Philanthropy Impact

Inspiring philanthropy and social investment across borders, sectors and causes

UK and International Trends in Philanthropy

Expert opinion

I was asked recently by Philanthropy Impact to join an international panel on philanthropy providing an overview of the UK and touching on some broader trends which may be common across borders. This blog is a summary of my presentation.

It’s a very important time in philanthropy, the need for it is clear. Our planet and it’s people face many big problems, and as government deficits have risen, private capital in all its forms (individual, family, corporate and foundation) is needed to help plug the funding gap both locally and globally.

The biggest challenge may not be the supply of wealth but in getting private and public bodies to work together both in terms of pooling capital and in creating solutions - and to do so by using their resources more efficiently against shared goals. By way of example, there is a $2.5 trillion investment gap to fully achieve the UN SDGs – this gap can only be filled by public and private collaboration.

Professional advisers (for example financial, legal, tax, philanthropy and impact) have a big role to play in encouraging and enabling the philanthropy needed. This is because of the growing client demand for more and better philanthropy advice: ‘Two thirds of the UK's wealthiest people believe professional advisors could do more to provide good philanthropy advice’

So let’s start with UK giving:

The total amount of giving in 2015 was £9.7bn compared to £9.6bn in 2016 with the average amount given being £18 in 2016, more generous than the average donation of £14 in 2015. The UK came 11th in the 2017 World Giving Index but came 7th when scores were aggregated over 5 years. This leads us to believe that charitable giving in the UK is quite stable but it can’t be taken for granted.

Simultaneously, the wealthy of Britain are getting richer and they are giving more than they have before - but they are giving a smaller proportion of their wealth i.e. their wealth is growing quicker than their philanthropy.

The rich gave £3.2bn to charitable causes in 2016 up 20% on the year before, with the threshold to be included in the rich list increasing to £110m. There are now more billionaires in Britain than ever before. What’s also interesting is the big shift in the source of wealth. When the rich list was first published in 1989 two thirds of people had inherited the wealth - but now more than 80% of those listed come from new or created wealth. As those who have created their own wealth are more likely to give it away, we could see a new age of philanthropy.

As an example, Jamie Cooper, former wife of Sir Chris Hohn, topped the Giving List for the first time, giving away over 60 per cent of her personal fortune to charity – about £205m.

I hope that the self-made entrepreneurs will be less risk averse with their giving, opening up exciting new opportunities, especially with the rise of new financing models and social enterprise start ups. There is a big role for philanthropy as risk capital in order to encourage others with greater constraints to co-invest.

In terms of million pound donors, the Coutts report tells us there were 310 donations over £1m+ and 45 over £10m+. This is a total of £1.8bn with an average of almost £6m.

So, the positive news is that there is a large amount of wealth being made available to do good. But there is also a lot of room to increase giving by the wealthy. According to Scorpio research, annual giving accounts for less than 0.2% of the richest people’s wealth - and most giving is accounted for by 15% of them (those with over £10m of liquid assets). So the challenge is to inspire more of the very wealthy to give – and to give more – through creative and personalised advice.

Turning to more macro factors, we’ve certainly seen a link between giving, the economy and the stock market. For example, with the recent bull run in the equity markets we’ve seen an increase in share giving. I think we will also see more property being gifted as part of the huge transfer of wealth between generations which is occurring over the next few decades

Donor Advised Funds

One simple way to enable philanthropy is through DAFs or their UK equivalents like CAF charitable trusts. Donor advised giving has grown significantly in the UK over recent years and we predict it will grow even more in the coming years - especially if professional advisers get behind it. DAF giving in the UK reached £372m per year in 2016 and is predicted to hit £1bn by 2026.

Professional advisors should look at DAFs and their equivalents as an essential part of their ‘philanthropy toolkit’ when helping their clients.  

Trusts & Foundations

Foundation’s grant-making has been on a steady increase year on year; grant making increased by 10% in 2015 and 12% in 2016 to reach a total of £2.9bn.

Personal and family foundation giving grew by nearly 20% and now accounts for 64% of the total value of the top 300 foundations. However, this is the second year in a row that voluntary income in to family foundations has fallen (by 8%). This might suggest we are entering a period of reduced giving into foundations;  some may be looking to spend down more quickly to deliver change earlier – or to use other methods to deliver their missions like impact investing.  

