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Cultivating Generosity: The money coach: Shifting your wealth from worry to wellbeing

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Iris Brilliant is an anti-capitalist money coach who guides wealthy people who are confused about what to do with their money. She offers a compassionate space for people to address their shame and anxiety about money. Using her expertise in social justice philanthropy and investing she helps them create a plan for their wealth, lead values-aligned lives and help fund social justice.

Iris Brilliant

Here she talks to Beacon’s Philanthropy Network Director Sarah Hughes…

Sarah:  I’m interested in the idea that money can make you unwell, or cause a lot of anxiety, including when you are wealthy. What is your experience of this and how does  anxiety manifest among the rich?

Iris: The moment we receive something good, we start grasping onto it and are afraid of losing it. That’s what I see happening with my clients when they inherit wealth or quickly earn more money than they’re accustomed to. There’s this very human reaction of immediately being afraid of losing it and grasping on tightly. As we grasp on, we don’t realise how much stress we’re putting in our body; how exhausting it is to suddenly be so afraid of losing something. Something that’s meant to be a gift and a privilege becomes a kind of burden.

When that occurs, a great deal of suffering immediately happens both to the individual and  to their sense of self in the world and their relationships. My work starts there, by helping my clients notice the tension they’re holding in their body and emotionally.

It really doesn’t matter how much money people have. They could inherit half a million, they could inherit 20 million. The stress is still the same. I try to help my clients recognise those stresses and unpack them. What are our fears of what will happen if we lose or give away some of this money? Or consider not investing the money in super lucrative extractive investments just to get richer?

Supporting people to really examine what those fears are helps them make an active choice: how much stress they want to take on when it comes to the tension between protecting versus softening the grip around their money.

Sarah: Iris, can you explain what a money coach is and why you became (an anti-capitalist) one?

Iris: Broadly speaking, money coaches come from an industry of all kinds of professionals, some of whom want to help you make more money, while others want to help you work on your relationship with money and so on. It’s a broad term, but there is a small group of us in the US who work with wealthy people on wealth redistribution commitments. It’s a very small subset.

I’m an anti-capitalist money coach, which means everything I do is played out in the wider context that we’re living in corporate capitalism and we’re functioning in an economy that is not sustainable, that isn’t working for the majority of people and that really relies on exploitation to function properly.

So I take the stance that may be controversial, which is that I don’t believe there’s such a thing as moral capitalism. I don’t believe there’s such a thing as capitalism being reformed to work better for people. My belief is we need a new economy that’s going to actually support the well being of the majority of the world and of the planet.

So I’m an anti-capitalist money coach who specifically works with wealthy people who want to do the opposite of what they were told to do! That is to redistribute wealth, to divest from extractive investments, to have the audacity to talk about money and to disclose their finances for the sake of being transparent in their lives. To dare to consider giving up unearned power and moving towards a life of more humility and closeness with others.

And to also just dare to feel and explore all of the emotions that we have that are connected to wealth and our money stories and our family’s money stories.

Shifting from worry to wellness: Getting real, personal beliefs systems, family stories, big picture commitments

Sarah: Are there any clear steps or stages that a wealthy person can move through to shift from money worry to money wellbeing?

Iris: There’s a very clear formula. Everyone’s a bit different, but for the most part, there’s a kind of predictable arc I take clients through to experience a lot more ease in their relationship with money and wealth.

The first is getting clear on how much money you have, which might sound simple, but I would say 90% of my clients are inaccurate in how much money they think they have, until we really go through and add up their bank accounts and their assets. I would say 99% of the time my clients are richer than they thought.

Then we explore people’s default beliefs about money, and it never ceases to amaze me just how many different and opposing beliefs we carry about money that we’ve just inherited from society and from our family. So we really unpack our different moral beliefs about money and power and our different emotional experiences and early lived experiences connected to money.

I often tell my clients that my first memory of money was my Dad taking me shopping, and he was too embarrassed to come into the girls clothing area, so he sent me off by myself with a $100 bill. I was nine or ten. I don’t know why he decided to do that. I lost the money while I was trying on clothes, and I just had this horrible sinking feeling that I was going to get in a lot of trouble and that I was spoiled and bad for losing this money. And I did get in trouble. As a result, I used to carry a lot of shame and fear. The idea that I’m bad at money and if I make a mistake with money, I’ll get in really big trouble comes directly from that first experience.

Additionally, we will explore legacy and family messages around money because a lot of us carry instinctive money reflexes that we’re not sure of the origins for. However, we know trauma gets passed down intergenerationally. So there’s always trauma in a family lineage that is in some way connected to safety and survival. For those of us who are raised wealthy and have wealth today, demystifying that can help us understand why we have so much fear about our security.

And then we will look at values we have that are bigger than any feeling or emotion about money. An example could be someone setting out that they want to commit to climate justice and to feeling proud of what they did in their lifetime to support different ecosystems to flourish. That becomes their guiding principle and is set as something that matters more to them than their individual comfort. This allows them to create a long term vision for what they want in their lives.

Finally, when we have those commitments laid down as part of a vision for the life they want to lead, we identify the measurable, courageous steps they’re going to take to move towards that long term vision, both for themselves and for the world they want to see. That always includes setting a concrete giving goal that feels more brave than ones they’ve had before.

And then the coaching shifts into offering accountability and support to ensure they’re making progress on their goals and supporting them when they get stuck, which often happens when we have ambitious goals.

Sarah: Do you include all the different ways they can use their capital for good in your coaching? Would you talk about impact investing and if so, does that surprise any of your clients?

Iris: All of my clients here in the US are very interested in impact investing and divestment and all the different aspects of the burgeoning ‘just economy’. So no one is surprised to look at leveraging all their actions and resources.

I find it a tricky topic, however. I recently read Marjorie Kelly’s book “Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises” and I recommend it. It’s an incredible book.

One of the things she talks about is capital bias, which is a bias towards maximum increase of capital, no matter what, which is ultimately to benefit the wealth holders and the shareholders at the expense of workers, the economy and the planet.

I worked at a wealth management firm that does social impact investing. And in working there and studying different types of socially responsible investing, I’ve learned we have to be really careful to look under the hood of where our money is being invested. There will always be marketing that tells us that it’s impact-oriented or more socially aware than other forms of investments, which it might very well be. The bottom line is, when we are making more profit than inflation rates from our investments, we’re always extracting.

Marjorie has a great expression in the book: “There’s a dream world of wealth. The fiction that financial gains somehow fall from the sky pristine and unblemished.”

And that’s exactly the myth we’re taught. You see this little number on your computer screen that’s invested somewhere. You don’t know where it is. It magically grows as it’s supposed to, and all is well and good. But underneath that number on your screen are human beings who are working and being barely paid for their efforts. They don’t get to have any agency in the company. And the profits go to us, those who aren’t doing anything.

So part of what I do is help clients develop more discernment around which types of investments truly are centred on social justice and which ones are just a little bit less bad than being invested in oil companies.

The wealthy white family has firm rules

Sarah: Iris, you’ve written about the “rules of the white wealthy family”. Can you summarise them for us and why wealthy white people, or all who are wealthy, should understand and resist them?

