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#Philanthropy — 28.08.2017

Philanthropy: In Pursuit Of Impact

Nathalie Sauvanet

Next generation philanthropists’ investment tools and strategies.

The shift in the approach to philanthropy is demonstrated by the investment strategies and tools adopted by family foundations in which millennials are playing an increasingly active role. Family foundations often invest the bulk of their endowment in conventional investments, such as real estate, stocks, bonds and mutual funds to generate returns to sustain the endowment and support their grantmaking activities.

Millennials, however, are increasingly interested in using innovative financing tools and market models to make an impact. They are seeking digital and data-driven tools that allow them to support initiatives and social entrepreneurs in distant parts of the world to bring about real social change.

In fact, the interest in simple donations as the principal philanthropic tool declines among younger age groups, according to a study by Blackbaud, a supplier of software and fundraising services to non-profit organisations. In the survey, 48% of older donors and 45% of baby boomers said financial donations made the biggest difference, while only 36% of Generation X and 25% of millennials agreed.

"We find them more engaged in the philanthropy venture, social enterprises, social impact investing” says Mr Vaccaro (CEO, CerPhi). “They are interested in models that are self-sustaining in the long term.”

There are broader benefits for family foundations as well. “Impact investing can help bridge the generation gap in families, as it allows younger family members to pursue good goals, while the need to try to do so profitably can reduce the fears of older generations that the youth will squander their hard-earned money” says Mr Bishop (senior editor, The Economist Group). This is happening against the backdrop of a growing impact investment industry, which is increasingly blurring the lines between philanthropy and investment.

Some millennials engaged in their family foundations are leading the charge.

Ms Jacobs, who heads the Jacobs Foundation in Switzerland, has made forays into impact investing, allocating CHF2.5m (US$2.5m at current exchange rates) to three impact investments in 2016, with plans to invest a total of CHF6m by 2020 in impact finance, including equity investments and loans. Specifically, these include the creation and management of an education impact fund, seed capital for a portfolio of EdTech companies, and funding for microfinance institutions to expand their education products portfolio, all in Côte d’Ivoire.

Ms Cordes (vice chair, Cordes Foundation), in the US, is working to shift all the foundation’s investments into impact investments. Howard Warren Buffett, the 33-year-old grandson of Warren E Buffett, is an executive director at the family foundation, The Howard G Buffett Foundation, and is championing social value investing.

Even in China, where impact investing is in its infancy, Mr Cunningham (director, Ash Centre China Programmes and the Asia Energy and Sustainability Initiative, John F Kennedy School of Government at Harvard University) sees a rising interest among the younger generation in using new financial tools for good, particularly as that generation becomes more involved in international business transactions. “Millennials are more fluent in financial instruments and much more aware of international mechanisms, tools and legal regimes such as trusts, family offices and donorrated funds,” he says. “You see the rise of people in their late 20s to early 40s beginning to engage with impact-investing products as China builds those products domestically.”

 

Read the 2017 BNP Paribas Philanthropy Report, written by the Economist Intelligence Unit, to explore how the Next Generation of Philanthropists is shaping the future of philanthropy, balancing the weight of family legacies through new tools, technologies and strategies.