Recognition of the power of philanthropy to drive growth and positive social change is growing.
Citi Private Bank’s Head of Philanthropy was recently interviewed by AdvisorPrivate on the relationships between philanthropy, sustainability and growth. We reproduce a translation of the original article in Italian with kind permission from AdvisorPrivate.
Philanthropy, impact investments and corporate social responsibility are now more interconnected than ever before. This is the view of Karen Kardos(pictured), Head of Philanthropic Advisory at Citi Private Bank and contributor to the research report "Philanthropy and the Global Economy: Opportunities in a World of Transition". AdvisorPrivate spoke to her about key trends in philanthropy and the role it could play in building a more inclusive and sustainable world.
How has the concept of philanthropy changed and evolved over the years?
Historically, philanthropy has consisted of time, treasure and talent, mainly taking the form of grantmaking and volunteerism. While this is still true today, we have seen how younger generations' attitudes have broadened this concept, considering their lifestyle choices as a way to help others. Decisions about the organizations they will work for, invest in and buy from are just some of the tools that the younger generation sees as a way of doing good and making positive change.
Environmental, social and governance (ESG) factors are measures of an organisation's values designed to have a positive impact on society. For many people, engaging with an organisation that is helping to create positive change means that they too are creating positive change for the world. The lines between philanthropy, impact investment and corporate social responsibility have therefore become much more intertwined.
What role can philanthropy play in global economic growth?
Governments play a dominant role in driving economic development, but they cannot solve pressing social issues on their own. Philanthropy, unlike governments, can be nimble to help bridge solutions and take risks to find them. Through long-term partnerships with government, philanthropy can thus guide scalable systemic solutions. Support for non-profit organisations often promotes activities that would not otherwise have taken place.
The downstream economic value generated by philanthropy can also be material. For example, just in terms of jobs, the non-profit sector is not only a significant employer, but the services provided by non-profit organisations to alleviate the burden of support or training and development allow for greater workforce participation.
In which areas can it be strategic? Education, health care, female empowerment etc.?
Regardless of the focus area of philanthropy, collaborations and partnerships at all levels can be strategic to create meaningful change. At the funding level, working with like-minded funders is an opportunity to learn from each other, mitigate risk, avoid duplicating efforts and increase support for non-profit organisations with shared resources, a more thoughtful decision-making process with more funder experiences to draw from and economies of scale.
From a programmatic level, collaboration with non-profit partners, including shared decision-making and other trust-based philanthropic ideas, can lead to better results.
We often hear about how philanthropy can play an important role in the green transition and net zero. What do you think about this?
I fully agree. At the moment, there is relatively little funding to support environmental causes relative to other areas of interest. The easiest way for philanthropy to play an important role is by increasing grants to non-profit organizations that are working directly to address aspects relating to the climate crisis, such as pollution, loss of biodiversity, waste and emissions.
Regarding the transition to net zero, socially responsible investment is designed to ensure that securities or sectors that conflict with environmental values are excluded from the investment portfolio. Meanwhile, ESG integration uses data to inform decisions to include securities that are leading the way in terms of the environment or that are strongly directed towards improvement. Impact investment is designed to provide a double baseline, with clear environmental scores measured alongside financial return.
What is the relationship between philanthropy and technology? Can technology be considered a driver of growth for philanthropy?
Technology is a key trend that will impact many aspects of the future, and the future growth of philanthropy is no exception. We have identified four key opportunities to focus on:
- Upgrade the user experience of the service to transition to digital, which can offer support or a broader group to extend the reach and impact of non-profits.
- Digitize the volunteer experience to include short-term opportunities that can be accessed via online apps to increase engagement, especially among younger volunteers.
- Digitize fundraising, which is increasingly becoming the preferred method of donation by donors and provides the infrastructure to easily receive small donations from a larger donor population.
- Make greater use of data, including when measuring impact, to provide more transparency to donors.
What other factors could enable philanthropy to grow?
We are already seeing the power and leadership of women when it comes to philanthropy. They are set to inherit 70% of the intergenerational wealth transfer by 2035. Given that women are more likely than men to support equality, donate to more charities and sectors and make unrestricted donations, they will likely continue to drive the future growth of philanthropy.
Corporate philanthropy could also be a driver of future growth. With the intertwining of philanthropy and corporate social responsibility, corporate philanthropy could enhance brands and attract customers and talent to the workforce. Global multinational corporations are better positioned to provide international support.
The Covid pandemic itself could be a catalyst for the short-term growth of philanthropy. Charitable donations correlate positively to inequality. The pandemic has highlighted its impact on minorities and low-income families. Coupled with the disproportionate impact that climate change has on those same populations and the demands for racial and social justice here in the US, there is the potential for a marked increase in philanthropy.