Iris: I think this article series is relevant to all wealthy people, although not every message will resonate as deeply with families of colour or immigrants who have different family and community values. But some of them certainly still will, because these are general rules of wealth.

In the ten years I have been doing this work I have seen two things hundreds of times over that make me very curious.

I’ll be coaching people on increasing their giving and I’ll find that a lot of the people who come to me are only giving away 1% or 2% of their money annually and want to increase this and will happily increase a little bit. But when we explore the possibility of greater giving from the principal or corpus, there’s this full body shutdown. Again, it doesn’t matter how big the corpus is, there’s an intense fear that I see on my clients’ faces. This total block that it is not okay to spend down, it is not okay for the next generation of your family to have less money than you.

The second contradiction is with clients who are very committed to community, perhaps they live more in a community and they have a really strong network of relationships, but they are terrified to share money with people they know. They can give to nonprofits, but they are scared and overwhelmed at the concept of giving money to people in their lives who deeply need money.

These two contradictions led me to a lot of research and then to this article series which made total sense to write because I see so much of it.

The first article is my best attempt to examine the unconscious beliefs that we were taught about family and money. Beliefs that serve to preserve wealth in wealthy families and not have us share money with anyone else, through the guise of it being just. This is how family is and is intended to be.

The first rule is that the nuclear family is the only legitimate form of family. And I know it very much lives in my body that in order to have a good or successful life, I need a spouse and I need to have kids. I think a lot of us feel that pressure and there’s a lot of reasons why. But one of them is because the nuclear family is one way to preserve wealth within a wealthy family and to make the lines of inheritance extremely clear.

The next, which goes with the first rule, is that you can’t share money outside the family. The only new person you can bring in is someone that you will marry. Beyond that, it’s inappropriate, it’s rude, it’s simply not done. To share money with your friends, employees, neighbours; it’s inconceivable for us and another thing that serves to preserve wealth within wealthy families.

That’s two of the rules, the next three cover why anything goes in the name of family, secrecy and the strict behaviour code that traps us all.

I really encourage your readers to dig into the article, and I would add another read that I think they might appreciate. This one is about the conditionings in philanthropy and finance around perpetuity legacy with the default assumption that we need to preserve wealth for future generations and that generations should only get wealthier over time. This is core to what I want your readers to consider questioning.

It’s natural and normal for parents to want to feel reassured that their children will be okay when they die. That’s just such a natural and loving instinct and a really beautiful thing. I want people to avoid taking it to the extreme though.

Because when you give your kids enough money to live off of indefinitely without having to work, let alone when you create trust funds for your grandchildren or your unborn grandchildren — which people can do and my clients parents often do so — you are actually setting up your children to be really disempowered in their lives.

Rather than a gift, you are opening them up to a huge world of existential turmoil, insecurity around their ability to work, separation and alienation from others, potential  entitlement, and a lot of mental struggles and mental health issues at the expense of keeping more resources that really the rest of the world desperately needs.

So I encourage anyone concerned about releasing capital and letting their descendants down to reconsider, as leaving massive inheritance might not be the gift that you hope it would be.

I meet a lot of clients who would much prefer quality time with their parents over all the material luxury. It’s kind of tragic because I believe the parents were working really hard with the belief they were taking care of their kids but then were unintentionally neglecting them and having their children just basically be raised by other people.

And so most children just want quality time and emotional nurturing from their parents and they want that more than toys and they want that more than money.

That’s really at the core of where we get stuck around wealth redistribution is around parenting and around family. I encourage your readers to just reflect on what type of legacy you really want to leave behind and if that can really be achieved through inheritance.

Exploring generosity

Sarah: I’d love to know what generosity means for you personally, how it either shows up in your life or work, or how you get to tap into your own generosity.

Iris: For me, generosity is doing something that is difficult to do. I don’t feel particularly generous if I buy lunch for someone. It’s a nice thing to do – a gesture. But I more feel generous when I do something that’s genuinely hard. So, for example, my friend went through a really traumatic experience when they got robbed and they didn’t want to sleep alone in their home. So I loaned them my dog. My dog is my emotional support animal. I love her so much.

At the time I was really struggling with my mental health and I really didn’t want to do it. I didn’t want to be away from my dog. But I knew it was important to do. To me, that is being generous — more than doing things that externally look or seem generous. I feel the same way about receiving.

If somebody comes and they’re super busy and stressed but they still make the time to show up for me and to offer me emotional support or to spend time with me, even if it’s challenging for them, I really feel the generosity of that.

I think that that’s what’s hard about what it means to be generous.

When you have $20 million, at what level would you have to give for it to really challenge your life and affect your life? That’s going to be quite a big number, right? And so I think that’s where giving can sometimes get confusing when we’re working with such unfathomably high numbers, because it’s just difficult to give at a level that will actually reflect some type of sacrifice on your end.

Sarah: Your dog example is incredibly generous. When you did such a thing, did you enjoy it? Did you allow yourself to feel the halo of generosity? Because you’re allowed to feel warm and fuzzy.

Iris: I absolutely believe that. I believe in taking in the moment. I usually encourage clients to pause after they donate and just notice what they feel in their body. I have them imagine the communities they’re supporting. With the dog story, if I’m honest, I think I felt a mixture of relief for my friend who I knew was sleeping better, and felt reassured, but I also felt sadness because I missed my dog. But then I got her back. It wasn’t that big of a deal.

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Where next?

The Philanthropy Ecosystem: Giving vehicle providers

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Once a philanthropist commits to thinking about their philanthropy as a long-term activity, they need to decide which giving vehicle to use.

This vehicle will support them to ring-fence their money for charitable purposes and help manage its distribution and the involvement of family members.

Foundations

The traditional option has been setting up a foundation.

This is a regulated charity set up for public benefit, which makes grants in support of the chosen cause areas. It remains a popular model with almost three quarters of global foundations being set up in the last 25 years.

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The main downside is that it involves time, effort and some costs to administer because it involves setting up a legal entity that needs to report on its activity and comply with certain standards.

Donor-Advised Funds (DAFs)

The Donor-Advised Fund or DAF has become popular as a less time-consuming alternative.

The funds in a DAF are still committed to be used for public benefit but the DAF provider takes on the administrative burden. DAFs have been criticised because the money can sit in the fund and not be spent and so the donor can gain from the tax incentive before any money reaches a charitable cause.

However, they are also seen as an accessible mechanism that encourages giving and can certainly help a donor to act on their intention to be philanthropic whilst they work out exactly how they will give.

DAFs have increased in popularity over the last decade and there are many UK providers including Stewardship, Prism, CAF and NPT-UK.

Rosemary Macdonald

Community Foundations

In this interview, we spoke to Rosemary Macdonald (pictured right), CEO of UK Community Foundations, about the role of Community Foundations as providers of giving vehicles for philanthropists.

We asked her to explain what Community Foundations are and the benefits to donors of giving through them.

What is a Community Foundation?

Rosemary: Community Foundations cover every postcode in the UK.

They are based in a particular geographical area – a county, a city or, in the case of Scotland, Wales and Northern Ireland, a country.

Community Foundations build an endowment from lots of different funders and use this as a sustainable source of funding to distribute grants locally.

