Trends shaping philanthropy in the post-pandemic world
One of the things that has become evident, particularly during the Covid-19 pandemic, is that philanthropy itself has become the trigger for many high net worth families to begin to consider creating a new one-off family office. But the notion of philanthropy is highly personalized and unique to each family and, as such, is guided by what matters most to them. This quickly becomes an important factor in determining what advice families seek and obtain from a trusted counselor.
For example, the recent downturn in some commercial real estate markets has led many family offices to consider investing in social housing programs. They do this by forging bonds with their peers who demonstrate a common goal of making a difference.
The nature of the donation is changing
The nature of donation is changing, as are innovations in philanthropic structures to effectively facilitate the receipt of financial contributions. Recent financing innovations piloted by financial institutions, philanthropists, nonprofit organizations (NPOs) and development finance agencies include social impact bonds, blended finance, and debt obligations. development impact. Standard Bank’s Africa Wealth Report 2020 found that only 17-27% of families have their own private foundation or charity. Giving structured through a variety of financial vehicles, including donor-advised funds (popular in the US), can be supported by impact investing within family investment portfolios.
Measuring impact is another rapidly evolving trend for families moving towards a much more proactive assessment of the overall impact of their family wealth, aligned with a growing appetite in the financial sector to effectively measure assets. non-financial returns for investors. Dr Michael Overton, co-founder of the Global Family Office Partnership, highlights the shift in the focus of the family from ‘philanthropy aside’ to ‘the heart of family business practices’, which implies ” assess investments from both the point of view of shareholders and stakeholders at large.
Strategic philanthropic giving
Philanthropy is fundamentally concerned with private initiatives for the public good. While this is different from charity, there is some overlap. Unstructured and unplanned spontaneous charitable giving makes it difficult for nonprofits to invest in long-term strategic initiatives for maximum impact. This is where the strategic philanthropic efforts of families on the continent can make a difference. Likewise, the expansion of responsible, sustainable and impact investing is echoing the traditional goal of philanthropy, focusing only on impact. This favorable wind in terms of environment, society and governance (ESG) is evidenced by the great interest aroused by the first African bond linked to sustainable development of Netcare ad Standard Bank.
The resulting post-pandemic collective consciousness has propelled philanthropic activity even further beyond traditional charitable giving, with ESG issues now at the forefront of this modernization of philanthropy.
Significant changes in the philanthropic landscape were, however, already well underway in the run-up to what the UN has dubbed the ‘Decade of Action’, which calls for accelerated sustainable solutions to the world’s greatest challenges – ranging from poverty and gender to climate change and inequalities. The Covid-19 pandemic has exposed these complex societal issues more than ever before, underscoring the vital role modern philanthropy must play in addressing them.
Reassess commitments, prioritize opportunities
South Africa is not alone in facing difficult social and economic challenges that are too great for the public sector to solve. The continent’s philanthropists must reassess their commitments and prioritize the opportunities that can achieve a just and sustainable economic recovery. An important role is played by more than 220,000 NPOs registered with the Department of Social Development in reaching communities that the public and private sectors cannot reach. The heightened pressure on local NPOs facing the lingering challenges of Covid-19-related lockdown measures, social distancing and funding gaps calls for revised methods to “ help at home ”, revised management of cash flow, clear communication with existing and potential new donors, and greater collaboration with other NPOs facing similar challenges.
Respondents from Southern Africa, often second or third generation families, place more emphasis on financial support from nonprofit organizations.
the Africa Wealth Report 2020 shows that an overwhelming number (94%) of wealthy families surveyed across the continent engage in philanthropic activities, often following regional trends identified in the report, such as the entrepreneurial approach of families in East Africa and Africa. West who focus on creating jobs through social entrepreneurship confidently expand into new and multiple sectors or sit on nonprofits or foundation boards. While respondents from Southern Africa, often second or third generation families, place more emphasis on financial support from NPOs. The long-term strategic nature of philanthropy is essential to supporting the generous short-term traditional charitable and religious giving in South Africa and key to the continued survival of the country’s many NPOs.
Education remains a popular cause and commonly supported by philanthropists on the continent, with grants to university and school endowments being an effective way to give back to society. This focus on education resonates across the wealth spectrum and an example of democratized philanthropy is Feenix – South Africa’s crowdfunding platform for college students. Philip Faure, director of Feenix, underlines the need for emerging philanthropists to “adopt and promote new scalable fintech solutions for good” on the continent. Besides education, health is another key cause supported by African families.
The Nextgens are also now, due to the growing awareness by Covid-19 of the social, emotional and mental health challenges that can affect their family members and many are choosing to include specific provisions to promote these issues with impact. .
Planning an inheritance
The pandemic has made all of us consider our own mortality and many families have reviewed the arrangements for giving after death. A reward of developing a solid financial plan to meet your personal lifelong needs to support your desired lifestyle (and establish your financial independence) is the ability to focus on planning a legacy for the next. generation and others. A regularly updated will is fundamental to this process, and many still choose to donate through this mechanism. Charitable trusts or foundations can be established before death and there is a growing movement towards “strategic giving while living” aligned with areas of impact that resonate most deeply with a family.