Wealthy give more than governments

Those wishing to give something back to society are no longer content to simply write a cheque and now wish to establish sustainable legacies, writes Fiona Bond

They say opposites attract, but in this instance, it is more a case of two very different worlds colliding.

For years, it has been popular among the very wealthy to give something back to society. But while it was once de rigueur to write out a cheque to your chosen cause, today “giving back” has taken on a whole new meaning.

No longer is it simply enough to donate. Many wealthy individuals now have a growing desire to build structured and sustainable philanthropic legacies, resulting in two worlds that were once poles apart coming together; business and charity.

As Plum Lomax, senior consultant at NPC, explains: “We are seeing a growing trend towards becoming much more involved in the giving process; improved accessibility to information, advice and support has made it a lot easier for donors to become engaged. In a way, supply has created its own demand.”

Jon Needham, head of fiduciary services at SGPB Hambros, says: “The very wealthy want to ensure funds and expertise are applied appropriately, and that as much benefit as possible reaches the end-user.”

As such, there is a hunger among the very wealthy to create their own dedicated charities and charitable foundations “where the whole process can be targeted at a cause close to their hearts”, he says.

The term “venture philanthropy” was first coined in the 1960s by John Rockefeller III, but didn’t begin to find its feet in the United States until the 1990s when the dotcom boom gave rise to the idea that it might pay to apply a venture capitalist approach to charitable giving.

The very wealthy want to ensure funds and expertise are applied appropriately, and that as much benefit as possible reaches the end-user

As with many things, mixing two disciplines can be a balancing act. Venture philanthropists face the challenge of getting under the skin of mission-driven organisations in order to offer support and capital, while social organisations need to accept they have much to learn from the skills and vision of venture capitalists.

Rebecca Eastmond, head of philanthropic services at J.P. Morgan Private Bank, says: “The problems that philanthropy seeks to address are difficult and complex. Our advice to clients is to use the bulk of their ‘pot’ to give fewer grants, and to make those grants larger and longer-term. Good giving follows thorough due diligence and pursues objectives that both donor and charity agree make sense, tied to measureable results.”

But while it may well be a complex area, it is one that shows no signs of stopping. According to Scorpio Partnership, in 2012 family giving in Europe was an estimated €22.7 billion, with roughly one third derived from ultra-high-net-worth families. The European Venture Philanthropy Association says the most “outstanding trait of European venture philanthropy is its presence in so many different countries”.

The financial crisis of 2008 proved a catalyst in boosting the profile of venture philanthropy in the UK, with many organisations, including the big banks, looking at new ways to enhance their client proposition. In the faster developing economies of Asia and India, there is also a distinct upturn in interest in venture philanthropy. However, the rest of the world still has some way to go to catch up with America.

Ms Lomax explains: “The US has spent many years developing and fostering a strong sense of community and conscience from a very young age. We are starting to see this emerge in the UK as younger generations demand greater accountability, but so far we have only scratched the surface.”

Going forwards, increasing transparency, data and support will prompt huge innovation within this field across the globe, and result in effective giving becoming much more mainstream.

The volume of worthwhile causes that venture philanthropists have at their fingertips is also growing, with the option to use their funds and knowledge both on a local and global scale.

J.P. Morgan’s Ms Eastmond says that local causes popular with their clients range from providing breakfast clubs for schoolchildren and elderly care in Greece, all the way to skills training for immigrants in the south of Italy. However, many of their clients also look to act globally, whether their focus is reducing poverty, protecting human rights or environmental conservation.

Mr Needham adds: “Far more families are seeing venture philanthropy not only as a means of giving, but as a more tangible way of demonstrating acceptance of the wider responsibility wealth can bring on current and future generations.”

With private financial giving continuing to far surpass government donation, it seems venture philanthropy is here to stay.