FT REPORT - UNDERSTANDING GLOBAL PHILANTHROPY 2007:

Charity no longer begins at home

By Sarah Murray, Financial Times
Published: Dec 11, 2007

In a world where business and economics are becoming ever more closely connected, it is perhaps no surprise that philanthropy is undergoing a process of globalisation. While technology provides access to information about what is going on in once-remote parts of the planet, people are also travelling more frequently for both business and pleasure - and encountering some of the world's more intractable problems along the way.

Some countries have always focused a portion of their giving on international projects. In the UK, about 13 per cent of charitable giving by individuals in 2005 went to overseas causes, according to the Hudson Institute, a think-tank. In the US, the percentage of overseas gifts is far smaller. However, this is changing, with American donors who once might have given to their local church or university directing more of their money to causes in developing countries.

The shift in emphasis is partly the result of the way in which today's donors made their money. "A lot of the wealth that's fuelling the new philanthropy comes out of global businesses," says Salvatore LaSpada, chief executive of the UK-based Institute for Philanthropy. "They're often relatively young people that have created significant amounts of wealth very rapidly in global companies. So, they're taking the same boundary-crossing drive into their philanthropy."

At the same time, figures such as Bill Gates and Al Gore have raised issues such as HIV/Aids and climate change to prominence, while large-scale disasters such as the Asian tsunami of 2004 and the Pakistan earthquake of 2005 renewed interest in overseas giving.

Carol Adelman, director of the Hudson Institute's Center for Global Prosperity, adds: "There's been a general dissatisfaction with government foreign aid - and that's not just in the US but also some of the European regional barometers, and opinion polls show Europeans are dissatisfied with government foreign aid programmes."

One of the reasons that this hands-on approach is becoming more prevalent among donors is a shift in the source of wealth. "It's especially noticeable in the UK," says Susan Mackenzie, director of Philanthropy UK, an independent resource for donors. "Fifteen years ago, three-quarters of the Sunday Times Rich List had inherited their wealth and a quarter were self-made, and today that ratio is completely reversed."

And, say experts, if the wealthy have made their money, rather than inheriting it, they tend to view it as their own. This changes their approach to philanthropy. While those who have inherited money tend to see it as part of the family legacy and act as stewards of that wealth, protecting it for the future, those who have generated their wealth feel a greater sense of ownership, giving them the freedom to give it away as they choose.

For the new generation of venture philanthropists and social entrepreneurs, this means monitoring and assessing the impact of philanthropic projects - something that is challenging when those projects are on the other side of the world.

A greater professionalism is being brought to bear on the non-profit sector as organisations try to achieve more with their funds and infrastructure. "People want to get results because the problems are gigantic compared to the resources," says Tom Tierney, founder of Bridgespan Group, a consultancy catering to charities and non-profits. "When you go down the track of impact philanthropy, it changes behaviour. You become much more cost efficient, more disciplined and you have to build capacity in organisations."

In the process, the lines are blurring between the business world and the philanthropic sector. Take microfinance. Looking towards the double bottom line of social benefit and profit, mainstream banks such as Barclays and JPMorgan are entering a field that was once the preserve of non-profit organisations.

The presence of the corporate sector in such fields will challenge philanthropic organisations. For a start, it is creating greater competition for talent. People wanting to help alleviate global problems once could only do so by working for charities or non-governmental organisations. Now they can take well-paid positions in the private sector and participate in corporate social responsibility programmes or company volunteering.

Meanwhile, as companies become more strategic in their own approach to philanthropy, these opportunities are increasing, with high-performing executives able to take sabbaticals to work with non-profits in the developing world.

The entry of corporations into arenas once dominated by non-profits is also introducing market-based tools and techniques to philanthropic activities. Innovative partnerships between non-profits and corporations are becoming more common while a number of organisations are on hand to help donors monitor and maximise the impact of their donations.

Impetus Trust, a UK venture philanthropy organisation, does this by becoming involved in the charities it funds and bringing venture capital knowhow to those organisations to improve their management and performance.

However, while business techniques can help streamline certain operations, they are not effective for every social or environmental problem. Mr Tayart de Borms stresses the need for organisations from different sectors to recognise their limitations. "Business can really bring a lot in but not everything can be applied," he says. "It's easier to sell a product than create social change and [foundations and charities] are moving in a much more complex environment than those selling products to the market."

Perhaps one of the most powerful forces shaping the new philanthropic landscape is technology. The internet and global communications tools are not only facilitating the flow of information to and from remote parts of the world but are also helping philanthropists to exchange ideas and contacts and providing a powerful tool through which to tap into new sources of donations.