Do You Know European Philanthropy?

1. The increasingly important role of “philantrepreneurs”

Following in the footsteps of their counterparts in the US and the UK, an increasing number of entrepreneurs in continental Europe are opting for a philanthropic approach inspired by methods used in finance, particularly in the world of venture capital. This approach, known as ‘venture philanthropy’, entails more than a simple financial commitment. These entrepreneurs offer up their skills in the form of coaching or mentoring as well as mobilising their professional networks to promote the causes that they are supporting. They are focused on efficiency and the social return on their “investment”. The younger generation of entrepreneurs is more willing to accept hybrid methods in the search for efficiency and impact in philanthropy.

However, contrary to assumptions, these philanthropists do not necessarily select their causes rationally. I regularly meet committed entrepreneurs who are planning to sell their business in the short or medium term and express a desire to give back to society, particularly in terms of education. Most of them are interested in improving young people’s future opportunities, usually through merit-based scholarships… whereas a “rational” entrepreneurial approach would have involved a market analysis to determine the needs and obstacles, for example. The choice of cause is usually emotional, whereas the ensuing philanthropic approach is highly rational, grounded in social impact.

Not all European philanthropists become “venture philanthropists” or “philanthro-capitalists”. Whilst they are looking for concrete results, many  philanthropists are extremely reticent about the notion of philanthropic “investing” because they consider philanthropy to be about passion and generosity. For them, performance criteria should not be the priority.
 

2.  Questioning family philanthropy

Many high-net-worth families are starting to consider a familial approach to their philanthropy. Family heads hope to encourage their children and close relatives to develop altruistic values. Philanthropy is seen as having educational value but also forms part of their legacy; some individuals bequeath a quarter, half, or even most of their wealth to a foundation, rather than leave it to their successors. This trend is growing in several continental European countries, particularly among family business dynasties.

However, unlike their peers in the US and UK, the philanthropists I meet are not always looking to perpetuate the family philanthropy.  Many of them challenge the assumption that their successors are obliged to carry on in the same vein after their death. An increasing proportion of third- or fourth-generation family members express their fear of “imposing such a burden” on their heirs, particularly when a family foundation already exists, or is planned. In this regard, the Europeans diverge fundamentally with philanthropists in the US and the UK, or even in Asia, where advice on the subject of setting up and running family foundations is regularly sought. Some of our US and UK clients have even asked us for advice on how to re-establish family ties through philanthropy!

3.  Umbrella foundations and donor advised funds : philanthropic tools

The 21^st century has seen a growing awareness that effective giving is not a simple matter. In this context, structuring has become progressively more important. Umbrella foundations and donor advised funds provide both a platform for action and deliberation, as all of the different aspects of a philanthropic project have to be taken into consideration. This type of structure is ideal when the philanthropist wants to be personally involved, think about the long term, or would like to think about estate planning.

It is not necessarily a good idea to set up a foundation if there is already an existing structure with the same objectives and beneficiaries. In this case, pooling resources could save time, money and improve efficiency. For example, one of our clients wanted to set up a foundation in order to award prizes in the medical field. The costs associated with running this type of structure, an independent evaluation committee, the awards process, as well as marketing costs, would have equalled the grants awarded. We suggested that the client consider earmarked funding to an existing structure which shares the same goals and would agree to award the prize in his name.  This approach was logical and perfectly adapted to his philanthropic project.