They mainly support the smaller, grassroots charities in their area such as a Scout troop, older people’s lunch club or bereavement counselling service.

Community Foundations also play an important role in encouraging philanthropy locally; providing insight on local needs; and take a convening role in bringing the statutory, private and statutory sectors together to address long-standing issues such as knife crime or poverty.

Our role is to find the balance between the funders and the needs of the community – we sit in the middle as the translator and advisor to both, which is a unique position to be in.

What giving vehicles do Community Foundations offer?

Rosemary: There are three main ways we work with donors:

1. Named Funds – this is what we call DAFs. For those giving above a certain level, we offer a bespoke fund where they can give to the issues they care about. When donors set up a fund they get a fund agreement which sets out how the funds should be directed, reporting requirements and contribution to costs.

The Community Foundation manages the grant process, carrying out the due diligence on the groups supported to make sure they are the right fit and doing the right thing. The level of engagement varies with some donors wanting to see the applications and deciding which groups they want their funds to go to.

2. Pooled funds – This enables donors to combine their funds with others to address a particular issue such as young people, the arts, or a specific geography.

3. Flow-through funds – This is where a donor wants their money to be used immediately, often in response to a local appeal such as funds to support those affected by the cost-of-living crisis.

What is the benefit to the philanthropist of giving through a Community Foundation?

Rosemary: If a donor wants to make a real difference in a specific geography then they will find the best quality of advice from their Community Foundation.

They will have access to groups they would never come across who are doing amazing things in communities. We provide insight and understanding to make sure their funds go to the right people and places.

Giving through a Community Foundation is a much simpler option for those who want to do something but don’t want the hassle of setting up a new charity.

The donor does not have to worry about the governance or the reporting. We handle the financial side of things and the grant-making.

What changes have you seen?

Rosemary: A positive change is that donors are much more willing to think about unrestricted gifts and trust the groups they are funding to know how best to use this money.

Another change I have seen is that people want things to happen quickly. Because we have had so many crises (Covid, the floods, cost-of-living), donors seem to want to get their money out the door very quickly.

This has had a negative impact on Community Foundations’ ability to build their endowments. It is vital that Community Foundations have these endowments to provide long-term sustainability.

Most of the issues in communities are not going to be solved in three years.

Having an endowment enables more strategic grant-making where we can support longer-term solutions. We can fund groups for longer periods and give them the stability they need to do their job.

Groups will have a greater impact on people’s lives if they are not constantly worrying where their next funding is going to come from. We need donors to think about investing over the longer-term.

With thanks to Rosemary Macdonald, CEO, UK Community Foundations

Emma Beeston

Emma Beeston

Independent Philanthropy Advisor

Emma Beeston is an independent Philanthropy Advisor supporting individuals and families with their giving.

Her book on Advising Philanthropists (Co-authored with Beth Breeze) is out now.

www.emmabeeston.co.uk

The Philanthropy Ecosystem: The Connectors

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When we think of a philanthropist, we often imagine a ‘lone saviour’. Someone who works alone to determine how best to do good and acts alone to achieve their desired impact.

Of course this is far from the reality.

As we have already seen in this series, there is an ecosystem of support around donors (philanthropy advisors, thinkers, wealth managers) who can help them with their choices.

Philanthropists also do good through the actions of others – those partner organisations and community leaders they choose to support. Increasingly, there is a rise in collaboration, linked to the fact that the world’s problems are too big to be tackled without collective effort.

Part of the philanthropy ecosystem is made up of the connectors – the networks, platforms and collaborations that ensure philanthropy is less lonely.

They connect philanthropists to each other as well as wider learning, practice and ideas.

The Philanthropy Workshop (TPW) is part of this infrastructure supporting a global community of 400 high net worth philanthropists.

(There are others such as The Mesa and Beacon’s new Beacons Connect network which you can read about here.)

TPW was established to educate individual wealth holders and their families; providing frameworks, approaches, toolkits, principles and practices to help them have a greater impact.

Now, alongside the learning programmes, TPW is a community which provides a safe space for discussion and connection, convening peers to share best practice, to learn from and influence one another.

In this interview, Marie-Louise Gourlay, the Managing Director of Europe for TPW, tells us more about their work and how a community of peers benefits philanthropists.

Please tell us more about the work you do.

Marie-Louise: I work closely with a community of 100 philanthropists in the UK and Europe. I bring new philanthropists into the TPW community which involves understanding what they hope to do and identifying the support they need from TPW’s education and our community of peer philanthropists.

We have a core learning programme and that provides a shared framework and language, which in turn creates the basis for a shared sense of community.

TPW is officially cause-agnostic and so we focus on the process, the ‘how to’ of philanthropy. We give people access, knowledge, resources and lots of connections. We hold the space for peers to influence their fellow peers.

Our work is underpinned by our values: we are open and collaborative, promote transparency and action-oriented mindsets and we have a strong focus on equity and justice.

We really want people to move from education to action and collaboration.

How does this benefit philanthropists?

Marie-Louise: There are so many things members get from being part of TPW: education, connections, community. There is huge value in the peer to peer influencing – the ability to sit down with peers who have trodden this path before them. There’s a lot more complexity than people first realise.

New philanthropists often don’t know how to navigate the sector, are concerned they are not having enough impact and consequently some lack the confidence to move forward.

Many report feeling a huge responsibility to achieve immediate impact and that can sometimes get in the way of giving:  we sometimes hear people say: “We’ve set up a Foundation but we haven’t made a grant yet”.

We provide a safe space where they can ask anything: What are the questions I should be asking? How do I do due diligence? How do I do a field scan? How should I consider risk?  They build their knowledge, their tools, their approaches and confidence. We talk a lot about root causes, so they really understand how best to effect change at a wider systemic level.

We’ve had members who have gone on to set up their own organisations, or a co-funding arrangement or collaboration.

We can’t attribute this solely to TPW but we believe our role in holding a trusted space plays a vital part in accelerating their philanthropy and its outcomes, and there is no other community or convening space for philanthropists like it.

Another value of the community is that it is two-way. You’re coming not only to learn but also to give back, through mentorship, thought leadership, or sharing learning, failures and best practice. We encourage members to think beyond their own giving to their influence on the wider sector and how they can push things forward.

And the benefit of connecting with peers goes far beyond discussing philanthropy. It could be talking about family dynamics or prenuptial agreements.

Our community is a safe space for people to come together who are facing a lot of the same challenges such as the responsibility of stewarding wealth, understanding where their wealth came from and what that means today.

What differences do you see when supporting younger wealth holders?

Marie-Louise: In the past people felt that it was their wealth to decide what to do with and when and how to hand down.

Increasingly we’re hearing that the next generation see themselves as stewarding money that is not theirs. Younger philanthropists are more interested in changing the system and they apply different lenses – justice, climate, racial equity – rather than focus on a single issue.

We’ve also seen a shift to leading with impact.

This could mean extending their philanthropy to include activism, giving that is non-financial e.g. time, and taking a total portfolio approach. This changes the intention from “How do I do the best philanthropy? to “How do I get the greatest impact?”

A lot has changed in my eight years with TPW.

