Philanthropy among the wealthy is booming. But, as Jane Simms discovers, today's givers are not simply writing cheques, they are making sure their donations generate the right social returns
Generosity is fashionable again, writes Charles Handy at the beginning of his recently published book The New Philanthropists. Across the world, the seriously rich are giving away their money and time in unprecedented amounts to address major social problems. Warren Buffett's announcement in June that he intends to give £16.3bn of his hard-earned fortune to the Bill and Melinda Gates Foundation is a far cry from the "greed is good" ethos so popular 20 years ago. Indeed, it is more redolent of the Victorian approach to philanthropy espoused by the likes of the Carnegies and Rockefellers in the US, and Quaker families in the UK such as the Rowntrees, Cadburys and Frys.
But in a sense Buffett is atypical. "I don't think I'm as well cut out to be a philanthropist as Bill and Melinda," he says. "What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?"
By contrast, the majority of the new wave of philanthropists are characterised by their determination to be deeply involved in the causes they choose to support, rather than just writing a cheque.
What's different from the Victorian era is the rising numbers of self-made rich-the entrepreneurs and City folk who have made fortunes at a relatively young age. Many of them are applying to their social causes the skills that made them successful in their careers. What's more, they expect a return. Sir Tom Hunter, the Scottish retail tycoon who has invested more than £100m in charitable causes over the past decade, says: "We don't just put our money in and hope."
Examples are legion. Stanley Fink, one of the highest-paid managers in the City, recently announced he would be stepping down from his role as chief executive of Man Group to spend more time on charity work. One of his philanthropic activities is acting as a trustee for Ark (Absolute Return for Kids), a hedge fund charity that focuses on helping children. Jamie Oliver has captured the public's imagination with his restaurant Fifteen, whose profits are ploughed back into helping disadvantaged young people. Dame Steve Shirley, founder of outsourcing and technology firm FI (now Xansa) set up the Kingswood Trust for her autistic son and others like him, and has since invested more than £50m in projects in IT and autism. Here philanthropy, she says, is always pioneering and strategic.
The list goes on, and the example of these high-profile philanthropists has proved infectious. Since the turn of the Millennium there has been a surge in generosity, prompting Philip Beresford to add a Giving List to his Sunday Times Rich List, and spawning a cluster of new organisations dedicated to providing information, research and guidance on the charity sector for wealthy-and not so wealthy-donors.
Coutts, the private bank, established a philanthropy team in April 2005 to help its clients better understand all the different ways of giving, so they can make a bigger impact with their money and derive more personal satisfaction from the process. Voted best provider of philanthropy services by Euromoney magazine in 2005 in recognition of its pioneering role, the philanthropy team's clients include landowners, entrepreneurs, City people, sports stars and other celebrities and family businesses.
Mark Evans, the ex-JP Morgan and Citigroup banker who runs the team, explains that several factors underpin the new surge in generosity, including increased longevity and a more enlightened attitude towards money.
"In 1989, 75 per cent of giving came from inherited wealth, with just 25 per cent self made. Today that position has reversed," Evans says. "While those with inherited wealth traditionally see themselves as stewards of that money, the new rich are interested in mobilising it. Many of our clients are now thinking twice about leaving everything to their children, either because they believe it is better for them to make their own way in life, or because they think that wealth is a burden."
Susan Mackenzie, interim director of Philanthropy UK, another organisation set up to disseminate knowledge and best practice, also notes a desire among the newly wealthy to give something back to the communities they grew up in and to which they feel a direct connection. Many of them also believe passionately in a cause, and want to be a catalyst for change. But how much of it is to do with ego?
"There is none of the condescending 'giving of alms' that characterised much Victorian philanthropy," says Mackenzie. "I am always impressed by how humble and earnest these people are."
Indeed, the desire by many donors to be anonymous could arrest the giving trend. Handy says: "Social change is triggered when new role models begin to set a new fashion. For that to happen these new heroes have to be individuals with whom others can identify. Their personal stories should excite the imagination. They must also be willing to put their heads above the parapet so that others can see them."
A recent survey called Why Rich People Give from Philanthropy UK found that half the self-made wealthy givers to charity were entrepreneurs, the other half professionals, particularly from the finance sector. But according to the 2006 Sunday Times Giving List, although the top 30 donors gave away £440m in 2004/5, the 1,000 wealthiest people donate on average only around 0.2 per cent of their wealth-a far lower percentage than that given by the less wealthy. One of the reasons for the restraint is concern among wealthy potential donors about how well charities will use their money.
"Charity fundraising costs can be very high-in the US they are between 22 per cent and 43 per cent, for example-and one of the roles of organisations like ours is to try to reduce them," says Nigel Harris, chief executive of New Philanthropy Capital (NPC). NPC was established as a charity in 2002 by a group of ex-bankers who decided to use their expertise to research the "market" for philanthropy, providing advice and free research reports to would-be donors about where the greatest needs are and how they can be met.
Modern philanthropists fall into two broad camps. There are the "venture philanthropists" or "social entrepreneurs" that Handy focuses on in his book-people who spot a particular need, often by accident, and mobilise their own and others' talents and energy to fill it. Then there is the more formalised giving encouraged by the likes of Coutts, NPC and others, who guide donors who lack the time, expertise or inclination to plough their own furrow.
The twin approach is putting pressure on the charity sector to be more accountable. "That's more difficult to do in the voluntary sector than it is in the private sector where you can boil success down to one parameter like return on investment or operating profits," admits Harris. "There is no single meaningful measure of social return. But we are getting charities to better articulate their vision, and to provide some evidence of their success."
