If there is a buzz-phrase at the moment among those interested in philanthropy, then it must be “high-impact”. George Soros is a fan. So too is Bill Gates. Rakesh Mittal is also getting in on the action. In fact, there are plenty of big-name businesspeople and philanthropists advocating it.
Gone are the days, they say, when it was enough for wealthy individuals to write cheques to well-meaning people and trust them to do something good with it. Now philanthropy should be treated like a business – and offer measurable returns. “High-impact philanthropy is the art of achieving the biggest bang for your buck, where the ‘bang’ is social impact, or an improvement in the lives of others,” says Katherina Rosqueta, founding executive director of the Center for High Impact Philanthropy at the University of Pennsylvania’s School of Social Policy and Practice.
Unlike impact investing – where the aim is both social/environmental improvements and financial returns – charitable giving is still at the heart of high-impact philanthropy. But that doesn’t mean those making the donations are less likely to take a strategic approach. “With high-impact philanthropy, philanthropists see their donation as an investment more than a gift. High-impact philanthropy seeks first and foremost to achieve the greatest possible good from that investment,” says Rosqueta.
It’s an approach that seems to make sense – if you are going to give away millions or billions, it’s probably wise to make sure that the money is having an impact. Yet Josh Baron (pictured, right) from Banyan Family Business Advisors, a US-based consultancy, reckons high-impact philanthropy is probably “talked about more than it’s actually done”, something Richard Bruens, global head of private wealth management at ABN Amro Private Banking, agrees with. “The number of families explicitly looking for high-impact philanthropy solutions is still small,” he says.
John Stone, who set up the Stone Family Foundation (see below for more information) in 2005 after selling Lombard International Assurance, the life assurance firm he founded, says he has struggled to find many kindred souls. “My impression is that I am fairly unusual in applying rigorous business practices to my philanthropic activity,” he adds.
Rosqueta isn’t surprised by this. “It may sound like an obvious thing to do, but plenty of philanthropy doesn’t follow that pattern,” she says. “Many people make philanthropic decisions out of a sense of gratitude, for example to an alma mater where they met their best friend, or the hospital that took care of a sick relative. In other cases, donors give out of a sense of duty.”
Two examples she cites are tithing to a church, or supporting an important cultural or civic institution that the family has been affiliated to for generations. “In these cases, the actual impact of their donation can be a secondary concern to donors,” she says. Research seems to support this – a 2012 study by Bank of America, which asked what motivated wealthy individuals to give, found 69% simply donated to the same organisation or cause annually.
That said, the tide appears to be changing, albeit slowly. “There are several drivers [behind the change], including an increased sense that wealth confers responsibility together with growing concerns about the future of our society and indeed the planet,” says Andrew Nolan, head of the Stonehage Family Office Division.
Rosqueta adds: “The economic downturn forced both donors and non-profits to understand how they could make a bigger difference with the funds they had.” British family foundations are already planning to reduce spending in the years ahead, due to falling assets and tough economic conditions, according to a recent study by the Pears Foundation and the Centre for Charitable Giving and Philanthropy – so a targeted approach is becoming the obvious solution. As Rachel Findlay (pictured, left), head of funder effectiveness at UK-based New Philanthropy Capital, says: “People are becoming more aware that they need to ensure that limited resources are targeted in the right place.”
Add to this the sway of a new generation of entrepreneurs who have amassed huge wealth relatively young – and who, says Rosqueta, are “expecting real, tangible results in a way that many previous generations have not” – and even the most traditional of philanthropists are having a re-think. “People are becoming more high profile about their giving, and there is more discussion about what effective philanthropy looks like,” says Findlay.
In some cases, wealthy families are beginning to realise it’s not just their money, but their skills that are useful – and effective – when it comes to high-impact philanthropy. “These families have an entrepreneurial background and as personal donors, they are interested in entrepreneurial solutions to societal problems,” says Dr Volker Then, managing director of Heidelberg University’s Centre for Social Investment.
This is the approach Stone has decided to take. Using his business acumen, he acts almost as a venture capitalist to about 15 non-government organisations – mostly in the water and sanitation sector in the developing world. “Although I am no expert in sanitation or water, during my time in Cambodia recently, I was able to give advice to the NGOs, acting almost like a non-executive director of the project. I’m not involved in the day-to-day management, but I am used by the managers of the projects as a bit of a sounding board and I try to give them some helpful advice as a businessman,” he says.
He could, of course, be making some money doing something similar as a non-executive of commercial businesses. But he’d rather make sure the wealth he has already amassed is being given away effectively. “I’d much rather spend my time where my money is being invested, where I’ve got a real interest,” he says.
Even if other wealthy families aren’t as active as he is when it comes to philanthropy, he reckons they should be taking a high-impact approach. “If you are going to give some of your wealth away, surely you want to give it away wisely and well. After all, you have almost certainly worked very hard and taken lots of risks to build the business to create the wealth – for that wealth not to be spent wisely seems crazy,” he says.
STONE FAMILY FOUNDATION
When John Stone went about setting up his family’s foundation, he “didn’t know what to focus on”. “A lot of people in a position to make philanthropic grants may well have a passion for a cause because of something that’s happened in their life or someone else’s life,” he says. But Stone didn’t – and he didn’t know whom to give the money to. With the help of New Capital Philanthropy, Stone decided to focus his giving on the developing world – “because you achieve so much more for each pound than in the UK” – and chose three sectors; water and sanitation, micro-finance and education for girls. “It’s taken some years to develop a sensible strategy, but our primary focus is now on water and sanitation,” he says. Last year the foundation ran the Stone Prize for Innovation and Entrepreneurship in Water, receiving more than 175 applications. The winner was Dispensers for Safe Water – the Stone Family Foundation is now supporting it and a number of shortlisted candidates.
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