It is a cliché to say that the pandemic has changed everything. But for those looking to engage with philanthropy it has brought out some new questions and challenged existing norms.
One of the clearest of these being the decision about long term planning, in effect whether to help now or help later. A number of individuals and institutions with prudent financial planning, large reserves, and rainy day funds were left asking themselves if a global pandemic, affecting millions and bringing the world to a standstill, isn’t the rainy day then what is?
There were some spectacular responses from the philanthropic institutions, a prominent example being the Ford Foundation in the US raising 30 and 50 year bonds totalling US$1bn to provide the opportunity to grant more emergency relief now.[i] Feedback from across Europe via the European Venture Philanthropy Association (EVPA) showed a similar drive amongst foundations to provide emergency funding to existing partners, with responses ranging from providing millions of Euros in emergency funding to the building of hospitals in the case of Fondazione CRT in Italy[ii]. HNWIs likewise responded quickly with UBS identifying 209 billionaires publicly committing US$7.2 billion in early response from March to June 2020[iii].
Despite this large early response, it was another cliché to present the COVID-19 pandemic as one event with one timeline. This crisis has moved at differing paces for differing communities. This can be seen very evidently amongst the IFC sector, with some such as in the Caribbean having now emerged from the restrictions and back to business, whilst for others working from home and limited interactions are still the norm; a difference reflected globally. For some countries the effect is now mostly an economic one; early success stories in limiting the virus’ domestic spread such as New Zealand are now facing the restrictions of travel and tourism. Others, 18 months after the virus first appeared, are still in the midst of the worse humanitarian effects such as Brazil with its rising death toll. At the same time other major countries (US or UK) are looking to open up, based on the success of vaccination programmes. Each stage brings differing priority needs and support. Ranging from responsive emergency support, through to policy and opinion changing. For those societies past the emergency stage, larger questions have arisen around building back better or similar.
The length of this crisis has also meant that those who have been early responders are also now under more financial pressure as extra levels of funding cannot always be continued ad infinitum. This unique set of circumstances raises the core question of when and how philanthropists, be they corporations or individuals, should play a role.
Where does this leave socially minded HNWIs? Often back at the start, exploring what they wanted to achieve with their philanthropy. Not just through the lens of social impact (what they wanted to change) but also through the lens of family benefit. To be clear: by family benefit, it is not to say that individuals are looking to financially benefit (although indirectly this may be the case through reputation building etc.) nor is it to say that this family benefit cannot be complementary or secondary to the desired social impact. Families engaging in philanthropy can have a number of differing drivers: religion or beliefs; a desire to engage the next generation in issues; provide purpose to the family; perceived guilt; tradition etc.
Clarity on ambitions ensure that the philanthropic effort remains sustainable over the long term and enables full engagement. Answers are difficult to come by and are often changing. The need for regular review is important. The pandemic and the mobilisation of actors posed a stop point for many philanthropists to review how and where their philanthropy could play its best role.
Aside from the normal human initial reaction to want to help, more individuals are taking a longer, more strategic approach to see where their philanthropy can fill gaps that other (often larger) actors may be unable or unwilling to address. These individuals are seeing themselves as investors for impact. These actors, for whom impact is a non-negotiable, are looking at interventions where they can be a catalyst or can leverage other actors and resource; supporting not just with grants but also other instruments and non-financial support (expertise, connections, or profile for example). Looking to step in to deliver impact, with a higher risk tolerance than other funders, they are able to respond more flexibly than institutions or corporations, governed as they are ultimately purely by the wishes of the family.
One area where both HNWIs and corporates find themselves overlapping would be in the area of reputation. For those HNWIs seen to be benefitting as their personal wealth increases during the pandemic, the need to be engaged in ‘good’ becomes both more pressing but also more challenging. The very act of giving away their assets can draw attention to the gathering of those assets in the first place. Even the most recent leader in large scale giving, MacKenzie Scott, former wife of Amazon founder Jeff Bezos, is in the strange position of actively giving away billions (an estimated US$8bn in 11 months) yet still seeing her fortune increase purely as an outcome of Amazon stock increase[iv]. To be clear, this is not to criticise her or others, but rather to highlight that there is a reputational risk for philanthropists – in the act of giving large gifts, they draw attention to the perceived inequality in the system and to their own success and assets. This can even lead beyond the theoretical reputation risk, to the physical, in terms of family security.
Corporations are in a similar situation, and their philanthropic giving reflects this. For those who have seen their size and relative importance grow through the pandemic, there is a need to engage with their new communities, building their corporate reputations and reinforcing their social licence to operate. Whilst challenging, these are the lucky ones.