Members are now more open to the value of influencing one another and see that as part of their responsibility in driving more rapid change. They are looking to the community to share opportunities, to ask for ideas of what to fund, and to make connections.

They aren’t afraid to challenge one another and certainly hold one another to account. The culture of money as a taboo topic remains something of a limitation: our community builds trust and breaks down the entirely private nature of discussing finance.

Increasingly members are thinking about what their role – and the role of philanthropy – is in society, beyond what their own strategic interventions might be, and how to find the levers for change.

Marie-Louise Gourlay is Managing Director of Europe at The Philanthropy Workshop.

Emma Beeston

Emma Beeston

Independent Philanthropy Advisor

Emma Beeston is an independent Philanthropy Advisor supporting individuals and families with their giving.

Her book on Advising Philanthropists (Co-authored with Beth Breeze) is out now.

www.emmabeeston.co.uk

Where next?

The Philanthropy Ecosystem: Private Client Advisors

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Most philanthropists will have other advisors in place before they seek help with their philanthropy. These private client advisors may include wealth managers, accountants, lawyers, financial planners, and tax advisors.

The degree to which they cover philanthropy will vary as it is not the primary focus of their work. Yet they are well placed to raise the topic of giving and to help with certain aspects, such as advising on giving vehicles, as well as referring their clients to philanthropy advisors and others in the philanthropy support ecosystem.

George King is a leading wealth manager who embeds philanthropy into his work. In his role as Senior Wealth Manager at MASECO Private Wealth, he provides investment management, financial planning and financial advice to high-net-worth individuals.

Alongside this, George is on a mission to see philanthropy advice included in the wealth management proposition. As a Trustee at Philanthropy Impact, he seeks to promote philanthropy and trains wealth managers and other private client advisors.

Private client advisors

George King
Senior Wealth Manager
MASECO Private Wealth

Tell us more about the work you do

George:

My day job is directly supporting clients, most of whom have a transatlantic connection. My conversations include questions and explorations around aligning their values with their capital. This includes philanthropy alongside ESG and sustainable investing. I came to this work when setting up the Royal Bank of Canada’s wealth management offer in the UK. I wanted to infuse values and philanthropy advice in our work both as a differentiator in the market and because I believe you are not a competent or complete wealth manager if you’re not able to have these conversations. You don’t talk with clients about leaving an inheritance to their children without raising the issue of taxes. Similarly, when you talk to your clients about what money is for and what they care about, this has to include philanthropy.

Alongside my core work, I am involved in initiatives that promote the values-aligned allocation of capital. I view my role as a positive catalyst. However, I don’t consider myself as a philanthropy advisor. I am involved with ascertaining values, exploring what my clients want to accomplish through their philanthropy, helping them think through the options such as giving in their lifetime or after death, supporting local causes or systemic change. I don’t help with the last mile of the decision process – finding the specific entity to give to – so for this part I connect them with specialist philanthropy advisors.

How does your work help philanthropists?

George:

It is hard to quantify the value of this work but for people where it really matters, it matters a lot. For example, I have one client who did not set out to be rich, they just ended up in a job that meant they earned millions.

They now have more money than they can ever need in their lifetime and their kids are embarrassed by this wealth. I am helping them think through what money means to them and what it is for.

The value in this relationship is not in the discussion about the investment transactions (though that is fine too), it is in the discussion about their relationship with their wealth. The client sees that someone hears them, understands what they care about, and can help them advance their values.

For others, they are not in a position to think about moving from a traditional approach to investing right now. However, they value knowing that when they are ready there is someone there who can help them.

What should philanthropists expect from their advisors?

George:

It will vary for different types of advisors as it depends on the nature of the relationship. For example, lawyers rarely have ongoing contact with their clients; their work is usually more transactional. Wealth managers have much more of an opportunity to talk about philanthropy as we have the frequency of contact over several years that means relationships evolve and deepen.

It is easier for us to talk about what matters to our clients and what they are passionately interested in. And we have lots of time to do so because we do not bill for our time. However, any private client advisor should know enough about the philanthropy ecosystem to help their client.

They should be able to raise the issue of philanthropy in a helpful and thoughtful way and, where there is a need or an interest, plug their client into the relevant resources. These conversations should be initiated by the advisors – you don’t wait for a client to ask if there is a tax consequence or if they are taking enough or too much risk.

So it is the job of the advisor to put philanthropy on the table in a non-judgmental way. For example, is this something you are thinking about? Is this something you’ve done before? Is this something you want to learn more about now or in the future? Wealth owners should expect – and are increasingly looking for – advisors with knowledge and competence in values-related issues including philanthropy.

Emma Beeston

Emma Beeston

Independent Philanthropy Advisor

Emma Beeston is an independent Philanthropy Advisor supporting individuals and families with their giving.

Her book on Advising Philanthropists (Co-authored with Beth Breeze) is out now.

www.emmabeeston.co.uk

The Philanthropy Ecosystem: Thinkers, researchers, academics

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Philanthropy can look very simple – a case of deciding who to give some money to. However, one or two steps into the journey the complexity reveals itself.

There is an overwhelming array of options to choose between and different approaches to take.

Each decision involves difficult choices: is it better to respond to a crisis or tackle the root causes of a problem?

How do you judge whether an intervention will be effective? Questions go beyond the practical to the fundamental: should you fund something which you think should be covered by taxes? Should your decisions be led by need rather than your own interests? This is where the thinkers can help.

There are researchers looking at topics including giving trends, donor motivation and measuring impact; think tanks and thought leaders are influencing policymakers and providing opinions and publishing books on what ‘better’ giving looks like.

One of these thinkers is Rhodri Davies. Rhodri has set up the new website and resource, Why Philanthropy Matters that pulls together his writing and podcasts. He is a Philanthropy Expert-in-residence with the Pears Foundation where he acts as a sounding board on philanthropy issues as well as a resource for the organisations funded by the Foundation. He is also a Research Fellow at the University of Kent’s Centre for Philanthropy, where he carries out research and helps teach on the Masters course in Philanthropic Studies. Rhodri describes his role as thinking and writing about philanthropy.

In this interview, he explains how this brings value to philanthropists themselves.

The thinkers – researchers, academics, think tanks, thought leaders

Rhodri Davies
Why Philanthropy Matters

Rhodri has written two books:
For Public Good by Private Means

What is Philanthropy For?

How did you end up as a philanthropy thinker?

Rhodri:

I originally wanted to be an academic and started out in philosophy before realising I wanted my research to be focused in the real world. By a series of happy accidents, I ended up on a research project where I interviewed philanthropists. I got to find out what made them tick and found it fascinating.
I’ve gone further down that rabbit hole ever since.

Tell us more about the work you do?

Rhodri:

I sit between academic study and practice. I step back from practice to show how philanthropy fits into a broader context but I don’t step back so far that my thinking is not relevant to practitioners. Philanthropy can easily be seen as a niche topic that sits in a corner of the charity sector. My aim is to get conversations about philanthropy to a wider audience. By framing it in the right way people can see that it is relevant to what they do and are thinking about. Take for example the relationship between charity and justice. It can sound theoretical, but it plays out in everyday lives such as philanthropists funding the distribution of vaccines. People recognise giving to support vaccine distribution as a good thing but they are also uncomfortable that it is necessary for philanthropy to step in to do this when they think the state should provide vaccines.

