Philanthropy continues to play an important role in the lives of the wealthy, and the nature of giving is constantly changing. Rachael Glazier canvasses expert opinion and finds five key trends we can expect to see coming to the fore
Strategic giving
One of the dominant themes in philanthropy at the moment is the increase in strategic giving. The days of just writing a cheque are fading fast - as a result, charities are expected to provide business plans rather than just a collection tin.
“There is more interest from people in determining what their money is doing, and therefore organisations that can communicate their impact tend to be more in favour with a newer generation of philanthropists,” explains Plum Lomax, Senior Consultant at New Philanthropy Capital.
In part this is down to another trend - the emergence of the entrepreneurial donor who"s made their money in business and is using their acumen to inform their philanthropic ventures.
Alison Hope, Founder of Hope Philanthropic, explains: “They are still driven by the heart, but it needs to be backed up with sound business evidence that charities are doing the right thing and have thought about what they are doing.”
As a consequence, measuring outcomes has also become a growth area. And it"s not just business-savvy entrepreneurs who are shifting to more strategic gifting - family foundations and others who may have been giving for a long time are planning more and selecting target areas.
The CGAP Five Year Review 2008-2013 highlights that this entrepreneurial approach is also influencing the way in which organisations approach donors. “There"s a shift that"s taken place between a case for support, which is a little more emotional, and a business case,” explains John Pepin, Chief Executive of membership organisation Philanthropy Impact. “The content may be relatively the same, but the presentation is quite different.”
Impact/social investment
Impact investment, according to the European Venture Philanthropy Association, is defined as "a form of investment that aims at generating social impact as well as financial return". Impact (or social) investment is a key trend in the Coutts Million Dollar Donors Report 2013, but the application of capitalist values to philanthropy is one that began in the late 1980s.
As Catherine Tillotson, Managing Partner of Scorpio Partnership, explains: “There was an article written in 1987 about how venture capitalists can apply their skills to make the world a better place. That"s when we started to realise that capitalism and social impact are not mutually exclusive.”
The principle is simple, explains Plum Lomax: “You make a loan to a charity, a charity can potentially do something with that money that it wasn"t able to do before and then generates a revenue and pays back that loan to the original investor.” By establishing a profit motive, organisations are able to attract people who wouldn"t have normally given to that cause.
The Golden Lane Housing bond, for example, which has allowed the charity to raise £10 million for purchasing houses for people with a learning difficulty, has a fixed gross yield of four per cent per annum for a five-year fixed term.
It"s an area that is still very much in its infancy and one that has limitations, explains Hope: “There are so many charitable causes where social investment isn"t possible because there isn"t an opportunity to generate money. For example, when funding the arts or a project in a country where there is deep poverty to help people get fresh water, more often than not there isn"t a business opportunity that allows for a social investment product to be offered.”
Anonymity
The Giving Pledge in the US - where individuals and families commit to giving at least half of their wealth to charitable causes in their lifetime - aims to inspire others to give more, as well as to facilitate discussions about how best to use their money. While Plum Lomax says: “We"re finding that more donors are prepared to speak about what they do, either to the media or in forums” - it is, she admits, a slow trend.
The reluctance for UK and European donors to be more visible is mainly cultural, explains Catherine Tillotson. “Because we have fundamentally a somewhat left-of-centre approach to politics in Europe, wealth is often seen as being part of the problem, not as part of the solution.” There is also a tendency to criticise, which can be unhelpful. “If you"re trying a new strategy for a problem that nobody"s had the courage to try before, it"s not really helpful if you then get knocked off that perch.”
There is, Tillotson says, a lot of debate going on within family foundations within Europe at the moment about the need to be open to scrutiny, where they"re saying: "We can"t be fully accountable if we can"t be transparent". Donors may also wish to remain anonymous to protect themselves from inappropriate approaches, while some just see their choices of charity as deeply personal and not a public issue.
The younger generation
Another trend cited by the Coutts Million Dollar Donors Report, and those working in the sector, is the involvement of the younger generation in philanthropy. “Parents see it as an important tool to prepare their children for the opportunities and responsibilities that their wealth may bring,” says Maya Prabhu, Managing Director of Philanthropy Services at Coutts.
“An important thing that wealthy families think about is "how do we pass on our values when our children are growing up in a life of complete privilege?",” she explains. “It"s a bit awkward to just sit around the dining table and say "What are your values?", but I think it"s quite useful to talk about having a charitable foundation, what"s it for and what do we all really care about, because what you care about is closely linked to your values.”
Wealth and responsibility courses provided by banks for the younger generation - who are generally in their twenties and thirties, says Lomax - will usually incorporate a philanthropy element to help prepare them either for roles they may have in their family foundation or their own philanthropic endeavours.
These courses are part of a bigger trend - that of the greater use of philanthropic advisors. Advisors help clients think through their philanthropy, give them expert guidance on the charities and sectors they are interested in, and ensure their money is making the most difference. “If you"re looking at the key to the future and to growth in philanthropy and social investment, I think advisors play a significant role,” says John Pepin.
Technology
The rapid advance of technology in the past decade has changed the way that people give. No longer are sponsorship forms rustled under noses, but instead emails, tweets and Facebook requests with links to giving pages are sent to ever-larger groups of friends and acquaintances.
The UK Government made it clear in its Giving White Paper (June 2012) that technology needs to be used to facilitate greater giving. It is now possible to donate money via cashpoints as well as mobile phones, and it"s also being used as a way of raising awareness of charities and issues across the globe.
The speed at which campaigns can travel via the internet is also occasionally staggering: in March 2014 the idea of women taking pictures of themselves without make-up on and posting them online to show their support for those with cancer went viral - as did Cancer Research UK"s number that people could text to instantly donate £3. After just 48 hours, £2 million had been donated to the charity.
Another positive aspect of technology for philanthropists, be they millionaires or Joe Bloggs on an average wage, is being able to see how their money has helped. “There are some organisations like Kiva [an online network of micro-finance institutions] that help connect you to the stories of the people that you might support through your philanthropy,” says Maya Prabhu.