Some charities are irritated by what they see as the meddlesome interfering of upstarts who undermine their own patiently accumulated expertise and influence. Some of the charities involved in the Make Poverty History coalition, for example, thought Sir Bob Geldof was soft on the G8 after last year's Live 8 concert. Geldof claimed Live 8 was successful in persuading governments to introduce policies to eradicate poverty, but the coalition felt there had been no real change.
Tony Durham, a spokesperson for ActionAid, says: "One of the most effective ways for philanthropists to make a difference is to work with charities like us who have built up years of experience and expertise."
That may be, but, as Harris says: "New players are vital to stimulate the market and keep it dynamic. The new generation of wealthy business people don't just have proven business skills, but a keen understanding of risk." As Evans at Coutts adds: "Charities are having to get to grips with the idea of more meaningful and engaged givers." In truth, each side needs to learn from, and work with, the other because, as Handy says, "profound social change does not come from a few inspiring projects or individuals. It generally needs a host of interlocking shifts in attitudes, social movements and markets, as well as more involvement from government".
But fears that growing involvement by the private sector in social initiatives will lead to a further withdrawal of government support for key services are unfounded, believe the new advisers. "Philanthropy is too small to take the place of government," says Salvatore LaSpada, chief executive of the Institute for Philanthropy. LaSpada believes that philanthropy complements state support by finding niches that governments are usually unwilling or unable to fill, and by testing, building and evaluating new ideas that might subsequently become more palatable to the tax-paying public.
One of the best ways to ensure charitable giving is more efficient is by helping the charities themselves raise their game. An organisation called Pilotlight acts as a broker between carefully-selected charities that need to move from dependency on hand-to-mouth fundraising towards a more self-sustaining future, and individuals-typically directors from a large range of businesses-wanting to offer their time and expertise to coach them. Each "Pilotlighter" pays £1,300 to join the organisation, a donation that funds a dedicated project manager who arranges all the meetings and handles all the administration so that the volunteer only has to turn up and do the job.
The high-profile and high-giving donors may be grabbing the headlines, but you don't have to be super-wealthy to give strategically. "Many people we advise stick their toe in the water with an annual donation of, say, £1,000 a year," says Evans. "We would advise them how to do that tax-efficiently and on the best place to donate it. Setting up a charity bank account with the Charities Aid Foundation is a good way to start. And charitable giving is not just about giving money-time and expertise can be equally valuable."
But people who give have a responsibility to do it wisely, say advisers. "The charitable impulse is lovely, but uninformed giving can be wasteful or positively harmful," says LaSpada. And, as Andrew Carnegie, the Scots-American industrialist and philanthropist, said: "It is more difficult to give money away intelligently than it is to earn it in the first place."
NPC's Harris predicts that "a huge transfer of wealth" to social causes from the current generation of successful business people is still to come. But social causes won't be the only beneficiaries. Donors themselves get great personal satisfaction from their philanthropy. Harris, himself an ex-banker, says: "My colleagues and I find it not just morally satisfying doing what we do, but the most intellectually challenging job we have ever done."
Business as a whole is also a potential beneficiaries. "There is a lingering question around the role of business and capitalism: is it there purely for the shareholders, and do they really deserve all that? Philanthropy gives a point to the process of wealth creation and it gives the people who work in it a reason to get out of bed in the morning," says Handy.
Philanthropy is becoming a new status symbol. "We should not sneer," asserts Handy. "If status is measured by how much one gives to others, society is the richer."
Why do they do it?
Berry and his brother, Tim, run a hotel business in the Lake District employing 350 staff, turning over about £14m a year. They give a lot to local environment projects and 12 years ago helped set up the Lake District Tourism Conservation Partnership, a public private body that has so far raised £1m. The money funds activities, from footpath and dry stone wall repair to protecting the habitat of red squirrels.
"We feel privileged to live here and owe our living to the beauty of the Lake District, so we want to look after it," says Berry.
The pair also fund an orphanage in India and are developing a catering skills programme for young Kenyans. "We are engaging with philanthropy in a creative way," adds Berry.
Berwick, 45, has worked in the City since 1982. He says: "When you reach a certain age you want to start giving something back. With a cheque, you don't know where the money's going and you get a minute or two's satisfaction, but there is no lasting impact."
He joined Pilotlight because it helps build capacity and infrastructure for charities, and it requires involvement. For the past nine months he has worked with Free at Last, a charity helping young people to develop respect in a deprived area of Birmingham.
"As I've grown older and started looking after my parents, I've become aware of how little government support there is, and I've had to turn to charities to help. That's made me want to put something back myself," says Higgins.
He acts as a trustee of the Beacon Fellowship, which was set up in 2002 to recognise exceptional giving to the charity sector in order to inspire others. "We all have duties and responsibilities to help make society a better place, and when I retire in five years I intend to do more. My charitable role is more satisfying than making money," he says.
Renard joined Pilotlight two years ago to help the Westminster Children's Society, a group of nurseries that looks after disadvantaged children. Renard is raising standards in order to attract more full-fee-paying children who, in turn, can support more disadvantaged kids.
"It is very rewarding helping the charity move forward and to grow sustainably," says Renard. "Engaging with a different part of society is personally beneficial, and forging these outside links helps BP, too."
Before joining the family business, Bower worked as a loss adjuster investigating insurance fraud. One job brought him into contact with a heroin addict living in a half-derelict house looking after a baby. The experience was a sort of epiphany, and when he took over the £1.5m turnover family business he made it his goal to achieve social as well as financial success. He and his senior managers are school governors in a deprived area of Sheffield, and he works closely with poor coffee-growing areas in, for example, India, where he has built a social centre for one community.
"We give to charity for selfish reasons: it makes us happy," says Bower. "We give away about £10,000 a year in straight cash. But it's more fun finding a project and working out what we can achieve. The amount you donate is far less critical than what you do with it."
