How to be good… or at least a little bit better!

Four experts share their insights on the long, rewarding road to catalytic philanthropy

Starting out

Rebecca Eastmond, Head of Philanthropic Services at JP Morgan Private Bank

Everybody gives, whether it’s to a person on the street or to a member of your own family. We’re about moving from basic charity to philanthropy: our belief is that you can achieve significantly greater results with the money that you give away, if you engage not just your heart, but also your brain.

When you’re starting out as a philanthropist, we’ll talk to you about what you care about. What have you done in the past that you think worked or really made a difference? Or we’ll ask you about the things that make you angry in the world, and the injustices that make you think ‘something should be done about this’. Those things are often the things that, if you boil it down, you would most like to correct. It’s a question that you might not ordinarily ask yourself: what makes you mad?

Many families in the Middle East are dealing with wealth and business transition, and see philanthropy as an integral part of what they’re doingDo some initial thinking but don’t spend forever on research. There are shortcuts: one is to convene an afternoon and sit with a group of experts and other funders for a few hours, to get a very quick tutorial. Or go and meet some other donors who are working in the same field who can tell you about their experiences, what works and what hasn’t worked, to see what resonates. There’s an inward learning phase, and then a quick and dirty research phase. Some people can do a lot more thinking and spend a lot more time and be okay about it, but the thing that often helps many people is to then learn by doing.

Deciding whether to set up a foundation or not usually comes down to how much money you’re looking to set aside for philanthropy. At about $2m it makes sense to consider forming some kind of structure, and then we advise people to look seriously at setting up a charitable foundation structure once they are up to around $10m.

There are a number of reasons why you might want to set up a foundation. One is psychological: you want to earmark this pot of capital for philanthropy. You may add to it or take away from it, but from a management and psychological point of view that money, once it’s in the foundation, you can’t take it back. It’s in there for you and for your family, for charitable purposes.

In addition, setting money aside into a foundation can act as a really great way of bringing people together around the family, structuring a family enterprise around supporting the community. Many families in the Middle East are dealing with wealth and business transition, and see philanthropy as an integral part of what they’re doing. Structuring the philanthropy can be important as a way of keeping engaged the family members who won’t be involved in the business. Sometimes it’s a way of helping grandchildren understand the value of money, and teaching them the family values. Not everybody can work in the business – you certainly can’t do it when you’re 14 years old – but you might be able to sit in an advisory capacity or on a junior board of a family foundation.

You may wish to set up a foundation structure for tax reasons depending upon what jurisdiction you are in: it might be tax-efficient to give profit or income to a charitable structure, and that structure might also act as a holding vehicle while you decide how you want to disburse the funds. Finding the right jurisdiction is so important: as well as tax considerations, you need somewhere that allows international giving and is open to giving across borders.

You should also think about right-sizing your management team. I’ve worked with a couple of Middle East families who set up small boards, with trusted family office advisors on them, alongside a few key family members, perhaps five individuals in total. This small group makes decision-making much easier, and you can then have an advisory board of experts who can add their knowledge to your activities. It helps to keep costs down, too: if you have a board and an advisory board they don’t need an office. They’re volunteering and they’re meeting every now and then, to help you, so they can do that at your business office or even at your home.

Most of the early-stage family foundations I work with don’t have full-time staff. They might have a part-time researcher, but they’re not running a full-time office for the foundation. Pretty early on it becomes cheaper to run a foundation than to run another structure: you’ve got filing, you’ve got admin spend in terms of producing accounts and an annual report. That’s not a great deal and you may even be able to get someone to do it in the office.

The thing to do is actually get started, and once you are giving and you’re involved with something, you will find that the pleasure and the benefit you will get back from it as an individual, makes you want to do more. Try something. Get going.

Demanding results

Francois Debiesse, Former CEO of BNP Paribas Wealth Management, and a senior advisor on philanthropy at the bank

Wealth has changed: 20, 30 or 50 years ago most wealthy people had inherited their money and they had an obligation to transmit that money to their children. Of course generosity was present, but it was in the form of traditional charity. Now most wealthy people in the world are aged between 50 and 60, are more and more often female, and have built their wealth through their professional life. They have all this money, and face the same existential question: what to do with it?

Today most clients consider philanthropy as an investment, not a donation. Of course they do not expect any financial result from this investment, but they want a social impact. When you have been a successful entrepreneur all your life, you have in mind that you have to optimise your investments, and the day you stop being an entrepreneur and become a philanthropist, you still have that mindset; it doesn’t change.

The starting point of this evaluation is defining the most important objectives of your philanthropy: what do you expect, and what will you ask of the beneficiary, the person in charge of the project? Defining objectives and measuring the way you approach these objectives is important for the investor, by which I mean the philanthropist, and for the beneficiary – the association or NGO in charge of building the project.

Your methods of evaluation will depend on the type of project you are funding. How do you measure the result of an investment in culture? If the objective is to restore a monument, then of course the objective is finishing the restoration. But if your idea is to support creative artists, it is much more difficult to have a precise mathematical approach to results, and so you will need to be more qualitative in your approach. It can sometimes be easier if you are addressing specific social challenges: if the idea is to enable more children to go to school, then you can count the numbers of children enrolled at the end of the year, and you have your answer.

