The shift toward philanthropic causes, evident among ultra‑high‑net‑worth (UHNW) individuals even before the pandemic struck, has appreciably stepped up during the last 18 months.
Sarah Bartram‑Lora Reina, Executive Director, Private Client, at Ocorian and President of the Jersey Association of Trust Companies, believes the globalised nature of the pandemic and climate change has led the wealthy to leverage their business skills and networks to deliver cross‑border projects with social impact at their heart.
This trend is supported by Ocorian’s own global survey of private client advisors, in which a significant majority (76 per cent) stated that the pandemic had led to an increase in philanthropic projects undertaken by their clients.
This matches the experience of Barclays Private Bank, where many clients felt compelled to give back through the pandemic and, as such, have continued – or even increased – their support for their chosen causes.
Dynamic, innovative and hands‑on
Significantly, the pandemic has been a wake‑up call for many about the relationship between people and places across the globe. Not only is it driving a desire to make a positive difference, but those who have funds at their disposal want more control on where their money is invested.
‘The fact that COVID‑19 has affected every part of the world has made people realise that the world is very connected and that each of our efforts may have a far‑reaching impact,’ said Nancy Chien, Partner and Head of the International Private Client Team at Bedell Cristin. ‘Given this realisation, we have seen that UHNW individuals and their families are increasingly moving away from simple charitable donations, where the recipient would spend the money as they see fit, towards a much more dynamic, innovative and hands‑on approach.’
She added that the lines between philanthropy and business are blurring as wealthy donors seek active involvement in the management of their charitable funds, applying the same principles of control and accountability as they would for regular investments.
A previous Barclays report published just before the pandemic explored some of the barriers to giving among the wealthy; it cited a lack of control over how donations are used and a lack of faith in charity management as significant issues. In contrast, explained Juliet Agnew, Head of Philanthropy at Barclays Private Bank, as the pandemic developed, early philanthropic responses focused on getting money out the door quickly, with greater flexibility, to enable charities to adapt to local needs. She also pointed to the general movement towards ‘trust based’ philanthropy.
‘This approach is characterised by looser restrictions on funding by donors, greater humility and collaboration. There are also high‑profile billionaires, led by Bill Gates and Warren Buffett, encouraging the world’s wealthiest individuals to contribute a majority of their wealth to philanthropic causes, establish their giving plans sooner and give in smarter ways.’
Kevin Lemasney, Head of High Value Residency Engagement at Locate Jersey, part of the Jersey government, said: ‘Anecdotally we can say that philanthropy has had a huge impact among the families moving to Jersey. We know, through working with other organisations and government departments, that a lot of our clients have become very involved in philanthropy.’
Lemasney was able to illustrate this commitment to charitable causes, which looks like being a legacy of the pandemic, through his own experience in Jersey.
‘From a Jersey perspective, residents have had more time to reflect and discuss the areas that they wish to support, and better decisions are being made by donors. We made calls to high‑net‑worth families to help with the Bailiff Covid fund and a joint venture with the Education Department on the digital divide in primary and secondary schools.’
In a matter of weeks, GBP1.2 million was raised for the Bailiff Covid fund and a further GBP125,000 was collected to assist with the purchase of iPads and laptops. Another high‑net‑worth (HNW) client was able to provide access to an engineering company that had developed respiratory apparatus and was able to acquire equipment for Jersey’s General Hospital.
Growth in regulation
Alongside the mushrooming in philanthropic support from the wealthiest individuals, there will be equivalent growth in the rules that regulate the charitable giving sector.
‘Governance around ESG investing will definitely increase. From setting the investment objectives to how they are measured, through to demonstrating the actual impact of an investment, [governance] will become increasingly sophisticated in order to avoid greenwashing,’ said Bartram‑Lora Reina.
Chien indicated that, as the industry is already seeing changes to sustainable investment disclosure requirements for funds, trusts and foundations that are invested in funds or managed by fund managers will also be affected by the various regulations and legislation. However, given the flexibility of the legislation applicable to trusts and foundations, there does not seem to be any urgency to amend the legislation in order for ultimate beneficial owners and trustees to carry out philanthropic investments. ‘Nevertheless,’ added Chien, ‘it is important that the constitutional and any investment documents are well drafted to ensure that the parties’ objectives can be achieved without risk of any breaches of duty.’
The move toward philanthropic endeavours is a global phenomenon, but is it consistent in different parts of the world? Most practitioners noted regional differences. The Ocorian survey revealed that Asian respondents (88 per cent) saw philanthropy as an important factor in driving client discussions about changing their wealth structuring, more than any other continent. As Bartram‑Lora Reina pointed out, ‘This could be linked to Asia’s wealthy population being significantly younger than those seen in other regions and the younger generations generally being more socially conscious in their investment strategies.’
Chien noted that the number of billionaires in China is increasing at a rapid pace and the landscape is changing. In 2020, 39 individuals in China donated over USD15 million each towards philanthropic projects.
Agnew said that best practice in philanthropy is usually relevant regardless of someone’s location, but it is also important to be mindful of the local context and giving culture when supporting clients on the optimal strategies for their giving.
Taxation may also play a role in the increasing culture of giving and this may vary by region. Lemasney suggested that governments could encourage giving by using schemes that provide tax benefits to donors or add the tax paid to those receiving the gifts. These schemes are quite sophisticated in some jurisdictions, but not in others.
Bartram‑Lora Reina added that, although global philanthropy is on the rise, as identified in Wealth‑X’s World Ultra Wealth Report 2019, it is drastically uneven: ‘A one‑size‑fits‑all approach to private wealth simply does not hold. From common‑ and civil‑law issues around wealth structuring, to differing religious and cultural perspectives influencing philanthropic strategies, to discrete country‑by‑country challenges, clients expect bespoke planning that accommodates their specific wishes.’
The next stage
Nevertheless, whatever the response in different parts of the world, it is hoped that philanthropy, driven by the wealth management industry, is set to have a significant role to play in the long term.
‘It is clear that philanthropy has made a very positive contribution to society over the past 18 months,’ said Agnew. ‘It is now the hope that crisis giving will evolve into thoughtful long‑term giving aimed at addressing some of the systemic vulnerabilities that have been laid bare by COVID‑19.
‘Less certain is the extent to which the levels of giving and the greater trust we’ve seen among philanthropists will continue. There are many factors at play here, including the trajectory of post‑pandemic recovery and its effect on family finances and obligations.’