For big companies, total giving by the FTSE 100 has continued to fall year on year – down by 26% since 2013 to just under £2bn in 2016. Thanks to increased giving by a small number of companies, the overall percent of pre-tax profit donated has increased. But we must remember that some companies don’t report on this activity, because they don’t have to whilst others may be focused on other forms of corporate responsibility in addition to the giving of cash, product and talent – in short, integrating social purpose into their business strategy and way of working.

Moving outside the UK, what about two areas of obvious interest in light of their development and growing wealth – China and Africa.

Africa was the only continent in 2017 to see a rise in all three giving behaviours (donating money, helping a stranger, volunteering time). So people in Africa are giving more money and time to charity.

And for the first time in history, African philanthropy is beginning to play a central role in questions of development and sustainability, and is starting to inform policy at a national level.

And China accounted for 80 of the 113 new Asian billionaires in 2015.

Between 2010 and 2016, donations from the top 100 philanthropists in mainland China more than tripled to £3.6bn, and about a quarter of the wealthiest 200 now have their own foundations.

In keeping with their cultural philosophy, Chinese philanthropists show a strong desire to contribute to social harmony, and that is where much of Chinese giving is focused.

The majority of Chinese philanthropists focus on a single issue, with education the most common, and Philanthropy in China is more often an individual rather than a family affair, as many philanthropists are first generation wealth holders.

It’s also great to see that a new ecosystem is taking shape to develop and professionalise the sector, including China’s first training centre, the China Global Philanthropy Institute, established by prominent Chinese and American philanthropists.

More broadly, it is estimated that 2.4 billion people are set to join the global middle class by 2030. So a big opportunity for philanthropy is emerging. If the world’s middle classes were to give just 0.5% of their spending – less than the average UK household gives and about the same as people in the Republic of Korea – that could amount to an extra $319 billion in resources for civil society organisations annually by 2030.

Encouraging not just the very wealthy in areas like Asia and Africa to give but also making it easy for the growing middle classes to give could have an even bigger impact over time, and bring with it a much stronger civil society. 

Turning to other themes, I’d like to touch on the impact of trust, strategic philanthropy and the rise of female philanthropists.

We’ve seen trust in charities decline in recent years and the sector is taking another big hit now with the Oxfam events unfolding and impacting other big charities like IRC and Save the Children. This could affect not just funding but the reputation of all large NGO’s in the way the Kids Company crisis tainted many other smaller charities in the UK.

A lack of trust in multi-national NGOs may lead to more local giving instead, where donors feel more in control, but the question is at what cost to those in the developing world. Giving is closely linked to trust and confidence. In order to gift significant sums to an organisation a great deal of trust is put in that organisation to act responsibly and use the money as intended. Thankfully, giving levels are pretty robust over time but a lot of work is needed to rebuild trust in leadership and governance.

With regards to more strategic philanthropy, I do think we are seeing an increased focus on longer term, collaborative and impact-led giving. It’s certainly true at the Bill & Melinda Gates Foundation level with the formation of co-impact, a philanthropy partnership kicking off with a $500m global fund.

One way of getting our heads around this trend is thinking about the differences between transactional and transformational giving.

Transactional giving is obviously good as it addresses an immediate need - but does it help to change the conditions that create the need in the first place?

Transformational givers on the other hand research and identify the core problem, the right approach and the target outcomes. It’s about changing the system.

Connected to this, I’m a big supporter of the “all assets” approach to social investment which is gaining traction. This is about leveraging all the assets of an organisation, or an individual, to maximise sustained, mission-led change.

We are also seeing interesting methods and models evolve such as blended finance, social impact bonds and co-impact funds. And the size of the need, and the potential social and economic benefit, is encouraging many types of asset-rich entities to get involved; for example, banks and pension funds investing in critical infrastructure projects.

Women are also making a big mark on philanthropy. A global #MeToo movement for good perhaps?

Forbes counted 56 self made women billionaires in 2017 – what impact will they have on the sector? Fresh thinking, natural collaboration, shared priorities for change? The vast majority of the 56 women have their own charitable foundations and they tend to focus on empowering women and girls around the world. One reason I highlight this is that women are more likely to give - and to give more – so this is another great opportunity in the making.

So what’s my punchline?

The need for philanthropic capital is huge – at a local level in the UK and globally. The number of very wealthy people is growing at a staggering pace both in the UK and around the world, but many contribute relatively little.

So the wealth is out there – and I think the interest and methods to address big problems are out there – but we still have a lot to do to get that philanthropic capital to where it is most needed.

David Stead – dstead@cafonline.org   www.cafonline.org