Philanthropy Trends: Navigating the evolving landscape of giving

Fairway was delighted to host a Thought Leaders 4 webinar where Dominique Burnett, Private Client Director at Fairway joined Neasa Coen, Partner at Payne Hicks Beach, and Sianne Haldane, Founder of Boon Impact, to discuss philanthropy trends and the evolving landscape of giving in 2024.

The philanthropic journey

There can be a perception that traditionally, philanthropy begins with old money – established families using their wealth down the generations for good causes. But the philanthropic journey can begin in many ways and from many different motivations. Sianne Haldane from Boon Impact believes that individuals start thinking about philanthropy at varying life stages, which are often dependent on life events that impact an individual, such as liquidity events, retirement, losing a loved one or visiting somewhere new and witnessing something moving. According to Sianne, philanthropy traditionally was focused around “setting up a foundation and legacy giving, which was a little bit more arm’s length and transactional”.

The beauty of philanthropy is that it gives meaning to a family’s financial journey and provides measurable outcomes for a family’s wealth. It is interesting to consider a client’s end goals when discussing their philanthropic journey: are they more outcome focused, or purpose focused? According to Sianne, “We are increasingly seeing more ‘what are we trying to achieve?’ and more of a strategic approach, moving away from these ideas of arm’s length grant making. There is more of a professionalisation in what families are doing today”.

Neasa Coen, Payne Hicks Beach, considers that HNW families are thinking about three key factors when contemplating philanthropic giving:

• Structure – whether they need a charity, can use a Donor Advised Fund (DAF), or can make large gifts to charities or institutions. Clients are thinking about their aims and tailoring the structure to suit these goals.
• Type of projects funded – people are giving much more thought to the projects they choose to fund. More people are setting up charitable structures resulting from their own personal experience. There has been a trend towards funding grassroots causes, as people want to give back to where they came from, or to organisations with which they have a personal or family connection.
• How they run it and who runs it – people need to be more aware of reputational issues than in the past; thought needs to go into which family members should be involved in the charity’s work, taking account of their expertise, interests and available time.

Philanthropic structures – what are the options?

“Historically, when we think of philanthropic structures, foundations and charitable trusts come to mind and for many of our clients at Fairway, these have always been the preferred choice. However, as more people want to ensure that philanthropy is included in their goals, we are seeing a shift in the type of structures commonly chosen, such as the DAF.” Dominique Burnett

Sianne agreed with Dominique’s observations and added that high net worth individuals and families are increasingly looking for more strategic and impactful ways to give back to society. “DAFs can be more anonymous in terms of how you are giving, it takes away the administrative burden and it can be way more flexible in terms of how you can respond to potential crises”. Neasa outlines that “for simpler and small-scale grant making, DAFS are great because they have made smaller-scale philanthropy much more accessible to a wider range of people”.

Other trends discussed included impact investing strategies that align financial returns with social and environmental impact - people are choosing to leverage their assets in a different way. Sianne believes that, increasingly, as family values come through businesses, there are rising trends to go beyond the bare minimum and be an impactful business. “We are seeing more charitable foundations owning a business, for example Patagonia. It is a really interesting time and there are so many creative ways that families and individuals can be thinking about the impact they have and how they can leverage their wealth to do that”.

Dominique agrees with Sianne, it is extremely interesting to see the emergence of this business approach to philanthropy, where impact philanthropy is an integral part of strategy. It seems to be something that stakeholders within and outside of the company can get onboard with.

Another factor to consider when choosing a structure type is whether the individual intends to pursue a political purpose. Neasa observes that, as charities are tax privileged organisations, they are subject to additional regulation as a result. One such regulation dictates that it is not possible for charities to pursue political purposes. Due to this restriction, a charity may not always be the best option; for example, for philanthropists aiming to effect social and/or political change. Many organisations with a political focus are instead choosing to adopt lighter models such as community interest or not-for-profit companies.

As well as an increase in DAFS, Neasa and Sianne are both seeing a growing interest in collaborative philanthropy initiatives, particularly at grant maker level. Charities are working together in thematic areas to tackle complex societal challenges collectively. Often this is done through matched funding or collaborative arrangements between organisations to achieve a common goal.