Alongside some undoubted winners from the lockdown scenario, Zoom or Amazon being oft quoted examples, there are losers amongst traditional industries, airlines being just one of the most visible. For those engaged in the philanthropic actions of these companies they are living through the challenging funding paradox implicit in corporate funded foundations. Their income is linked to the economic success of their parent. That parent often is less successful during an economic downturn, resulting in budgets being cut just as the same downturn increases need amongst the communities that the foundation may look to support. Here the importance of long term planning and some financial independence for corporate giving structures, or at least longer term financial cycles are vital, to enable already challenged corporate actors from increasing their reputational hit by having to disengage from communities they may have been supporting for long periods of time.
IFCs can play a great role here for both audiences, providing anonymity to enable decisions to be made, experiments undertaken, and long term support to be grown. The beneficial regulation can also enable a more flexible approach providing support to those areas of need without the requirement to meet restricted national and/or politically charged charitable regulation on spending. It can enable support of politically divisive issues and provide protection for wealth owners. This protection can stretch to family security alongside reputational protection. However, with anonymity comes the opportunity for others to paint their own truth onto the donations. Here IFCs need to make a stronger case for their positive role, highlight their increased governance and call out negative behaviours.
More widely, this crisis has helped to accelerate the existing movement towards reviewing the impact of individuals more widely. Families are increasingly removing the division between the method of making their money with the goals and ambitions of their philanthropy. Rather, they are looking at their whole impact, stretching from the CSR/ESG of family businesses to the impact of their investments. This movement had already started but now has been accelerated with individuals seeing the value in identifying their whole impact footprint. Looking across their portfolio, and whilst their priorities might change (some finance first, others impact first) there is growing interest in making sure at the very least they are doing no harm. This has led to growing offers across the private wealth space, affording individuals the opportunity to invest for both financial return and social impact. What started with negative screening ESG funds (no tobacco, arms etc) has developed beyond the mass divestment campaigns in fossil fuels and others to begin to take more of a positive impact lens. Whilst still relatively small, (US$715bn globally in latest reports[v]) this growing trend for ‘impact investing’ is starting to be seen at the large institutional level with both pension funds and multinationals being affected.
Where does this leave IFCs? Their core strength of recognised, neutral, independent and discrete governance brings a huge amount to this space. The crisis has grown the appreciation of HNWIs for the security that IFCs can provide in a tumultuous world. However, there is a need for IFCs to both actively answer the perception challenge of being a negative actor on societal growth and provide access to the newer impact paradigm services. The perfect opportunity lies in that by solving one, IFCs could look to help solve the other. Increased ESG, impact investment and philanthropic support give IFCs the chance to talk about their positive impact and role in the global financial system.
[i] Ford Foundation Announces Sale and Pricing of Landmark $1 Billion Social Bonds, Press Release 23rd June 2020: https://www.fordfoundation.org/the-latest/news/ford-foundation-announces-sale-and-pricing-of-landmark-1-billion-social-bonds/
[ii] Examples from: Covid-19 A Catalyst for change in Foundation practice? Peter Cafferkey, Gianluca Gaggiotti and Alessia Gianoncelli, EVPA 2021: https://evpa.eu.com/knowledge-centre/publications/covid-19-a-catalyst-for-change-in-foundation-practice
[iii] Riding the Storm, Market Turbulence accelerates diverging fortunes, Billionaires Insights, UBS & PWC, July 2020: https://www.ubs.com/content/dam/static/noindex/wealth-management/ubs-billionaires-report-2020-spread.pdf
[iv] MacKenzie Scott Gives Away Another $2.74 Billion Even as Her Wealth Grows, Nicholas Kulish and David Gelles, New York Times, June 2021: https://www.nytimes.com/2021/06/15/business/mackenzie-scott-philanthropy.html
[v] GIIN – Global Impact Investors Network; 2020 Annual Impact Investor Survey, Dean Hand, Hannah Dithrich, Sophia Sunderji, Noshin Nova https://thegiin.org/research/publication/impinv-survey-2020
Peter Cafferkey is the CEO and Founder of Boncerto Ltd, based in London. Boncerto is a social good consultancy providing guidance and support to individuals, corporations and foundations looking to engage in the next generation of philanthropy, CSR, and impact investing. Peter is also a representative of the European Venture Philanthropy Association, Trustee of charities including Global Health 50/50, an international health charity focused on gender equity in healthcare. He has worked in the philanthropic and impact investing space for over 15 years and regularly speaks on impact investment and philanthropy at conferences around the world. Previously, he was a Director at Geneva Global and International Manager at the Charities Aid Foundation.