How does your work help philanthropists?

Rhodri:

My work helps in three main ways:

1. Practical
Those getting on and doing philanthropy are busy and rarely have a chance to stop and think about what they do, where it comes from and how it touches on fundamental questions about the nature of humanity and what we want society to look like. On a practical basis, I can do some of the leg work and then share what is interesting.

2. Reassuring
It can feel a bit lonely as a donor or someone running a foundation. It is reassuring to know that not only are lots of people in the world right now going through the same things but also that historical figures have also grappled with the same challenges. I hope philanthropists take strength from knowing they are not alone.

3. Enriching
There is so much knowledge out there to draw on and most trends in philanthropy have a historical precedent. My hope is that my work enriches people’s understanding of philanthropy – it’s history, where it sits in current debates and where it might go in the future.

What do you find challenging?

Rhodri: When you recognise that philanthropy moves in cycles you realise that nothing is clear cut. I do have my own views on how philanthropy at its best should look and work, but I also don’t think my view is the final word because there are perfectly valid alternatives. It can be tricky to stay in the middle and try to be balanced and nuanced. And there are some issues such as climate change or racial justice where the challenges are even greater, because in attempting to be even-handed you risk giving legitimacy to points of view that many would see as actively distasteful. Wherever possible though, I want to hold that middle space which allows people who might not agree with each other to think through and discuss issues and work together, because ultimately, they share the same ambition of wanting philanthropy to do good in the world.

Emma Beeston

Emma Beeston

Independent Philanthropy Advisor

Emma Beeston is an independent Philanthropy Advisor supporting individuals and families with their giving.

Her book on Advising Philanthropists (Co-authored with Beth Breeze) is out now.

www.emmabeeston.co.uk

The Philanthropy Ecosystem: What is a philanthropy advisor and what do they do?

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We are delighted to introduce the first article of our brand new Philanthropy Ecosystem Series, designed to break the ‘isolation tank’ syndrome that philanthropists can sometimes find themselves in. The good news is they are not alone and an evolving ecosystem of support exists to help them.

In this series, we will introduce and interview some of the incredible individuals and organisations that are here to help and support all potential and existing philanthropists. We are grateful to Emma Beeston, herself a Philanthropy Advisor, for conducting these real-world interviews on behalf of Beacon.

In this first article, we will be discussing what a philanthropy advisor is and what they do in the company of Lizzy Steinhart, a Philanthropy Advisor for the multi-family office LCM Family Limited. For any philanthropists trying to work out how best to make a difference in the world, the great news is that advisors like Lizzy will help them reach their goals.

What Is a Philanthropy Advisor And What Do They Do?

The role of a Philanthropy Advisor

A Philanthropy Advisor is a philanthropist’s essential guide through the myriad of choices you will make as you move from being a generally charitable individual to becoming an intentional giver. They act as a critical friend who is there to help you when it comes to deciding your philanthropic goals as well as bringing their sector expertise to inform (and sometimes challenge) your giving choices. Philanthropy Advisors can be found in a range of settings: banks, family offices, and wealth management firms as well as being independent consultants and advisory practitioners.

Many Philanthropy Advisors will be generalists who are able to help you with any aspect of what you want to achieve from your giving. Some Philanthropy Advisors specialise in a particular cause area such as the environment or a particular philanthropic approach such as strategic philanthropy, or particular aspects such as those involving the family and issues that can arise there.

A Philanthropy Advisor is not yet a well-known professional role. To demonstrate what they do we interviewed Lizzy Steinhart, a Philanthropy Advisor for the multi-family office LCM Family Limited. Lizzy has a background in the charity and grant-making sectors and joined the firm to set up their philanthropy service. Her purpose is to support individuals and families in turning their generosity into thoughtful and planned giving. Her typical day demonstrates the variety of areas that philanthropy advisors can help with such as liaising with tax advisors for a client wanting to set up a donor-advised fund conducting due diligence assessments and even accompanying a client on their project visits.

Some of Lizzys’ clients may come up with a firm idea that she will then help to make sure they have considered a broader marketplace than the charities they may already be aware of. Other clients of hers may come to her with a blank sheet of paper which means that Lizzy can work with them for several months or even over years to help them decide where they want their money to go and what the most effective and efficient timing of donations for both the client and the charities involved would be.

What Is a Philanthropy Advisor And What Do They Do?

Elizabeth Steinhart
Philanthropy Advisor
www.lcmfamily.co.uk

What benefits does a Philanthropy Advisor bring?

Lizzy:

It is hard for a philanthropist to pick up the phone and say “I may or may not be interested in giving you some money”. Philanthropy advisors are really useful intermediaries that can facilitate connections and conversations to benefit both parties as they are able to make these conversations deeper, clearer and more strategic.

Advisors also enable broader conversations about the purpose of wealth across families. This can help the wealth creator to express their values at the same time as listening, inspiring and guiding the future inheritors in financial literacy and charitable giving. This can prevent the issues that arise when family members only find out at death that someone has given lots of money away to charity. More importantly, it enables children and grandchildren to be incredibly proud of what their family has achieved.

Ideally, you are helping your client to become confident and self-sufficient to ask charities the right questions about causes and projects that they may want to invest in. As well as making introductions and guiding what good due diligence of a charity should look like, I can steer them in how to research a specialist cause or ‘ marketplace’ of charities working within a specific field and also support them in conducting meetings with charities.

They can then go off and follow that particular charity relationship themselves, often that will last many years. The majority of my clients are very intelligent people with fabulous careers. They are coming to this with huge intellect, curiosity and compassion. It’s about facilitating their onward journey without me.

What Is a Philanthropy Advisor And What Do They Do?

What should philanthropists look for in an advisor?

Lizzy:

This brings us back to our question of what is a philanthropy advisor. Look at their career path, their professional networks and their previous experience and knowledge of the charitable sector. There are plenty of good people out there so talk to others and get personal recommendations.

What challenges do you face in this role?

Lizzy:

Philanthropy is so meaningful and enjoyable that I find it frustrating that it is not part of all conversations about wealth across private clients‘ ‘financial services’. Clients don’t often know the added value they, their families and charities will gain from investing in some professional philanthropy advice. Too many wealthy individuals still make significant ad hoc, spontaneous donations to causes that they care about, rather than using their day-to-day business acumen to research, take advice and ‘invest’ in that cause to maximise their own knowledge, the terms, value and impact of the gift.

What do you like most about your role?

Lizzy:

I love the breadth of the individuals I get to work with – from the wealthy clients wanting to make a socially conscious impact with their money, to meeting with incredibly dedicated charity staff, volunteers, and of course, the end beneficiaries of funding – many of whom have humbling and inspirational stories to tell. It is so rewarding to take a client on their giving journey and see this often open up a new enriching chapter for them and their families.

Emma Beeston

Emma Beeston

Independent Philanthropy Advisor

Emma Beeston is an independent Philanthropy Advisor supporting individuals and families with their giving.

Her book on Advising Philanthropists (Co-authored with Beth Breeze) is out now.

www.emmabeeston.co.uk

How To Be The Philanthropist That Makes A Difference

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philanthropist

Save this for later. 

