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Philanthropy & development: from philanthropic intent to practice
Article published in Philanthropy Impact, April 23, 2018
If you advise a philanthropist who wishes to engage in development, the space can seem daunting. The amounts deployed by state actors are large, raising the question how one can make a difference. According to preliminary OECD data, the UK provided USD 18 billion in net Official Development Assistance (ODA) in 2016. This makes the country one of only six members of the OECD’s Development Assistance Committee (DAC) that actually met the United Nations target of 0.7% of gross national income (GNI) in ODA in 2016.
Around the world, institutionalised private philanthropies on the other hand accounted for roughly 5% of ODA, or just under USD 8 billion per year, according to the recently released Organisation for Economic Co-operation and Development (OECD) report, “Private Philanthropy for Development.”
The question is, what is the most effective strategic perspective for philanthropists, and how can advisors help?
Consider the full toolbox and complementarity of philanthropy
For starters, it helps to consider the context and the tools. Society seems to be reaching an inflection point along a number of dimensions such as inequality, climate change, geo-strategy and nuclear confrontation, as well as social peace and inter-ethnic relations.
The good news is that we also have powerful new tools at our disposal to tackle these challenges. Social entrepreneurship, impact measurement and innovative finance are three powerful ways to solve issues from a new angle.
The availability of more information at lower processing cost, alongside capital markets being committed to invest in ways that are positive for the world as well as profitable, and the celebration of the figure of the entrepreneur as a legitimate disruptor of the status quo, all enable philanthropists to back new propositions.
Take for example, Sea Shepherd UK, a registered marine conservation charity with the remit to conserve and protect ecosystems and species, and one of the grantees of a sub-fund of the Swiss umbrella foundation Fondation Philanthropia (like a UK donor-advised fund). Highlighting that “development” is a wide-ranging subject, Sea Shepherd’s mission to end the destruction of habitat and wildlife around the UK’s coastline and across the world’s oceans is aligned directly with the United Nation’s Sustainable Development Goal 14 (SDG), to “Conserve and sustainably use the oceans, seas and marine resources for sustainable development.”
Would the organisation’s innovative “direct-action” tactics to investigate, document and take action to expose and confront illegal activities committed against marine wildlife and habitats always sit well with the approach inherent to ODA? I will let the reader answer that question. However, we notice that it is a very effective complement to efforts such as the Foreign & Commonwealth Office’s Barren Isles Marine Protected Area in Madagascar, which aims to secure fisheries management rights for traditional fishing communities to help protect biodiversity while supporting livelihoods.
Follow four rules of thumb for effective philanthropy in development
According to the United Nations Conference on Trade and Development (UNCTAD), achieving the SDGs will cost between USD 5 to 7 trillion, with an estimated investment gap in developing countries of USD 2.5 trillion. Put differently, we will run out of neither work nor the need to innovate in development any time soon. There are a few rules of thumb though that help to derive a holistic, strategic perspective.
A philanthropist’s competitive advantage is the combination of capital and passion. Rule #1 is: Emotion fuels your commitment. Find out what your passion is. The best way for an advisor to help identify it is to ask a series of questions, including: what is your motivation for giving? What issues are dear to you? What does success look like - what impact would you like to achieve? What kind of engagement are you considering? With whom? And so on.
Moreover, philanthropists are not acting in a vacuum. So, rule #2 is: Scope what is already being done, and take a view on partnering. According to the Association of Charitable Foundations’ Giving Trends 2017, the UK’s top 300 foundation grant-makers made grants of GBP 2.9 billion last year. According to the 2016 Wealth-X report, philanthropy is now the top interest for 36.3% of Ultra High Net Worth individuals (UHNW), ahead of sport (34.5%) and education (19.8%; possible to list several top priorities). UHNW individuals with self-made fortunes represented almost 70% of major donors, demonstrating the philanthropy space as dynamic, with lots of entrants. Some could be potential partners for your philanthropic endeavours. The advisor’s job is to help clarify how to proceed, and what kind of “partnership” is best suited.
There are many ways to drive impact. One might argue that the total official remittances to developing countries of USD 429 billion (2016) recorded by the World Bank are at least as powerful in driving progress as the USD 462 billion in ODA recorded by OECD for 2013-2015. Rule #3: Make sure to consider all the tools in the box. Setting up a foundation that makes grants is one of several options to engage in the social change ecosystem. How do your objectives fit with other pathways such as impact investing, crowdfunding platforms, or donor collaboratives? In the United States, donor-advised funds seem to outpace the growth of other philanthropic structures. Rising regulatory requirements for charities bring the structural question of donor advised fund vs. independent foundation to the fore.
Finally, in a changing world, philanthropists are encouraged to monitor how the possibilities are evolving, and to keep some options open. Efficiency matters and options to drive results change. For example, the OECD report finds that private philanthropies in development primarily deploy capital through well-known large organisations, with the GAVI Alliance, World Health Organisation, UNICEF, PATH, and Rotary International topping the list in terms of volumes. In practice, going through re-allocators is today often the most efficient way to finance small organisations on the ground, where donors are not present. As the digital transformation continues, new options to bridge the global-local gap, including via Big Data and algorithmic grant making will come on stream at some point. When they do, it will be time to revisit how to translate the philanthropist’s initial vision into results. It is best to keep some flexibility to re-adjust.
Conclusion: be systematic, not dogmatic
Social change and development are multi-faceted, and so are the interventions with the highest likelihood to bring about the targeted results. There is no one size fits all for philanthropists who are, or want to become, active in development. The most important piece of advice is to take the time to locate advisors who act in the donor’s best interests and are technically competent.
Being systematic without being dogmatic helps to marry passion, strategy, and structure in ways that drive real progress on the ground.
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