Philanthropy and jurisdictions

It is not only the type of structure that families must consider, but also where to run the philanthropic structure from, which is often dependent on tax regulations and legal frameworks. Neasa clarifies that the jurisdictional choice usually flows from tax and residence considerations. She discusses how an English charity is often popular for the following reasons:

• It is a respected entity with a good regulatory backdrop and there is a vast body of both case law and legislation, which is very helpful to clients if there are any issues.
• English charities can do the charitable work anywhere in the world, unlike other jurisdictions which restrict where charities can fund and whether they can fund overseas.
• There is the possibility to create a dual registered US/UK charitable structure which allows US citizens who are also UK taxpayers to maximise their tax relief on charitable gifts.

In terms of other jurisdictions, Jersey has modernised its legislation fairly recently. Trusts Law in Jersey accommodates trusts with both charitable and non-charitable purposes, along with trusts established for their aims that are a mix of personal and philanthropic. The Jersey foundation is also extremely flexible for structured giving; philanthropists can be involved in the administration of the foundation and the regulations of the foundation can be easily amended if the foundation’s aims evolve in time.

Philanthropy and the new generation

A significant change that is currently being witnessed is the shift of wealth down to the next generation and the resulting changes of approach to philanthropy the new generation brings. 74% of millennials consider themselves philanthropists, compared to 35% of boomers*. Dominique asks if this was a perception shift in terms of what philanthropy means to each generation? Sianne’s view is that “…the next generation are becoming experts in this area, many are taking on education in social entrepreneurism, philanthropy or impact investing”. This then leads them to go on to develop philanthropic initiatives. With the older generation there is perhaps a perception that you must have a very complex strategy for giving, a huge operation that involves setting up a foundation. Whereas the younger generation are thinking about it in a different way, they have an alternative way of solving challenges.

Neasa thinks the younger generation are particularly interested in specific causes such as climate change, education and mental health, many of which are reflective of their own experiences. Sianne builds on this theme and states that the younger generation often talk about their “total portfolio impact”. They are aware of all the resources they have at their disposal and are interested in how they can leverage it in an impactful way. They are also often making conscious life choices around their beliefs.

ESG investing VS philanthropic giving

Sianne explores how ESG investing is quite different from philanthropic giving. “ESG investing is investing for a financial return but also “…about taking an approach to how you invest by identifying environmental, social or governance risks in your portfolio and investing in a way that you are addressing these risks”. Philanthropy, on the other hand is “far more about deploying your discretionary capital to specific projects to create positive impact”. With Philanthropy, people are expecting a social return rather than a financial return.

As Sianne points out, both approaches come from a place of values, i.e. wanting to invest in companies that are environmentally conscious. Further along the chain we come to sustainable investing, where you are making a conscious effort to invest only in sustainable companies – i.e. those that are not harming the environment or who are actively identifying challenges and addressing them proactively. A step further is impact investing where you are looking to achieve positive impact with your investments and investing in ‘solutions’ but are also expecting a financial return (for example renewables).  

Neasa discusses that, although ESG investing and philanthropic giving are different, they can be complementary approaches for high net worth individuals and families looking to create positive social and environmental impact. Many high net worth individuals and families are adopting a blended approach, combining philanthropy with ESG investing to maximise their impact across different asset classes.

Emerging trends in philanthropic giving in 2024 and beyond

During the webinar our panel experts discussed trends they believe will gain traction in the future, these include:

• More strategic giving through which philanthropists are trying to tackle challenges, taking a systematic approach, or trying to understand how their capital can have the most impact. This could manifest in collaborative/ thematic giving and joining forces with others to solve a challenge or tackle an issue. 
• More focused giving to ensure that money is spent wisely and achieves impact.
• Using technology to enable more effective philanthropy, be that through data collection or measuring impact, using AI for example.
• More of a call for better data on philanthropic and charitable giving, as current numbers are quite patchy and inaccurate. Data is needed so that the giving can be streamlined to properly suit this.
• Grassroots giving is getting more attention – people are realising that often dealing with grassroots level issues is often more effective than trying to deal with it further through the system.

From discussions in this webinar it is clear that, in the coming years, we can expect to see continued growth in strategic philanthropy, with an emphasis on measurable outcomes and collaboration among philanthropists, non-profits, and other stakeholders. Additionally, there is a growing focus on addressing systemic issues such as racial and economic inequality, climate change, and public health crises. We may also see increased use of innovative financing mechanisms, such as social impact bonds and pay-for-success models, to leverage private capital for social good. Overall, philanthropy is evolving to become more proactive, inclusive, and impactful in addressing the world’s most pressing challenges.

*https://www.fidelitycharitable.org/insights/2021-future-of-philanthropy/new-mindset.html