these have a more informal structure which lacks limited liability protection, which makes the trustees not only responsible, but also liable for the expenditure of the funds. These are more common for smaller charities or community groups.
  • Community Interest Companies - (CIC). A social enterprise is a company that uses its profits and assets for the public good. See other section about social enterprises.
  • Donor Advised Fund (DAF) – these are structured in a similar way to charitable trusts but as they are operated centrally by others, they remove the need for a donor to find his or her own trustees or deal with administrative aspects. The philanthropists put sums of money into this fund, and the other organsations, such as CAF, NPT UK, Prism or The Bulldog Trust channel it to the beneficiary. The funds can only be distributed to organisations that have been approved by the intermediaries but this means they have all been vetted already, so you do not have to. Note – a donor advised fund is effectively registered as a charity entity itself, so you don’t need to go through the administrative efforts to build one from scratch.
• Write your governing document
• Complete this form
  
  

If your charity will be based in Scotland or based in Northern Ireland, there are other processes which will need to be followed.

Whatever structure they take, charities must be registered and approved by the appropriate Charity Commission/regulator. It is often seen as a cumbersome and time-consuming process but if a donor has time to go through this, it means they will have detailed awareness of all the legal requirements and accountabilities that need to take place.

Please follow this link for complete info on Social Enterprises.

REVIEWING YOUR GIVING

HIGHLIGHTS

• Reflect on what you have achieved so far and consider whether you have met your aspirations
• Examine gaps between original aims and achievements
• Reflect on successes and failures – this helps improve strategic approaches
• Have new areas been identified within the cause you have supported, and should you redirect your support accordingly?
• Have other things happened in your life, or the world around you, that have completely refreshed your thinking and you feel have an even greater need than what you have one before?

Even for those already engaged in giving, who might be quite advanced in their strategy, there are many reasons to pause, take a step back and review where you are.

There may have been a life event, such as an illness or a liquidity event, giving you access to more capital that you wish to set aside, which could mean reviewing your mission and expanding your activity. You might also have more time on your hands and have become more engaged with your philanthropy, so you want to offer your skills and time. You may want to review your strategy to respond to external crises, like the pandemic, and you will need to review to whom and how you might be giving in order to support the global recovery best.

You might also realise there is a gap in what you were hoping to achieve, and in order to tackle the problem you are hoping to help solve, you need to engage on a different level. For example, if your priority is around human trafficking, you might want to support not only advocacy and awareness, but also support victims, helping them return to their families. You might also wish to align your investments with your mission and work towards a total portfolio impact.

Taking time to reflect on the successes, failures and outcomes of previous philanthropic efforts can only improve your strategic approach to new charitable ventures.

There are no standardised criteria or methods review to measure impact and this area is still evolving. Depending on your chosen approach, you can review the impact of your philanthropy in different ways. For example, if you are directly engaged in running a non-profit or administering programmes via a private operating foundation, you can evaluate impact through your programmatic outputs and outcomes. Similarly, if you provide financial support to an existing non-profit, you can rely on the non-profit to report the output and outcomes of their activities.

Be sure to align your evaluation with the size of your financial contribution. Evaluation requires a degree of effort so it should be commensurate with your charitable gift.

A light touch approach can also be to access more generalised impact data (e.g. number of programmes, individuals served) through non-profit monitoring websites such as Charity Navigator or Candid. (See more on evaluation later).

It is good practice to review your giving every 3-5 years to ensure your activities are still aligned with your values and aims, and that you are achieving and maximising the impact you would like to see. It is also important to assess efficiencies tied to effectiveness.

A particularly valuable paper to read, to consider what you have done so far, what you have achieved or what challenges you have faced, and what other areas need to be taken into account that you have not thought about yet, is the detailed Volume 2 of the Rockefeller Philanthropy Advisory Services’ Reimagined Philanthropy reports – Advanced Strategies for a More Just World.

There are also eight other questions that you can take into account when you are reflecting on the outcomes of what you have been doing so far: Are you cognisant of the inequalities our philanthropic systems are built on?

• Are your short-term gains laced with long-term harms?
• Are communities being empowered to determine their own solutions?
• Have you done the work or are you taking shortcuts?
• Are you engaging with the grassroots and valuing them properly?
• Do those on your board reflect the communities you are serving?
• Is your philanthropy truly catalytic?
• In whose name is this being done?

A lot of donors choose for their donations to be restricted grants, which often need to be assessed and reported on and the charities need to demonstrate the funds have only been spent on an agreed project. Many do not like their grants to cover core costs but over the last few years, that mindset has been increasingly challenged. In his Ted Talk, Dan Pallotta presents a useful summary of why that is.

