Important factors to consider in residence planning
Ultra high net worth individuals and the global fight for a brighter future
Christoph Courth, Anna-Marie Harling
While the notion of charity dates as far back as the beginning of civilization, the world’s first philanthropists of scale really only started to emerge in the early 20th century; to this day, Rowntree, Carnegie, and Rockefeller are names that are still known and admired for supporting causes close to their hearts.
In the 21st century, philanthropy is on the rise. There is increased wealth creation globally, especially among entrepreneurs who have a higher propensity to give back, and more wealth is being generated in developing countries by those who have seen and/or experienced poverty and inequality first hand. And thanks to technology, the world has become much smaller, making it difficult to ignore the myriad issues humanity faces presently.
While celebrities and the super-wealthy may be on the front pages of coverage related to this increased giving, giving is not limited to these individuals. The rise of the millennial generation, whose social conscience is a defining part of their identity, and development of technology-enabled giving are some of the factors supporting the trend of growing philanthropic sentiments. In this new era, a more diverse list of admired philanthropists has emerged: Zuckerberg, Gates, Masiyiwa, Branson, and Premji, among several others.
For philanthropists, and indeed everyday activists, who operate in a modern, connected, and information-driven world, a specific set of targets has been established, namely the Sustainable Development Goals (SDGs). According to the UN, the annual investment gap to fund the SDGs in developing countries is USD 2.5 trillion annually until 2030. To put that into perspective: one year’s funding gap is roughly equivalent to the GDP of the UK in 2017. The SDGs are about realizing the future we want, based on equality, sustainability, and opportunity for all. However, without the mobilization of private wealth, which Deutsche Bank estimates to be around USD 250 trillion, there are 2.5 trillion reasons why this future will not come to fruition.
But there is hope, as both philanthropy and impact investing are growing. According to a recent report from UBS and Campden Wealth,1 over 75% of family offices plan to increase or maintain their level of giving in the coming year, and over 40% plan to increase their allocations to impact and ESG (Environmental, Social, Governance) investments. While there are no truly global statistics, based upon the data that is available we estimate that in 2015 at least USD 500 billion was donated globally. To contextualize this figure, it is equivalent to the combined 2015 profit of the top 10 most profitable companies, twice over.2
However, despite this growth, philanthropy is not working as best as it could. With so much capital flowing towards fighting the world’s greatest challenges, be it food security or climate change, one would expect there to be countless examples of large-scale success. The reality is there are not that many.
One example of success could be the coalition of foundations supporting the near eradication of polio through the mobilization of resources and the engagement of both the public and private sectors, which resulted in the World Health Organization taking Nigeria off the list of polio-endemic countries in 2015. Another example is the conservation success story of the southern white rhino. With less than 100 of these rhinos left in the wild in the early 1900s, the species has now rebounded to around 20,000, arguably thanks to the tireless commitment of philanthropic conservationists.
We believe there are three inherent tensions at the heart of philanthropy that must be overcome to truly unleash the power of private capital for social good:
However, the leading philanthropists of the 21st century are breaking through these barriers and giving hope. We have identified 10 traits shared by these philanthropists, shown below.
On balance, as these traits become ever more the norm, the future of philanthropy and its impact on the world look bright indeed.a
10 Traits Shared by Leading Philanthropists
The most successful philanthropists take their business acumen and apply it to their philanthropic activities, embracing calculated risk, focusing on outcomes, working towards key measurable targets, etc. eBay founder Pierre Omidyar and his wife, Pam, who together founded the Omidyar Group, are a great example of adopting this approach.
Success in achieving philanthropic goals comes to those who identify an issue and focus the majority of their resources on developing a solution for it. Having a clear focus allows one to develop issue-specific expertise and partnerships, enabling cost-effective investment in staff and resources. For example, one of the world’s largest private funders of medical research, The Wellcome Trust, has just three core areas of focus.
The right engine and vehicle help to facilitate cost-effectiveness, calculated thinking, and appropriate systems alongside an impactful public image. Examples of successful structures that philanthropists have used include Chris Hohn linking his hedge fund directly to his Children’s Investment Fund Management. Others, such as The Prince’s Charities and The Sainsbury Family Charitable Trusts, use umbrella structures that house independent organizations that benefit from the cost-effectiveness of a central administrative parent.
Governments and businesses survive on reputations built on a positive image of success, and as such are often averse to risk. Philanthropists, however, enjoy almost total freedom to prototype novel approaches, experiment, tackle difficult questions, and take risks using fast analytical feedback systems that ensure learning.
There are countless examples of impactful philanthropists operating solely within the borders of their own nations, particularly those whose countries have high levels of poverty and inequality. However, generally speaking, in the interconnected world in which we live, the most renowned philanthropists are those who are not bound by borders and who operate on a transnational scale, tackling issues that are not restricted by geopolitical lines.
Today’s social issues are often not islands; rather, they tend to be linked, forming part of an intricate web that is, in most cases, too large for any one solution or organization to tackle successfully. Therefore, partnering with the right organizations or individuals is paramount to maximizing capacity to bring about substantive change. Warren Buffett’s 2006 pledge to donate 83% of his wealth to the Bill and Melinda Gates Foundation perfectly demonstrates that even the first- and third-richest people in the world recognize the need to join forces to achieve the change they seek.
High-impact, strategic philanthropy realizes that one’s financial investments cannot be in conflict with one’s philanthropic investments. The Rockefeller Brothers Fund, for example, follows a mission-related investment philosophy to ensure its investment practices align with its philanthropic goals. With over USD 30 million in grants allocated in 2015, yet over USD 830 million3 in investable assets, the managers of the fund have understood the power of strategic investing.
The greatest philanthropists are those who understand the importance of asking challenging questions, and they use qualitative and quantitative measurement systems that are ethically, culturally, and cost appropriate. At times, interventions will not succeed, as philanthropy is, essentially, an experiment in attempting to build a better world; however, learning from those failures and sharing these lessons with others will help drive greater impact and efficiency in the future.
Today’s philanthropists operate in a world of heightened visibility and many are starting to see the value of putting their head above the parapet in order to inspire others. There are countless examples of those who have become philanthropic role models, including Charles Chen Yidan in China, the Zuckerbergs in the US, Jamie Cooper in the UK, Jannie Mouton in Africa, or the Carvajal family in South America. Many of these individuals have signed the much-publicized Giving Pledge, been recipients of the Carnegie Medal of Philanthropy, been listed a ‘Hero of Philanthropy’ by Forbes magazine, or received some other honor for having taken a philanthropic stand.
American philanthropist, businessman, author, and politician Michael Bloomberg said the single best thing you can do for your children is to support organizations that will create a better world for them and their children. He has pledged the majority of his wealth to doing just that. Alfred Nobel signed over his estate to the establishment of the Nobel Prizes, and Andrew Carnegie set up the Carnegie Endowment; both of these initiatives are still operating to this day.