The next time you’re approached by a charity, come back to this article.

That’s if you want to avoid the funders’ remorse, and feel confident that every penny you give is spent well.

Kafui and Steph will be our guides. Why them? Because they sit between the people you want to help and funders like you. Kafui is CEO of FAST London and Steph is Co-founder of Doceo.

Their charities have both benefited from strong relationships with effective philanthropists. By 2024, these relationships will help to change over 10,000 lives.

Based on these conversations, here are 4 ways that you, as a philanthropist, can build a trusting relationship with charity.

What is an effective philanthropist, and why does it matter?

Philanthropy is the desire to promote the welfare of others, especially by donating money to good causes. An effective philanthropist is a person who makes it happen.

Donating to charities is a great way for you to address problems you care about. Like outsourcing the problem solving to other passionate people. 

If every UK multimillionaire gave 1% of their annual income, we would have £46.4m more for charities. But we have to make sure that £46.4m is well spent. 

Next time you consider a charity, apply these 4 things to ensure success.

How To Be An effective philanthropist…

1. Prioritise trust

Prioritise building trust.

25% of HNWI say a lack of faith in how charities are run is a barrier to giving. Some of this is down to misconceptions, but some is because of legitimate issues in the sector. How do you decide who to fund?

Look for expertise, transparency and results. 

At FAST London, Kafui is teaching young people trust, resilience and hope for the future. They live next door to the young people they help.

Funders visit the clubs, meet the young people and hear what the community says about their work. You want this level of access to a charity. But there’s more to it.

Doceo gives disadvantaged young people essential life skills to enter the workforce. They select programmes based on the young people’s personal experiences and conversations with recruiters. You want to understand their theory of change.

How do you build trust? Ask the right questions.

Ask to see impact data, annual reports, case studies, a theory of change, beneficiaries and more. If you’re interested, they should be able to share this with you.

If you can’t trust them, don’t fund them.

But let’s say you can trust them. What’s next?

2. Set effective expectations

Expectations help you achieve goals. But unrealistic expectations are premeditated resentments. Managing expectations is key.

Have guideline expectations in 3 key areas:

  1. Interaction with you
  2. Running the charity
  3. Solving the problem

Kafui highlights that “in a small charity 3 or 4 of key functions are done by one person.” If you’re expecting a weekly catch up call with a small charity, that would take a lot of time away from delivery.

And if you’re expecting to determine exactly how the charity spends your money, remember, they should be the experts. If you’ve built trust with them, you can trust their approach.

How can you set expectations? Have a kick-off call. Talk about plans for communication and spending. Listen but also challenge them. Take notes so you can refer back to them for accountability. Charities often have to adapt, but some can lose sight of their end goal. Clear expectations will keep your philanthropy on track.

3. Communicate regularly (enough)

Effective communication is crucial. Any relationship, personal or professional, requires input from both sides. Here’s why.

Your chosen charity wants to plan. You’re a part of their plans. They want you to see their work. You want to know your money is making an impact. You might have other skills that can help.

You won’t know any of these things if you only skim read a newsletter every 4 months. Your charity must engage with you, but you need to engage as well.

At Doceo, Steph says “At the bare minimum [expect] regular updates….All of our donors sign up for our mailing list.”.

If you invested in a business, you would keep up to date to safeguard your investment. Philanthropy works the same way.

Read the updates, reports, attend events, see any press, and ask important questions. You could volunteer. Every week? Not necessary. Once a quarter? That could work.

But what happens when you’ve done all the above, and it’s still not working. If you’re considering ending charity support…

4. Know your why

Remember why you care. In the words of Jeff Bezos, be “stubborn on vision and flexible on details”.

Knowing your “why” will keep you focused on the end goal, keep you inspired and guide you to make the most impact. 

Steph has a great suggestion. “Know the impact that the funding is having and the impact that the lack of funding would therefore have.” A simple exercise like this can put into perspective the impact (or lack thereof) of your support.

Take a pen? Pause for 2 minutes and write down what you care about. Why did you start in the first place? Why this issue? It will reassure you to keep going on or highlight that it’s best to try a different charity. Whatever you do, don’t give up. 

The people you set out to help still need you. You just need to find the best way to support them.

Society needs effective philanthropists. You can be one. 

These 4 pillars will help you to maximise the impact of your cheque, and work exceptionally well with the charities you invest in.

Start now.

Follow me, Steph and Kafui on LinkedIn

Emmanuel Ayoola

Director and Principle Consultant at Mission Growth

Philanthropy Right Now: Frameworks for confidence

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‘Philanthropy Right Now’ is a monthly column for Beacon Collaborative by Marie-Louise Gourlay, Managing Director of Europe for The Philanthropy Workshop. In this month’s column, Marie-Louise Gourlay considers the importance of clear frameworks for donors on their philanthropic journey.

Next month we’re bringing together the TPW community for the first time in two years at our Global Summit in Toronto. It’s not been without critical decisions on how best to ensure that we can come together safely and with purpose.

As Covid-related restrictions lift, people are looking to us to provide clear instructions about how to interact, what to expect, and how their needs are going to be met. There’s a sense that failing to do this may leave people without a set of parameters to operate within.

If you don’t meet the tacit group codes and norms, a sense of belonging can be elusive, destroying the potential for a successful gathering with lasting impact.

Without mandated guidelines, it’s up to one’s own interpretation and comfort level as to how to act. As this varies from person to person, it can create a deep sense of discomfort and mistrust of those around you.

When the UK entered its third lockdown early last year, I read the book ‘The Art of Gathering: How we Meet and Why it Matters’ by Priya Parker. A lasting takeaway was the need to be intentional about how we come together – not just in terms of content, but in creating a space where everyone feels they can belong.

Parker puts forward the notion that we need to switch ‘etiquette’ for ‘rules’. Etiquette can be exclusive – if you don’t meet the tacit group codes and norms, a sense of belonging can be elusive, destroying the potential for a successful gathering with lasting impact.

Rules, however, can be clearly stated, enabling people to know what the expectations are, and setting the scene for different groups to come together meaningfully.

Providing a framework, whether for gathering, for philanthropy or for anything else, is a necessary starting point to orient anyone in a forward direction. And having established rules – even if you choose to deviate from them – gives you that starting point; a shared understanding, a springboard.

We’re often asked, “can you just give me some tools?’, or ‘where can I find online guidelines for philanthropy?’.

Often, when people are at an early stage in their philanthropic journey, there can be much trepidation, coupled with low level self-confidence. We’re often asked, “can you just give me some tools?’, or ‘where can I find online guidelines for philanthropy?’.

Whilst the desire to create impact is usually there for new donors, there’s an underestimation both of the time and the complexity of societal systems.

This can mean that some well-intentioned potential philanthropists fall at the first hurdle. It all seems too much; too long; too complicated. And that’s what we, within this sector, need to address.

There’s a journey that all individuals – irrespective of the size of their philanthropy – have to go on, to understand our own role, our personal values and what’s driving us. To explore where and when we can contribute and where and when we should step back and cede power to enable impact.

There’s a journey that all individuals – irrespective of the size of their philanthropy – have to go on.