PURPOSE OF THE REVIEW

HIGHLIGHTS

• Clarify objectives and desired outcomes in order to maximise the value and impact of your giving
• Assess various approaches to determine desired pathway

A good place to start is to clarify what your objectives are in conducting the review, what outcomes you want to achieve, and to decide who the review is for (e.g. oneself, the team, external partners, the board, stakeholders).

Setting the purpose of the review from the start will help. Depending on what the purpose and scope of the review is, you can then determine the pathway you wish to follow and what areas you need to focus on. Ultimately, giving yourself a clear purpose for the review, will help to drive more aligned and impactful giving as you move along on the journey.

Part of the review’s purpose may be to assess various approaches to philanthropic giving.

Each is attempting to maximise the value and impact of a philanthropist’s giving – however, the means may vary and be complementary. Some examples include:

Values-based philanthropy

Donors articulate their values, motivations and ambitions in order to set goals and select an appropriate approach to achieving them. Key questions may include:

• What are my values? Life goals?
• What do I care about?
• What does my money mean to me?

Once this has been accomplished the philanthropist needs to be strategic about researching, planning and deciding on means and implementations, and on evaluation, refining and revising.

Strategic philanthropy

Philanthropists decide a clear goal, and design and implement how to achieve it and to achieve impact. The strategy is built on having a well-articulated theory of change and is based on evidence and data.

It emphasises accountability and rigorous evaluation, and assumes that outcomes arise from a logical sequence of causation, whilst keeping in mind unintended consequences as societal change is complex.

Transformative philanthropy

This approach turns the power of money into creative and decision-making power for many. Philanthropists are part of the process in direct contact with the supported group.

It is a process built on trust, recipient participation and decision-making about aims, desired impact and how the funds are used.

Transformational philanthropy supports projects, invests in organisational structures, offers flexibility in the way the money is used, commits to the long term and keeps paperwork to a minimum. Actions take centre stage, not the capital provided.

It is a process of letting go of control and moving to shared control.

Emergent philanthropy

Emergent philanthropy derives from the principle that if funders are to make better progress in meeting the urgent challenges of today they should move towards a more nuanced model of emergent philanthropy, which is better aligned with the complexity of today’s societies and social problems.

The philanthropist’s motivation in this case is to pioneer, disrupt, innovate and make a significant difference. The approach combines elements of venture philanthropy and the application of an emergent strategy.

Catalytic philanthropy

Catalysing philanthropy is mobilising a campaign that achieves measurable impact. It is issues focused.

Various approaches are used, incorporating expertise in advertising, corporate resources, investment capital, advocacy and litigation. It includes creating actionable knowledge – that is, the gathering of knowledge used to inform and motivate the actions of the philanthropist.

Venture philanthropy

Venture philanthropy is a high-engagement and long-term approach whereby an investor for impact supports a charity or social enterprise, helping them to maximise their social impact by providing funding and expertise.

WHAT TO CONSIDER AS PART OF THE REVIEW

HIGHLIGHTS

• Determine the parameters of review, including the giving process, the structures used and the approach to governance
• Look at what resources are available and how they have been used
• Ask how distribution will be measured

Once you have decided on the purpose of the review, you will need to think about what you wish to consider as part of the scope of that review. This will be how you give, what structure you are giving through, what your budget is, when you started giving, how decisions are made and so on.

There is a really useful tool that Rockefeller Philanthropy Advisors have created, which covers the essential areas and offers scope for your review while helping you recognise areas of alignment or otherwise. From here you will have a good grounding to ask yourself key questions aligned with the purpose of the review.

Rockefeller Philanthropy Advisors released two reports in 2023, falling under the term Reimagined Philanthropy. The first volume, A Roadmap to a More Just World is for emerging philanthropists, but existing donors would benefit from the second volume, Advanced Strategies for a More Just World, which provides detailed insights into:

• operating models
• diversity, equity and inclusion principles
• adopting a systems perspective
• redefining philanthropic impact
• strategic time horizons
• impact investing
• communications – alongside a range of other topics.

Both of these reports are very detailed.

A simple way to frame your approach might be to consider: What do you want to now start doing? What do you want to stop doing? And also, what do you want to continue doing?

If you wish to start doing something new, broaden the scope of your objectives,  increase your spend or align your investments with your mission, make sure that you are putting in place the right processes as well as recording a new objective. You might also want to start exploring other opportunities to increase your impact and the scope to a venture philanthropy model, impact investing or social investing.

