5 phenomena shaping world's philanthropic efforts

Are these the boom years of 'philanthrocapitalism'? The term was coined in 2006 by Matthew Bishop, US business editor of the Economist, to describe a philanthropic culture that draws heavily on business talent and entrepreneurship.

Isabelle de Grave explores the powerful phenomena guiding the world's wealthiest towards an increasingly entrepreneurial style of philanthropy. As it turns out, these may well be the boom years.

Carnegie’s gospel

“The problem of our age is the proper administration of wealth, that the ties of brotherhood may still bind together the rich and poor in harmonious relationship,” wrote Andrew Carnegie in his essay “Wealth” first published in the North American Review in 1886. 

Carnegie, a Scottish-American industrialist and 19th century steel giant believed that the rich had a responsibility to use their acquired wealth and business skills to administer wealth for the common good and solve society’s biggest challenges. The rich “have it in their power during their lives to busy themselves organising benefactions from which the masses of their fellows will derive lasting advantage – and thus diginify their own lives,” he argued.

By the end of his life, he had disposed of 90% of his vast fortune and built thousands of public libraries across the US. His philanthropic legacy has sparked a chain reaction among successive business tycoons. Warren Buffet, who gave $31 billion of his fortune to the Gates foundation in 2006, was inspired by Carnegie's book "The Gospel of Wealth". He passed on the book to Bill Gates, now one of the world's most ambitious philanthropists, hoping to inject him with Carnegie's philsophy.  

The chain reaction doesn't stop with Gates and Buffet. The past few decades have seen an explosion of foundations set up by wealthy entrepreneurs. Numbers of new private foundations are up from about 22,000 in the early 1980s to 65,000 today. Many were founded in the mid-1990s with dotcom money by individuals with careers forged on entrepreneurial zeal, and many of the founders are younger than in the past according to a detailed report by the Economist tracking the latest trends in philanthropy

Carnegie library

Carnegie funded 3,000 libraries, located in 47 US states, and also in Canada, the UK,  Ireland, Australia, New Zealand, the West Indies, and Fiji. (Photo credit: Brian Clift)

The ‘tech effect’ on philanthropy

The dotcom boom injected a huge dose of entrepreneurship into the world of philanthropy, and gave rise to the term 'venture philanthropy' based on the idea that Silicon Valley's entrepreneurs would transfer their creative skills to the foundations they were setting up. 

An increasingly business like vocabulary has grown around the sector, reflecting the goal to maximise the impact of wealth. Today, the best foundations are increasingly businesslike. They are “strategic” and “market conscious” say Matthew Bishop US business editor of the Economist and economist Michael Green in the book, Philanthrocapitalism: how giving can save the world. This strategic approach to philanthropy is less about handing out money, than of forging alliances and building networks: with government and industry, or among groups of charities.

The Gates Foundation's partnership with 'Big Pharma' is one example of the strategising behind today's philanthropic ventures. Since 2000 The Gates Foundation has worked with GlaxoSmithKline (GSK) on preventing the spread of HIV and AIDS and Malaria – a partnership, which has produced a promising malaria drug for infants by switching the focus of GSK's top scientists from research objectives with short-term commercial gain to global health issues. 

Silicon Valley Financial Centre

Silicon Valley Financial Center. (Photo credit: Christian Rondeau)

The birth of social entrepreneurship and giving the Ebay way

Bishop and Green describe the approach of Pierre Omidyar founder of Ebay and his first employee Jeff Skoll. In 1998 they strolled into Silicon Valley Community Foundation and made an offer of a $1 million block of shares. They did this before they'd pocketed a penny themselves and their one condition was that the foundation keep the shares for a year, a term that many others rejected. A year later the foundation sold its shares and banked $40 million. 

