Million Pound Donors Report | Key Trends In Philanthropy
Below are 10 trends our experts have seen in philanthropy over the past decade.
1. Philanthropy is more visible
There is no doubt that philanthropy has become more prominent over the past decade. More major donors have been publicly declaring their intentions to commit significant portions of their wealth to philanthropy.
One example of this is the number of people signing up to the Giving Pledge which, according to its website, marks “a commitment by the world's wealthiest individuals and families to dedicate the majority of their wealth to giving back”.
The inspiring interviews with major philanthropists in the Million Pound Donors Report, and the internationally-focused Million Dollar Donors
This increased visibility – along with growing media attention and efforts to develop charitable giving around the world – shines a light on philanthropy’s value to society and helps encourage others to give. It also encourages greater transparency on the part of philanthropists about what they fund, why, and how.
2. Specialist advice plays a greater role
Recent research from Philanthropy Impact suggests that wealthy individuals and families are increasingly seeking specialist advice to inform and shape their philanthropy
Coutts was the first private bank in the UK to establish a dedicated philanthropy team. Today, advice on giving is becoming increasingly valued as a dedicated specialism.
3. It’s a family affair
At Coutts, we are seeing a growing number of clients establishing family foundations, with many seeking to engage their children in philanthropy from a very young age.
Giving as a family can be hugely rewarding. Many families find that engaging the next generation in philanthropy, even as early as the age of five, can help convey family values, illustrate a broader meaning and purpose of wealth, and provide opportunities for family members to learn about the world around them. Indeed, studies suggest that the earlier children become involved in philanthropy the more committed givers they become.
4. Strong links with wealth succession
Whether or not children are on the scene, philanthropy has increasingly become a key feature in strategies for wealth succession, and charitable legacies in wills are now commonplace.
Where children or wider family are involved, philanthropy can be an enjoyable way to equip the next generation with valuable skills that are relevant to many aspects of their work and family life. For example, once a member of the family turns 18, becoming a trustee of a family charitable trust provides an excellent opportunity to learn about governance and decision-making, and to develop investment management skills.
Moreover, some wealthy families are choosing to commit most of their wealth to philanthropy rather than passing it on to family or friends.
5. Spend now, or spend indefinitely?
Philanthropists are increasingly debating the relative merits of charitable foundations that exist in perpetuity and those that exist for a limited lifespan (often referred to as ‘spend down’ foundations).
There is no one ‘right answer’, and a foundation’s longevity will depend on many factors, such as the challenges and opportunities in relation to the causes it focuses on, and the potential long-term involvement of family and future generations.
Our briefing paper In perpetuity or limited lifespan explores these issues in more detail – please contact your private banker if you would like a copy.
6. It’s important to be measured about measurement
Over the past 10 years, there has undoubtedly been a significant focus on how philanthropists measure the impact of their giving. While many helpful tools have been developed to support this, it has also raised questions for donors about how to judge success.
Can too much focus on the ‘measurable’ create short-term thinking at the expense of long-term goals? Is ‘failure’ necessarily a bad thing or can philanthropy play a valuable role as risk capital to try out new and innovative ideas?
There is also growing recognition of the importance of listening to those whom philanthropy is intended to benefit, with their views carrying increasingly more weight when measuring progress.
7. Fundraisers play a critical role
Charities and philanthropists alike increasingly recognise the importance of building the skills of major donor fundraisers. Their ability to attract new donors and nurture long-term relationships has been critical to the growth in the number of charities receiving donations of £1m or more over the past 10 years.
8. Responsible and ethical investing is on the rise
Responsible investing is commonly understood to involve the integration of environmental, social and governance (ESG) factors in investment decisions to reduce risk and deliver better long-term shareholder returns.
Clearly, these principles are relevant and valuable to the management of private wealth, as illustrated by Coutts’ commitment to responsible investing. However, some charitable trusts or foundations with endowments have chosen to actively focus on harnessing the power of their investments to achieve their mission. For example, some choose to apply ethical screens to their investment portfolios to rule certain stocks in or out – a service Coutts offers to private and charitable clients.
And there is no doubt that the growth and visibility of the Divest: Invest movement has shone a light on the potential environmental impact of investment portfolios, with some foundations pledging to divest from fossil fuels and invest in climate solutions.
9. Social investing is growing too
Social investment, or ‘impact investing’, involves actively placing capital in businesses or funds that aim to generate measurable social or environmental returns as well as financial returns.
In many respects, social investing is nothing new. Angela Burdett-Coutts, for example, gave an interest-free loan of £3,000 in 1855 to purchase land on the Fulham Road to build the Royal Marsden Hospital.
But there is no question that social investing has grown significantly in scale and prominence over the past 10 years, with organisations such as Big Society Capital playing a key role in connecting charities and social enterprises in the UK with social investment.
According to Big Society Capital’s 2016 report, the social investment market in the UK is worth at least £1.5bn and at least 3,000 organisations are already benefitting.
A number of Coutts clients have, in their own right, been driving the development of this market. Investment from high net worth individuals in social businesses or social investment funds is also becoming more commonplace.
10. The importance of ‘doing good’ across the board
As outlined in our recent insight article, more and more philanthropists are grappling with the challenge of ‘doing good’ – not just through their philanthropy or the management of charitable endowments, but through the wider management of their personal wealth or businesses.
This is especially the case for family businesses where longer-term horizons can lend themselves to a greater focus on social or environmental factors as they develop their business strategies.
What next? The unknown impact of leaving the European Union
The outcome of the European Union (EU) referendum has exposed potential challenges for UK funders and charities alike.
It raises many questions about how EU funding for the charitable sector will be replaced. Some foundations are also collectively reviewing the potential impact of possible changes in policies or laws, which to date have underpinned the work of the organisations they support (relating to issues such as climate change, conservation, human rights, employment rights or welfare).
The full impact on philanthropy
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