Many have reviewed their giving strategies in the wake of the Covid crisis, responding by making emergency contributions to appeals as well as reviewing their longer-term strategies to ensure that they are effectively supporting longer-term recovery. This does mean that traditional giving patterns have shifted, and much giving has been focused on Covid-related issues, leaving other cause areas behind.

Others in the wake of the pandemic, given the shrinking of foreign aid budgets, the economic impact on low and middle-income countries and the inward focus of many funders. Charity Excellence Framework has a detailed list of NGO projects in Africa, the Disasters Emergency Committee shows a list of charities who are part of their work and Charity Choice has a long list of UK charities who support children and young people overseas.

The COVID-19 pandemic prompted a number of philanthropists to dig deeper into their endowments and change their grant-making approaches to deploy more capital than they had planned. All are recognising that this historic pandemic has demanded an extraordinary response. Previous experience of recessions suggests that consumers will end up compensating for the shortfalls in charitable giving as we come out of restrictions and regain confidence in the economy. Giving has been deferred, not cancelled. On top of this, the pandemic has left many in a position to increase their philanthropy.

If ever there was a time for foundations to consider permanently accelerating the pace and volume of giving, it is now.

There is an increasing awareness that philanthropists should assess the time value of philanthropy in the same way an investor does: putting more value on a dollar deployed today than one spent in the future. The conclusion is that delaying grant-making in favour of capital accumulation often exacts a significant cost.

As we enter the long recovery effort, trustees as well as individual philanthropists should have explicit discussions about the rationales for their giving horizons. Does perpetuity help achieve your social-impact objectives, or is it serving another objective, such as family unity or founder legacy? If family connection is the primary goal, is setting up a permanent foundation the best way to achieve it? What do you believe your giving will be able to do better 50 or 100 years from now? If you have already received the tax benefit for your giving, why not disburse more of the funds sooner?

If you wish to stop something, this is likely also to result in the need to review objectives; for example, you may want to revise your objectives and grant-making policies to be less restrictive.

You may also want to check in on your risk appetite and if you need to flex on any of your due diligence requirements.

 Over the past 20 years, the philanthropic sector has adopted a more data-driven and rigorous approach. While those developments have strengthened the field in many ways, they have made the process of seeking and managing grants more cumbersome, especially for small, community-based organisations. The COVID-19 pandemic has accelerated moves to reduce those hurdles, prompting many foundations to relax grant requirements, speed up decision-making and give recipients additional flexibility in how they use funds. (See Trust Based Philanthropy).

Darren Walker, President of the Ford Foundation and ex-Vice President at the Rockefeller Foundation released an insightful book in 2023, From Generosity to Justice: A New Gospel of Wealth. It reflects back on the vision of Andrew Carnegie, and how it relates to modern times and could shift a donor’s mindset to a new methond of thinking.

If it is important to you that you fund topical projects that have urgent need, UBS’ Top Five Trends in Philanthropy 2023 is a valuable holistic vision of the current state of philanthropy sector.

ANALYSIS

HIGHLIGHTS

• Addressing gaps in the process
• Doing a needs assessment
• Deciding how distribution will be measured
• Charity selection
• Considering a giving circle to achieve more impact and targeted giving

Once you have carried out the initial exploration and answered some of the preliminary questions, a deeper analysis is required, where you will be going back to basics, such as addressing gaps and selecting charities.

A needs assessment should identify underfunded issues. An informal approach might involve reading some reports on the issue, talking to some experts on the cause area and charities, and forming a view of what needs to support. At the more formal end – for a large strategic foundation wanting to concentrate millions of pounds of donations on a specific issue (such as combating malaria), for instance – a full research study might be necessary.

You might also now consider whether you will achieve more by collaborating with others, for example by joining a giving circle or other communities.

As the landscape of philanthropy continues to expand and evolve, it is become increasingly clear that the future of real systemic change – i.e. using giving to find solutions that address the underlying causes of social, economic and environmental problems – requires not only larger pools of funding, but more combined willpower and expertise. If your philanthropic vision involves truly moving the needle on a big issue, it is worth exploring the possibility of bringing others along with you on the journey.

There are a number of benefits collaborative philanthropy can have, both for funders and for grantees, such as offering learning opportunities for donors, risk management and of course amplifying impact.