Soon after, Skoll was drawn swiftly and sharply into the world of social entrepreneurship, where people were building businesses to tackle social problems. He created the Skoll Foundation, endowed the Oxford Said Business school to set up the Skoll Centre for Entrepreneurship and began hosting the annual Skoll World Forum. Each year the Skoll Foundation awards $1.25 million over three years to social enterprises on the verge of growth significant enough to create better futures for millions.

Social enterprise and its blend of ambition to create change powered by entrepreneurial skills has emerged as the perfect match for the money of the business-minded philanthropist. Pierre Omidyar went on to found the Omidyar Network, and began investing in micro-finance and for profit social businesses including IGNIA a Mexican venture capital firm and Meetup.com, a platform bringing together communities based on shared interests.


Giving the Ebay way, before you've pocketed a penny. (Photo credit: Cheon Fong Liew)

Social investment and tax reliefs.

Social investment is investment with a philanthropic twist. It is a phenomenum gradually funnelling capital towards social causes as social investors look for opportunities to use their investments for the broader benefits of society. 

Simply put the social investor looks for both social and financial returns on their investments. There are increasing numbers of firms that invest in social enterprise including Bridges Ventures, the Social Investment Business and Big Issue Invest and organisations like ClearlySo, which connect social businesses and enterprises with investors. 

With a new social investment tax relief in the UK social investment is increasingly visible to mainstream investors. The UK government has launched a string of initiatives to grow the sector, including the first social investment bank, Big Society, and a range of social impact bonds.

Sir Ronald Cohen, chair of the Social Impact Investment Taskforce, widely credited as the father of social investment, argues that this is the tech effect continued, a natural progression from venture capitalism. The taskforce brings together government officials and senior figures from the worlds of finance, business and philanthropy from across the G8 countries and will publish a report indicating what needs to be done to grow the importance of the social investment market.

Cohen is a strong advocate for linking social and financial return, and sees social enterprise as the wave that will follow the tech explosion. Today social enterprise is increasingly gaining support from venture philanthropists like Skoll and Omidyar, and engaging with investors with both social and financial goals.

Photo credit: Thomas Leuthard

With news of a UK tax relief on social investment, social investment is more visible than ever before. (Photo credit: Thomas Leuthard)

The age of the ‘social good network’

A century on from Carnegie's essay, and hot on the heels of the tech effect and the birth of social investment a growing number of social good networks and conferences have emerged.

There is a lengthy conference circuit where individuals share knowledge from across financial, business and social sectors. For the first time in the UK a six month leadership programme is being launched inviting international wealth holders and inheritors, entrepreneurs, investors and pioneering individuals to learn, connect and act with like-minded others. 

The Pioneers for Change Leadership Programme is designed to inspire, equip, connect and support leaders who want to explore and elevate their potential for positive impact. Continuing the Carnegie legacy and in keeping with the Sillicon Valley brand of philanthropy, the programme aims to ignite a revolution, and foster international leadership in philanthropy, social investment and entrepreneurship.

Other conferences include the Skoll World Forum held every year in Oxford, Good Deals, the UK’s annual social investment conference, the Global Impact Investor Network forum and Social Capital Markets (SOCAP), a gathering of individuals and organisations dedicated to directing market systems to social impact.

These different influences are shaping today's approaches to philanthropy in the midst of a wealth transfer of gargantuan proportions. Years of accumulated wealth—in Europe and America—are about to change hands, as the post-war generation dies off. One estimate from a study in America, by Paul Schervish and John Havens of Boston College puts the size of the transfer likely to occur in the US between 1998 and 2052 as somewhere between $41 trillion and $136 trillion. There is an enormous amount of money available, and an evolving philanthropic culture among those who have made their money as entrerpreneurs, could see it strategically targeted towards the world's most pressing social issues.

Portrait Collage

Social good networks and conference circuits are connecting like-minded philanthopists across the globe. (Photo credit: Luc Legay)

Pioneers Post is the media partner for the Pioneers for Change Leadership Programme delivered by Adessy Associates.