As emerging economies become wealthier, a new generation of philanthropists is looking for ways to invest in good causes and support long-term projects.
The number of billionaires across the globe has risen steadily, despite the recent financial crisis. The Forbes World’s Billionaires list in 2007 showed 1,100; now there are close to 1,450.
The greatest increase in wealth has been in Asia, where there are now more billionaires than in the US. The number of millionaires globally has risen to 29 million and is expected to hit 46 million in 2017.
Although most of this money is new rather than inherited, the problems of wealth remain the same: should it be spent; passed to the next generation; or given away?
Those who transfer large assets to the next generation are often concerned that their children will lack motivation if they inherit an estate. Warren Buffett, the US investor and philanthropist, said: “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.”
Attitudes are changing as the wealthy begin to realise that with great wealth comes responsibility, not just to the next generation but to society. Philanthropy can take on many forms. Giving away to good causes remains one option but there is a move away from “cheque-book charity” to more targeted programmes that are longer term, work with other stakeholders and empower the donor.
With great wealth comes responsibility, not just to the next generation but to society
Those new to philanthropy often need guidance on when and where to intervene. Narrowing the focus to a particular area of interest usually helps. For instance, with child education, support for primary or secondary schools, literacy, numeracy or special needs? What targets have been set? Is the focus on cause, prevention or research?
Effective philanthropy is about understanding the essential needs and responding appropriately. An impressive new school building may not be as important as transport links for pupils and teachers, new books, food distribution or something as basic as separate toilets for girls.
The next few decades could well be a new golden era of philanthropy. The first golden era was in the late 19th and early 20th centuries and was associated with the period of wealth after industrialisation. The surge in high-net-worth numbers is a key factor – there is more wealth available to be put to good use. Between 2007 and 2012 the number of billionaires in the BRIC (Brazil, Russia, India and China) countries increased by a third and this upward trend is forecasted to continue. Demographics also play an important role as the post-war, baby-boomer generation in the West, who have acquired vast wealth, reach retirement age and consider how and where their money is passed on.
But there is also the attraction of seeing the impact of giving during the individual’s lifetime rather than just leaving money in a will. Bill Gates and Warren Buffett have shown how engagement alongside government programmes can work to defined targets such as the eradication of malaria.
Recorded philanthropic giving in Asia is low compared with the West, however, a more structured approach to philanthropy is rising rapidly with growing wealth. There has been explosive growth in private foundations in Asia, representing a departure from the more prevalent, less-structured funding of local community projects. Child education is a key theme for philanthropists across Asia and there is a huge opportunity to make an impact, improving the employment prospects and lifestyle of the next generation.
Philanthropy, if cultivated and channelled, could not only accelerate the economic development that has lifted millions of people out of poverty over the past 30 years but also help address other serious social issues that the world still faces.