Private investors typically look to investment managers who have specific expertise and a successful track record; private-equity investors frequently deploy their capital alongside others they trust, following others’ due-diligence efforts rather than conducting their own. Yet when it comes to philanthropic giving, many individual philanthropists — and institutional foundations — often go it alone. They build sizeable teams that develop expertise, create new initiatives and deploy grants largely in isolation from other philanthropists.

The pandemic response demanded a different approach, bringing donors together at the local, state, national and global levels to pool resources, align on priorities, and deploy funds rapidly through collaborative funding platforms. For instance, the Covid-19 Therapeutics Accelerator was formed to develop treatment options, anchored by $125 million in funding from the Bill & Melinda Gates Foundation, Wellcome Trust and Mastercard. It was quickly supported with follow-on funding from others. 

Although Covid-19 is still present in all of our lives, and more manageable for some of those who have been infected, long covid has been recognised as long-term impact affecting some of those people.  Some of the symptoms of long covid have been identified. There are several organisations such as Scope, the National Lottery Community Fund and NHS Charities Together,  who you could discuss this issue with and find where your grants would be the most effective.

Some new examples of collaborative giving are emerging, like Co-Impact who are a global philanthropic collaborative that supports locally rooted coalitions in the Global South to transform underlying systems and achieve impact at scale, with a core focus on advancing gender equality and women's leadership. 

You might also want to realign your philanthropy and social or impact investments along broader existing frameworks, like the United Nations Sustainable Development goals (SDGs) in order to understand how you are contributing to some of the worlds biggest challenges. Organisations like Maanch, an impact technology platform, can help you align, measure and report on your impact towards achieving the SDGs.

Most philanthropic funders will see that their missions are affirmed by the SDGs, whether they fund domestically or internationally. That is because virtually every cause that philanthropists and foundations support is included in the ambitious scope of the SDGs, which encompass a wide range of issues in the economic, social and environmental spheres.

The SDGs represent an opportunity to effect the systemic change that so many foundations aim for. Around the globe, the SDGs are inspiring funders to find new ways to partner, engage employees, collaborate with governments and NGOs, and gather and share data to mark progress on the path to 2030.

Funders may also find that the SDGs can help them frame issues, connect with other change-makers, strengthen partnerships, and communicate about their progress — all for greater impact. Foundations and their grantee partners can take part in this global effort by contributing funds, implementing programmes, sharing knowledge, and aligning their objectives with those of the SDGs. 

An example might be funding access to pre-schools for underserved children. This of course links to SDG, 4 – quality education, SDG 1 – no poverty and SDG 5 ­– gender equality.  Looking deeper at the targets and indicators, you can also see more specifically how your giving ties in, i.e. SDG 4.2 – “By 2030, ensure that all girls and boys have access to quality early childhood development, care and pre-primary education so that they are ready for primary education.”

Achieving the SDGs will require far more resources than are now being applied to them. To end poverty. To combat climate change. To achieve gender equality. To “leave no one behind” and be truly concerned with the most forgotten and disadvantaged people in every society.

Foundations can contribute to this endeavour in many ways. Some will change how they make grants or how many grants they make. Some will support SDG infrastructure so that funders can collaborate better. Others will match their existing programme areas to the SDG targets. Aligning with the SDGs in essence is another collaborative approach, and monitoring and reporting on progress is essential to capturing progress against the targets.

Moving to practicalities, you might also now take the opportunity to consider if your giving is as tax efficient as it could be, and if the way you are deploying your capital aligns with your overall wealth planning. This is also a good time to perhaps engage with an advisor, if you are not already working with one

IMPLEMENTATION

HIGHLIGHTS

• Think holistically to understand non-profit effectiveness
• Consider process to evaluate and monitor giving
• Do key stakeholder interviews if appropriate
• Identify if any additional resources or infrastructure are needed

Once you have undertaken the review, you will likely have some actions to implement. Some of these might be practical, like hiring an employee or an advisor in order to help you scale, refine and implement your strategy.

You might also need to use a vehicle in order to deploy your giving and this might be the time to set up a charitable entity to formalise or give some more structure to your giving or create a donor-advised fund (DAF) to provide another channel for anonymous or more flexible giving outside the structure of an established family trust. In the philanthropic world, charitable foundations are coming under increased scrutiny and pressure to ensure that their endowments are invested responsibly and for positive impact. This requires them to move away from investments that harm natural resources or exacerbate social inequality. As an example, a lot of foundations hold fossil fuel investments while at the same time making grants to combat climate change. Many are using their DAFs to also start exploring impact investing and ensuring they are aligning their mission with their investments.

