January 13, 2023

Unlocking greater impact through the integration of philanthropy and investment

January 13, 2023
Citi Private Bank

The worlds of investment and philanthropy are moving closer together. Taking an investment-focused approach represents an opportunity for philanthropy to play a key role in addressing 21st century challenges, while unlocking additional assets for social impact.

In times of difficulty, such as climate-related emergencies, conflict, or health crises, philanthropy is often called upon to help alleviate suffering and re-build communities. And as macroeconomic headwinds intensify, the support of philanthropists will be in strong demand.

Yet, during times of recession, donors often become more cautious, paring back their charitable giving*. As such, a new Citi Global Perspectives & Solutions report, Philanthropy and the Global Economy v2.0: Reinventing Giving in Challenging Times, asks how philanthropy can unlock more funding for non-profits, even when giving is under pressure.

According to the report’s authors, one way to deliver greater impact could be to encourage more integration between philanthropy and investment. The two are often viewed as distinct, unrelated pursuits*. Yet this misconception “may be the result of a myth that impact investing does not deliver financial returns.”

Figure 11. Investment involves the expectation of market-rate returns while philanthropy expects either sub-market or no financial return
Investment involves the expectation of market-rate returns while philanthropy expects either sub-market or no financial return
Investment Philanthropy
Traditional investing Responsible investing Impact-led Concessional capital Grantmaking
Not considering the impact of investments Integrating impact considerations into investment decisions Providing capital to projects seeking positive impact with market-rate returns Accepting sub-market returns as a trade-off for social impact Providing capital to projects that generate no financial return
Source: Citi GPS


Fortunately, this thinking is becoming a thing of the past. In the report*, Harlin Singh Urofsky, Global Head of Sustainable Investing, Citi Private Bank, explains: “Families and high net worth individuals increasingly see philanthropy and investing as complementary to one another and to their objectives.”

Karen Kardos, Head of Philanthropic Advisory, Citi Private Bank, adds: “It’s not siloed anymore. The two are very much intertwined with the shared goal to create positive impact for the common good.”

Connecting the dots

As outlined in the report*, greater integration between philanthropy and investment could further increase the contribution of philanthropy to the global economy in two ways:

Figure 16. Philanthropists can shift their investment practices to consider impact in various ways
Philanthropists can shift their investment practices to consider impact in various ways
Negative screening Stewardship & engagement Values-aligned investments Mission-aligned investments
Excluding specific industries or companies from investment portfolios, especially those that are considered counter-productive to the aims of a charity, for example health charities halting investment in tobacco companies. Engaging with investee companies, through well-known strategies including active voting, conversations with management, and shareholder resolutions - for example, poverty alleviation organizations discussing living wage payments with investee companies. Including a philanthropist's values in making investment decisions, for example diversity, equity and inclusion or sustainability considerations. This could include investing in women-led funds or with a gender lens for a philanthropist working on gender equality. Making investment decisions to advance a philanthropist's misison directly - for example, including a focus on education in an investment strategy if that is a focus in the philanthropist's grant-making strategy.
Source: Citi GPS

Overcoming barriers to change

Of course, bringing philanthropy and investment together will not be without its challenges. A lack of a common language between the two fields is a notable roadblock – though the report* outlines a taxonomy to improve communication.

And wealth managers could also play a role in bringing philanthropists and investors onto the same page. As Singh concludes, “The desire to drive change is absolutely there. It’s a matter of connecting the dots.”

Discover more about the benefits of integrating philanthropy and investing by reading the full report.


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