Knight Frank research the benefits of integrating philanthropy into the core strategy of a business and the wealth management strategies of high net-worth individuals. Alan McCormick, a Legatum Partner, shines light on the subject.
The Knight Frank Wealth Report - The business of philanthropy
The results of previous Attitudes Surveys have consistently shown that philanthropy is becoming more important to UHNWIs around the world. So this year, we dug a bit deeper in order to find out how important philanthropy was in their overall wealth management strategies.
Despite the rising popularity of impact investing, philanthropic outcomes were considered one of the least important considerations (see Databank, page 61). Perhaps surprisingly, this position didn’t change when we asked specifically about the priorities of the respondent’s millennial clients. According to Lenka Setkova, Executive Director at the Coutts Institute, who advises the bank’s clients on philanthropy, UHNWIs very often still view philanthropy in isolation from their wealth creation. Nevertheless, she says, “We are certainly seeing more wealthy families actively consider the social and environmental impact of the businesses they own or the investments they make.” Ms Setkova adds that the firm’s clients are very interested in the benefits of involving the next generation in philanthropy. “We have had children as young as six brought along to the workshops that we facilitate for families to help them articulate their values and craft their philanthropy strategy together.” The Coutts’ Million Dollar Donors Report (which tracks donations over US$1m or £1m in the UK, US and Middle East) also found a dramatic increase in the number of major donations – up 57% to 2,197 in 2015 compared with the previous year.
A 2016 survey The Business of Philanthropy by the charity Philanthropy Impact also found that UHNWIs donate up to 17 times more when they are professionally advised – currently, only 12% of UK UHNWI philanthropists use a special advisor.
The Legatum Group is a private investment partnership based in Dubai, whose partners share the belief that philanthropy is at its most effective when fully integrated into the core strategy of a business. “We don’t talk about the need ‘to give something back’, because we don’t think businesses should have to apologise for what they do. We believe that free market capitalism in itself is an engine of social good,” says Alan McCormick, one of the Group’s four partners. “We have a distinctive mission. While generating capital is our core business, allocating capital to help others prosper is key to all that we do.” The group applies a business-like approach to identifying the causes it supports. It tends to focus on areas that have received little attention from other philanthropists or aid agencies, first testing ideas on a small scale to prove they are credible and will make a real difference to a significant number of people by creating long-term systemic change.
Major initiatives to date have included tackling modern slavery; “speed schools” for children who have fallen out of the education system; and a programme to eradicate neglected, mainly worm-based, tropical diseases. “In total, more than 220 million people have received de-worming drugs via this particular project, including the whole of Burundi and Rwanda,” says Mr McCormick.