You may have also discovered that, as a result of the review, there is now a need to evaluate and monitor your giving. This is because you want to make sure that your efforts have the maximum impact.

Understanding non-profit effectiveness goes beyond the financial indicators. The best approach is to think holistically, taking into account all of the dimensions that influence an organisation’s impact, which requires taking a deeper look – beyond financials and the myth of the overhead ratio. It requires understanding their theory of change as well as who their leadership and management team are, as well as what targets and indicators they have set for themselves and how they evaluate themselves.

Ultimately, this will drive your grant-making policy, helping you measure your effectiveness and report to stakeholders (such as family members or trustees) on your impact.

On the practical side, you may want to consider if you need additional resources or infrastructure, such as technology solutions, to help you deliver your grant-making more effectively. There is a lot of grant-making software to support giving, and some will include some form of impact tracking and reporting functionality. 

INVEST IN THE RELATIONSHIP – TRUST IS KEY

HIGHLIGHTS

• Build trust and personal engagement
• establish open channels of communication with beneficiary organisations to keep your finger on the pulse
• Be responsive – ask for and act on feedback

A key element of successful implementation of your giving is to build open and transparent relationships with your beneficiary organisations (or the beneficiaries themselves, depending on how you are set up). If you have been providing philanthropic support over time in a more hands-off way, making grants and seeing some results but wanting to do more, now might be the time to build in more personal engagement. 

In building open channels of communication and relationships with some key individuals in an organisation, you will be able to keep your finger on the pulse, understand needs and challenges, and transform your giving from a transactional relationship to one that is truly fulfilling. Big challenges require collective effort, and you are playing a key part in helping find solutions.

The most successful interventions have been in cases where there is a dynamic of trust. One would think that if you support an organisation philanthropically this automatically exists, as you are aligned on values and mission, but often this is not the case. There is a lot of inefficiency and an unbalanced power dynamic in philanthropy, with charities having to “prove” their worthiness, undergoing rigorous due diligence and having to go through multiple grant application requirements.

Fundraisers or philanthropy managers are also sometimes regarded with a degree of scepticism, and it is important to reconsider this perception. Most fundraisers are highly motivated people who also have been drawn to a cause and working in the third sector, rather than the private sector, as it aligns with their values. In building a relationship with a fundraiser, you will find that you have someone in the organisation who can help you navigate your way and meet your mission, as well as introducing you to others, including beneficiaries, where appropriate.

This thinking aligns with an emerging school of thought around trust-based philanthropy, which looks to address some of these challenges. It is about shifting the relationship to be more inclusive and collaborative – recognising the power imbalance between funders and grantees, and working to actively rebalance it.

The most recent, unprecedented example of a philanthropist using trust-based giving by granting large, unrestricted funds and having faith in the charities that they will do what is right, is MacKenzie Scott. She is the ex-wide of Amazon founder Jeff Bezos and has been very open about her style of giving. She has listed some of the charities who received some of her $2.1billion in 2023 in the second-copy of the three-year report that is analysing the findings of her grant distribution process, Results from Year Two of Three-Year Study.

Key themes in trust-based philanthropy are to:

• Deeply value the quality of relationships – honour how we treat others on the path to winning on our issues, as much as valuing the act of winning itself
• Give multi-year, unrestricted funding – recognising that unrestricted funding over time is essential for creating healthy, adaptive, effective organisations
• Simplify & streamline paperwork
• Be transparent & responsive
• Solicit and act on feedback
• Offer support beyond financial support if you can, which can include your networks or professional support

Ultimately, we choose to embark on a philanthropic endeavour because we are answering a need which is aligning with our own “higher calling”, our values and our motivations to respond. In order to make this a creative and fulfilling experience, we need to be open to constantly learning and evolving on what is a collaborative journey.

SUMMARY

IN SUMMARY, THE BASIC ELEMENTS THAT COULD BE USED AS A GUIDE FOR REVIEWING PHILANTHROPY ARE:

• What is your vision as a donor and what values do you live by?
• What impact do you wish to accomplish?
• What resources do you have available and how have they been used?
• How is the distribution to be measured?
• What approach to governance is being taken? And why?
• If appropriate as part of the evaluation, do key stakeholders interviews.
• What information about other foundations/funders and charities in the sector do you have, and are there any particular/important comments/findings? If available, conduct a comparison of impact.
• Review vision statement, strategy documents and plans, risk analysis and management, staff performance evaluation, evaluation reports, management accounts, internal strategy, evaluation documents, information on your impact, and current funding partners/strategic alliances.