Conterminously, the sector needs to ensure that we are creating, driving and sharing frameworks and best practice across all of our organisations.

We should be enabling people not only to have a starting point they can launch from, but continued guidance about what works throughout their philanthropic journey.

Complex theory lacking in practical examples, compounded by the jargon that we all use (coming back to tacit understandings, and a sense of exclusion if you don’t ‘speak the language’) is not going to help.

I know I do it – use words that one hopes make one sound like an expert, but in reality, we’re missing the target, building barriers where there should be bridges.

A simplification of the world of philanthropy would be very welcome, bringing an evolving & relevant understanding of how we come together and how we collaborate; one in which we can each take a seat at the table, knowing that everyone’s perspective is vital & different.

[We need to] develop frameworks and guidance which are accessible for all.

We need to step forward confidently and develop frameworks and guidance which are accessible for all. In doing so, we can make use of the multiplier effect of community and collaboration to change systems exponentially.

marylou gourlay

Marie-Louise Gourlay

Marie-Louise Gourlay is the Managing Director of Europe for The Philanthropy Workshop. Find out more about The Philanthropy Workshop’s activity here.

Philanthropy Right Now: The Future of Philanthropy

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marie-louise gourlay philanthropy right now header

‘Philanthropy Right Now’ is a regular column for Beacon Collaborative by Marie-Louise Gourlay, Managing Director of Europe for The Philanthropy Workshop.

The report of the recent 21% decline in charitable donations by top earners, despite growing wealth, is deeply disappointing, though no surprise.

Talking about, let alone engaging in, philanthropy, is alas, usually a journey of many years. As a culture we share a deep discomfort in discussing money in any of its roles, creating taboos, even when it comes to giving money away.

Even our organisational credit card from a reputable bank, has misspelled our name, calling us ‘The Philantrophy Workshop’. They weren’t in the slightest bit concerned when we pointed it out; so we live with it.

That this mistake includes the noun ‘trophy’ got me thinking – our American cousins celebrate philanthropy far more than we do; with names emblazoned on buildings and widely-publicised patronages of large cultural institutions.

Are those the trophies of philanthropy? Trophy can be synonymous with status symbol, or, per the Ancient Greeks, a memorial of victory – neither of which we aspire to.* But what is it that really incentivises giving? And how do different cultures influence this?

The media’s take on last week’s Law Family Commission report emphasises that for giving to go up, it’s up to the charities to build back trust. That is indeed a part to it, and whilst not condoning the actions of some NGO staff which have served to undermine public trust, we must move forward.

As the late bell hooks wrote:

“For me, forgiveness and compassion are always linked: how do we hold people accountable for wrongdoing and yet at the same time remain in touch with their humanity enough to believe in their capacity to be transformed?”

My own perspective, whilst admittedly too narrowly focussed on the role of philanthropy, comes back to the need for the culture of generosity to be built. And how can this even begin to happen when we lack any degree of open-ness with anything linked to money?

Culture change starts with openness. To be open to listening, learning and sharing with great vulnerability and honesty. To recognise that sometimes we don’t have all the answers inside us already. Coupled with a willingness to challenge our values, assumptions, traditions, attitudes. We also need to address our money shame, for that can often be the cause of debilitating inaction.

Transparency is the core of this; urgently required from every angle. Philanthropists benefit from knowing what others are doing, by being able to learn from peers, to leapfrog often siloed journeys of giving in order to accelerate their own positive social impact.

And for those on the outside looking in, it would be hugely beneficial to have greater visibility over what benefits private capital can provide for public good, enabling the public to benefit from knowing how and where to hold philanthropists to account.

Looking forward to 2022, observing the behaviours that changed over the darkest times of Covid, and knowing that nothing’s ever certain, not least with Omicron infections steeply rising as I write this, reminds me of the basic need to be as transparent, flexible, collaborative and long term as we possibly can be.

Simply put, for philanthropy that means flexible, unrestricted, multi-year funding. Basic – yes. But is it common practice? Alas, not yet.

Traditionally, this is the time of year for giving. Let’s each ask ourselves what more we can – and should – do, and start to build on this, year on year.

*Side note on trophies; not a moment too soon on the new UK legislation banning the import of hunting trophies of endangered and threatened animals.

marylou gourlay

Marie-Louise Gourlay

Marie-Louise Gourlay is the Managing Director of Europe for The Philanthropy Workshop. Find out more about The Philanthropy Workshop’s activity here.

Philanthropy Right Now: Democratising Philanthropy

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‘Philanthropy Right Now’ is a periodical column for Beacon Collaborative by Marie-Louise Gourlay, Managing Director of Europe for The Philanthropy Workshop.

The prefix co- can be defined as “with, together, joint” and even “one that is associated in action with another” according to the Merriam-Webster dictionary.

The last blog touched on the importance of community in philanthropy. In recent weeks, the world’s eyes have been watching a small community of leaders making hefty decisions to tackle climate change and justice.

We desperately – urgently – hope it translates into action. But how do we bring people together around the metaphorical table and ensure that all voices are heard in shaping our future? How do we avoid simply reflecting the ideals of the statesmen and -women of the western world?

Ahead of COP26, we saw many within the philanthropy, public and not-for-profit sectors trying to figure out how to be a part of the conversation. Navigating just this one space felt like a microcosm of the challenges of navigating the wider social sector. The complexity and vastness, coupled with the all-too-often siloed and deeply private nature of philanthropy, can mean it’s a quagmire.

Even more challenging, is finding the spaces where all voices are equitably heard. In the now outdated system of hierarchy, meritocracy gets in the way. It gives louder voice to those with longest experience – but these are not always the people with the best ideas. When length of service trumps innovation and bold thinking, something isn’t right.

How do we ensure that there is always space for diverse opinion, knowing it furthers our discussion and expands our thinking? What is democracy if not sharing thoughts and ideas from across the spectrum in order to move us forward? How do we move away from purely intellectualised and theoretical discussion and refocus attention on the communities with lived experience of the issues we are trying to resolve?

People often refer to needing a case study to understand something. To take it from abstract theory, to real life example. In speaking with non-profit partners in Madagascar recently, they shared the distress of climate migration already underway. As men move inland to find work, forced from their homes by severe drought and ensuing famine, women and children are left behind – and we heard of women selling their unborn children in order to buy food and charcoal for their existing children.

And that’s just one example from one region. Do we have to wait until there are more tangible and hard-hitting examples before we move to action? Or can we build deeper trust with the voices from the communities that are closest to the challenges, and believe in the urgency?

The vitality of activists and movement builders is gaining in traction and voice, and they are not afraid to challenge. Space needs to be made to hear their demands. We have heard from philanthropists in the past that activism can feel ‘aggressive’ and can put people off funding such an approach – that narrative needs to change.

We need to listen. And then we need to move.

marylou gourlay

Marie-Louise Gourlay

Marie-Louise Gourlay is the Managing Director of Europe for The Philanthropy Workshop. Find out more about The Philanthropy Workshop’s activity here.

Is responsible investing “fit for purpose”?

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This article was written by Scott Greenhalgh for Beacon Collaborative. Find out more about the author below.