For me it’s very clear: philanthropy can’t be simply a question of money. If the philanthropist just gives money it will be very, very difficult to ensure the best efficiency of this investment, and to make sure that this money is well utilised. However, at the same time, the philanthropist can’t become the guy in charge of the project; it has to stay in the hands of the beneficiary.

That’s why you need a dialogue, a platform for interaction between the two stakeholders. It’s striking how often you see non-profit organisations that are doing great things, but are insufficiently aware of financial and economic realities. The donor, therefore, can drive financial efficiency, particularly because in most cases, the donor will have experience of managing these considerations. At the same time, the donor has to accept that it is not his or her own project, and that there are limits to their involvement.

Learning from others

Gillian Arthur, Director of the Sanne Philanthropic Foundation, a non-profit organisation created to give guidance to donors

If you take the more intractable social issues that the world is trying to sort out, if they weren’t so difficult then we would probably have solved them by now. However many people are still underinvested in understanding the issue they’re trying to tackle. What do you really know about it?

There are lots of people out there who have been working on these issues long and hard. So what’s gone before, and what’s the current thinking? You might choose to challenge that thinking, but you need to know what it is first. To quote a past director of the Rockefeller Foundation, “Money is a feeble offering without the study behind it which will make its expenditure effective”.

Take a look at other funders, and ask what data they have available, what lessons they’ve learned. After all, philanthropy is trial and error – you could argue that nothing is ever a failure, because if you then use that learning as you go through the next iteration, then that helps you. Do a scan of what’s out there. Who’s doing what, and what’s working? If you are looking for an NGO or association through which to channel your funding, then ask around: who’s got the expertise, who’s got the experience, the track record… and who’s really trying?

There are a lot of charities out there, when you ask them what they are planning for the future, the next stage, they don’t have an answer. It’s business as usual. I think that there is little substitute for data. That data may not be as robust as it is in the for-profit world, there may be many strands and you have to make a judgment call, but there needs to be constant questioning: does this intervention make sense?

Writing a one-off cheque drives me bananas because it might not achieve very much. You’ve got to set out to make a difference with this money. You can define what that difference is and how ambitious that difference is, but it’s not just about writing cheques. Fortunately, there is now more data than ever before available among the funding community. We go to donor meetings and there are sessions on failures, which is terrific because if you don’t admit that something didn’t work, then you can’t move on. Failure isn’t necessarily a negative; it’s a sign that you’re trying.

The next level

Jennifer Alcorn, Senior Program Officer for Private Donor Engagement at the Bill & Melinda Gates Foundation

Don’t think that you can go out and do it completely on your own. You want to be aligned with a range of partners that are working in the same space, and you want to be part of a global community that’s working towards something, because then your voice is amplified. We’ve found that the more you can bring groups of people together, the more influence you’ll have on government aid dollars around the world, and the more influence you’ll have on sources of funding.

What’s so amazing about the Gulf is that people are so generous, but the culture has been that you give with one hand, but then turn your head because you don’t want to embarrass the recipient; you want them to be empowered. It’s a beautiful idea but nowadays it really helps to put your name and your dollars against something that gets attention. Whether or not you’re looking for media attention, your dollars speak when you put them on the table. There’s a sea change going on in the Gulf among some very sophisticated philanthropists, where they are meshing the region’s historic culture of giving, with impactful catalytic philanthropy. By aligning with other partners, you’re doing that automatically.

Every individual’s philanthropic portfolio should have a mixture of types of investment, and you should work out how much you want to give to each type of philanthropy. Scalable, sustainable philanthropy is where you’re going to get the highest impact, and so that should account for around 50 per cent of your portfolio.

There’s real value in giving to something that you believe in, and that answers an immediate need and may not have scale attached to it, so the next 25 per cent should go towards those things where you know it’s the right thing to do and you just do it. Take the earthquake in Pakistan or the tsunami in Indonesia; those were examples where funding was needed but it wasn’t scalable because it was emergency relief.

The final 25 per cent should be reserved for risks. Like a venture capitalist, park that capital on the off chance that a risk might pay off. You might help create a new drug or get a vaccine through trials; you might change the world. It could become scalable and the chances are it will move into your 50 per cent when it is ready to be delivered.

At some point, you’re going to need to leverage governments and the private sector in order to maximise your impact. As an individual philanthropist I don’t know that you should go to a government and pitch a programme. Instead, invest in a grantee whose work you trust and believe in - the chances are that they will have relationships with governments. With the private sector, the most important conversation you will have is up top before any money changes hands. The power of the philanthropist is to say ‘Ok, I will make this investment, but then you need to make sure that the product will get into the hands of those who need it, at a price they can afford’. The corporate must adhere to strict rules and costings, otherwise we might as well just make a business investment and make a return on it. In this case, the return is that these interventions are going to get to those who need them. That’s real leverage.