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Active Philanthropy

Are we in a second golden age of philanthropy? Many people think so, particularly in the UK, which has had less of a philanthropy culture than the U.S. Despite the global economic slowdown, the numbers remain pretty impressive, and the Forbes list of the world’s wealthiest individuals is also full of the world’s biggest donors.

In 2010, the Coutts Million Pound Donor Report showed that there had been more than 170 individual donations to charitable causes that were worth more than £1 million. The total amount of these donations was £1.3 billion. In 2011, The Sunday Times Rich List showed that donations from major charitable givers had in fact fallen by 11.5 percent, but that was in the face of a 37 percent drop in total wealth. In total, giving from family foundations in the UK was worth more than £1.4 billion in 2011. Given the overall squeeze on wealth, philanthropy is holding up pretty well.

There remains a great deal of secrecy about philanthropy: there are plenty of hedge fund owners and city financiers who quietly give substantial funds to causes that are important to them.

But increasingly people are prepared to talk about their donations or the foundations they set up. Everyone knows about the Gates Foundation, and the incredible work it does in fighting and preventing diseases like HIV/AIDS, malaria, pneumonia and tuberculosis. But there are plenty of smaller, equally-focused foundations that are doing amazing work at a local or international level, whose founders recognize that talking about that work can and does encourage others to do more.

Experts say that the growth in philanthropy, and increasing recognition that it is the right thing to do, is because of a change in the donor profile. The Sunday Times Rich List of 15 years ago showed that in Britain, 75 percent of individuals on the list had inherited their wealth. Today, 75 percent are self-made. Surveys conducted in the U.S. have showed that people who make their own money are more likely to give it away. They should know: it is standard practice for American high net-worth individuals to donate 3.5 percent of their investable assets every year and total giving from the wealthiest easily reaches double figures.

We’ve also seen more people engaging with the idea that “giving while living” is more effective – and a lot more rewarding – than creating endowments that only really become beneficial after the donor’s death. Again the Bill and Melinda Gates Foundation is the great example: it was set up specifically so that its £15 billion capital will be spent down within 50 years of the last donor’s death.

The other side of this is that self-made individuals are increasingly realizing that leaving all their money to their children may not produce the best results – particularly for the children themselves. Warren Buffet summed it up when he said, “Rich people should leave their children enough money so that they feel they could do anything, but not so much that they could do nothing.”

Indeed, through their Giving Pledge, Gates and Buffet are hard at work encouraging their fellow billionaires to commit to giving away at least half of their wealth to charitable causes, and to making those contributions earlier in their lives, so they can be actively involved in the way their contributions are used.

So it’s not surprising that perhaps the most noticeable feature of this second golden age of philanthropy is the business-like approach that many take to it. To me this is absolutely the right approach. Rich individuals are setting up foundations and charitable trusts and then selecting donors with strategic precision, to make sure they maximize the impact of their investment – very much like picking a stock portfolio.

As Gates said, “Our giving is based on the simple premise that everyone deserves the chance to live a healthy, productive life. Given the resources at our disposal, we believed we could make the biggest difference by concentrating in three areas: global health, global development and, in the US, education.”

And so we see donors rightly conducting due diligence of the projects they invest in, considering the scalability of the programme and whether it can be ported to other, equally deserving areas, and ensuring that outcomes can be accurately measured and meet agreed outcomes. Impact measurement, monitoring and evaluation are becoming increasingly important. The language of business now applies to philanthropy: return on capital, leveraging investments, constant assessment, target definition and accountability to stake-holders are all part of the lexicon, because philanthropists recognise that if they can prove the merits of their work they can engage more people in its success.

I believe this is a far more active form of philanthropy than perhaps we have seen in the past. It is emphatically not about writing a cheque for some vaguely deserving cause, and leaving the work to others. It is about carefully selecting areas of interest and investing in it for the long-term.

It’s also about investing effort. Because active philanthropists are more likely to take a personal interest in the work they fund, they take a more hands-on role and engage on a more than financial level. They can also invest in areas where governments can’t or won’t, or where there is a vacuum or failure in the marketplace.

The Tej Kohli Foundation for example focuses primarily on treating curable blindness in India, my home country. It’s huge problem, but an entirely fixable one with the right interventions. So we work with experts on the ground to make sure as many people as possible can benefit from free health checks, glasses, treatments and surgery where necessary. We believe the benefits of restoring sight go farther than the treated individual: their family, their community and society as a whole benefits – and that’s where we see return on the investment.

But it isn’t just money that makes a difference. It is the hands-on experience and skills of businessmen who are used to running major organisations, it is the networks of people they can bring to the cause, it is the way they can channel publicity to encourage greater grass-roots participation that makes a difference. It is the involvement and guidance of successful individuals, and their engagement with causes that are of personal interest to them that ensures philanthropic giving is more effective than ever before.

And I believe this is where people without the financial resources to set up charitable organizations also contribute to the philanthropic cause. Are we in a new philanthropic golden age? Yes. Undoubtedly we are. And not just because the wealthy are giving in new and more effective ways. But because more people from every strata in society are encouraged to contribute something – be it ideas, skills, expertise, or simply time. Active philanthropy gives everyone a change to get involved.

This was posted in Bdaily's Members' News section by Tej Kohli .