13 July 2020

Effective philanthropy - does giving make you richer?

What if philanthropy was turned on its head along with the rest of the world in March 2020 as a result of the coronavirus (COVID-19)? Here, Carey Olsen's Andrew Munro explains how Guernsey's financial services sector is well-placed to help those in their quest for effective philanthropy.

The Oxford English Dictionary defines 'philanthropy' in line with our modern understanding of the term:  “The desire to promote the welfare of others, expressed especially by the generous donation of money to good causes”. No doubt many of us have always imagined philanthropy to refer to grand gestures, gifts to purposes and causes which, whilst worthy, might not be self-funding or sustainable without donations. Perhaps this leaves us predisposed to thinking of it as noble and effective but somewhat sterile, a duty, a one-way street, money simply poured into an ever-hungry hole.

Philanthropists operate in all spheres of human activity where improvement is possible; from dealing with crises and alleviating poverty, to education, human rights, gender equality, conservation, environmentalism and improving world health alongside a host of others. Many speak in terms of feeling a sense of duty but all are united in the positivity of their aims in bringing out the best in human nature and in seeking innovation and creativity to improve the lives of everyone. Philanthropists and the causes they support are as varied and diverse as the world and humanity itself but through the common threads we see the unifying power of positivity. Philanthropy as a whole, like the causes championed by its proponents, knows not race, culture, religion or geography let alone the artificial boundaries (sometimes supported by futile and ephemeral physical iterations) which mankind seeks to impose.

The Oxford English Dictionary definition goes on to note that the origin of the modern word 'philanthropy' is the Greek 'philanthropos' meaning 'man-loving'. This seems potentially much wider than the modern definition. Maybe in these strange times we are coming to 'learn' what the ancients could already have told us. By looking after others, by leaving no-one behind, we are taking the best steps to ensure our own personal survival and our survival as a species including by protecting the planet we all call home. As Chinese billionaire Jack Ma is reported to have said recently, venturing into coronavirus philanthropy: “One world, one fight!”

As to whether giving can make you feel richer as a person, you only have to look at the Bill and Melinda Gates comments on the Giving Pledge website. They note that the idea of the pledge came out of discussions with other givers about what they were doing and an observation that everyone was sharing the idea that giving had made them richer. Over 200 billionaires from all over the world, including Bill and Melinda Gates and Mark Zuckerberg and Priscilla Chan, have signed up to the Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to ‘giving back’.

As to whether giving can make you richer in a balance sheet sense, the world seems to be coming increasingly to realise that the truth in the old saying goes beyond the sense of satisfaction in giving (arguably the most valuable return in any event) and that philanthropy can also make economic sense. Philanthropy does not need to be limited to donations. Sustainable and long-term investments outperform quick wins.

Green finance

Guernsey is at the forefront of green finance internationally, including being one of the first members of the United Nations’ initiative around finance centres for sustainability UN FC4S and research collated by Guernsey Green Finance seems to provide plenty of evidence that green and sustainable investing makes the most economic sense in the long-term. Growth in this area is showing an exponential trend from general expansion of ESG portfolios to specific initiatives such as Climate 100+ which launched in 2018 and has seen over 400 investors with more than $35 trillion in assets under management engaging with companies to improve governance, curb emissions and strengthen climate-related financial disclosures. Within private wealth families, younger generations are seeking not just financial returns but also looking to make positive impacts and discovering that not only are the two not mutually exclusive but impact investing can also be more profitable. In a wider sense we are seeing a growth in conscious capitalism.

Experience shows that well-intentioned philanthropy can be counterproductive if not carefully structured and considered. The last thing a would-be philanthropist would want is to see their food aid being weaponised by ruthless dictators. Philanthropy needs detailed planning with expert input from many fields if it is to be at its most effective in an increasingly complex world.

Lasting change

Philanthropists, quite rightly, will want to ensure that their efforts or funding lead to real and lasting positive change and that the desired outcomes are achieved. This means ensuring that there is good oversight and control of any funds, transparency, diligence and monitoring of the application of such funds together with robust structures to leverage opportunities and make it easy to work alongside other philanthropic projects of significance. 

This is where Guernsey can provide amazing strength and depth. A strong entrepreneurial culture and deep-rooted sense of community abound at home. There is a robust Community Foundation in Guernsey to channel effective giving in the local community as well as advisors who specialise in philanthropic projects. 'Guerns', it seems, walk the talk. These factors combine with long-standing political stability, independence and neutrality to give rise to world leading initiatives, solid and established legislation and jurisprudence from trusts and foundations to form the core of philanthropic structures themselves to a plethora of corporate vehicles to meet the needs of investments through such structures. All of this is supported by depth of knowledge, experience and capability of professionals familiar with advising, planning and the administration of complex structures which are often high value and multi-national in their reach. 

The events of 2020 have highlighted the importance of the role of effective philanthropy in current times, helping those in need, of which there will be many in the near-term, helping our economies and hopefully setting the scene for a better long-term and sustainable future for humanity. Guernsey is already home to a number of philanthropic foundations with international reach and with a growing family office presence complementing an already diverse and competent finance industry Guernsey is well-placed to help younger generations of private wealth in their quest for effective philanthropy.

It seems therefore that giving can make you richer in more ways than one. Not only in the most important way: fulfilment of our sense of being part of a global community and that inexplicable sense of joy which comes from helping others, but, if well-structured, in the side-effect of generating long-term profits whilst supporting philanthropic projects.

When passion and profession combine it is a powerful cocktail for success.

 

An original version of this article was first published in the eprivateclient Guernsey report, July 2020.

© Carey Olsen 2020.