Responsible investing1 (which I define to include ethical, sustainable, impact and social investment) and the pursuit of profit with purpose has grown exponentially in recent years. It has many supporters who believe business and investment can be a force for good and help contribute solutions to our pressing environmental and social challenges.

It also has detractors who worry that shareholder primacy and the consequent prioritisation of profit over purpose, at best limits the ability of business and investment to be a force for good and at worst provides false comfort as to the contribution business can make. 

Ahead of the October 2021 Beacon Forum, this article examines some of the key issues in this debate and the role that philanthropists and private wealth can play. 

responsible investing featured image

 

1. The Growth of Responsible Investing

Growth in this sector has been substantial, particularly in 2019 and 2020. 

There has been a circa tenfold increase in the size of the responsible investing market over the past 10 years in both Europe and the US. In Europe, there are now some 3000 publicly traded mutual funds with over €1 trillion AUM and in the US almost 400 mutual funds with c $250billion AUM that pursue a core responsible agenda2. The table below highlights the strong growth in Europe.

responsible investing

In private markets, Phenix 2020 data lists3 some 1600 funds worldwide with $330 billion AUM as pursuing a responsible investment strategy. 

This explosive growth with the range of active and passive funds covering (almost) all investment strategies offers investors and their wealth advisers a huge choice on how and where to invest in both the public and private markets. 

In the UK, in addition to a wide range of responsible mutual funds, there is strong activity in the ethical bond, early stage “tech for good” and social property arena. 

2. Does values-based investing generate financial alpha?

The short answer is “yes, but…”

There are many studies that have analysed the return performance of responsible investment funds. Most show outperformance or at least performance equivalent to that of their “traditional” benchmarks4.

A 2019 Morgan Stanley report analysed performance of some 11000 mutual funds over the period 2004 to 2018 and concluded that investors could expect returns equivalent to those of traditional fund counterparts and that responsible investment strategies offered better downside protection to investors in periods of market volatility. 

Intuitively this equal or outperformance feels right. The environmental and societal challenges we face are throwing up huge opportunities for those businesses that can adapt and/or innovate to provide solutions to these problems.

Similarly, companies that engage positively with their wider stakeholders and actively consider the ESG factors that affect their business have a better chance of building shareholder value than those that do not. A recent McKinsey5 survey of business leaders shows a clear majority agreeing that pursuing ESG programmes creates shareholder value over the medium to long term.

However, the “but” in the “yes, but” above comes in two parts:

First, there are studies that disagree with the conclusion that responsible investing has led historically to outperformance. These studies6 do not dispute that Responsible Funds have outperformed in recent years, but they argue that this outperformance is not the result of the pursuit of a responsible investment strategy, rather the outperformance is the consequence of other more traditional investment criteria being used in the stock selection process by these funds. By the same token, these studies do not believe that responsible investment strategies offer better downside protection. 

The second part of the “but” is that most mainstream fund managers market responsible funds based on the potential alpha or outperformance that they offer. This approach ignores other investor motivations for responsible investing, such as the desire of investors to align their investment strategies with their values and the wish to influence investment funds and businesses to pursue more sustainable agendas. This marketing approach also raises the concern as to what will happen to investor appetite if outperformance were to cease. 

3. Do responsible investment strategies have a positive impact?

Here, I will argue the picture is mixed with quite a few positives and some large (current) concerns.

Let us start with the concerns. There has been much in the press about “greenwashing” or “impact washing” with the accusation that fund managers have over-claimed their environmental or social credentials.

greenwashing?

In part, this reflects the rapid growth in the responsible investing market and the desire for fund managers to have an investment offering that can participate in this trend; put another way, some managers may not have fully developed their impact strategy, metrics and measurement ahead of the fund launch. It also reflects the challenge of measuring impact, the lack of agreed standards and the different interpretations that can therefore be used to define and articulate impact.

A second fundamental concern relates to the question- does the purchase or or divestment by a responsible investor of an existing share (of fund position) have any impact? The sale or purchase of that share will presumably have no effect on the issuing company’s activities and so on the positive or negative impact of that company.

Arguably it is only if there are enough sellers of a (negative) company’s shares, that access to the capital markets for that company is endangered and so the company’s behaviour is forced to change. This question of the impact or additionality of secondary market transactions can be debated at length.

But there are some positives. These include the efforts by regulators to bring greater transparency, for example through the EU Sustainable Finance Disclosure Regulations that are now coming into force7. 

In public markets, data analysis organisations such as Morningstar and Sustainalytics are producing impact metrics and measurement both at a fund and individual (major) company level, enabling comparative performance and changes over time to be measured.

In private markets, there are a number of impact measurement tools in use that allow fund managers to show the impact and changes thereto both of individual investments and aggregated at the fund level. With a few notable exceptions, most private market impact measurement is done by the fund manager and so runs the risk of not being impartial. 

It is important therefore, in my view, for investors to help drive positive change by asking fund managers (and through them the companies in which they invest) to explain in detail how they define and measure the impact they have, how they factor ESG criteria into their decision making and then to hold those managers to account for the impact they report. 

4. Shareholder v Stakeholder Capitalism and will the latter lead to sufficient change?

It is 50 years since Milton Friedman’s essay that argued that the social responsibility of business was to maximise the financial return for shareholders and that decisions should be taken by the directors of companies on the basis of what would be best for (long-term) shareholder value. 

In more recent years, in line with the growth of the responsible investing movement, there have been increasing calls for business to adopt an approach of stakeholder capitalism whereby decisions are taken with a view to their impact on all key stakeholders (for example, customers, employees, the environment, the community) as well as on shareholders. The US Business Roundtable declaration in mid 2019 by the CEOs of major US companies and the manifesto of the 2019 World Economic Forum calling for business to embrace a stakeholder rather than shareholder capitalism model offer important milestones and evidence of this trend among global business leaders. 

Stakeholder capitalism seems therefore to be winning. But will it really make a difference as to how investors and businesses operate? And will that difference be enough to address the challenges we face? These are massive questions that merit careful debate beyond the confines of a short article.

My own view is that much of the current thinking around stakeholder capitalism follows a ‘business as usual” approach that does not go nearly far enough in rethinking our economy, the role of investors and investment and the constraints on their ability to be a force for good. Let me set out my reasoning below:

Company Law

companies act 2006

For the most part company law continues to give primacy to the interests of shareholders. For example, in the UK, the 2006 Companies Act requires directors to consider a range of factors (employees, community, environment) in their decision making in order “to promote the success of the company for the benefit of all its members/shareholders”.

In the US, Delaware law (where many companies are incorporated) also gives clear primacy to shareholder interests. It can be argued therefore that the law limits directors in their consideration of stakeholder interests to those that do not adversely affect shareholder returns. 

Lockstep

It is often argued by responsible investors that commercial success and positive environmental or social impact go hand in hand.

This means there is no trade-off between doing the “right” thing and doing well. Work by McKinsey suggests that this holds true especially over the long term of 5 to 7 years8. Clearly to the extent lockstep exists, the limitations of shareholder primacy can be mitigated.

However, one only has to look at the substantial negative externalities across a range of industries (for example tobacco, social media, mining) to make a powerful case that lockstep is more the exception than the rule, especially over the shorter term and that there are trade-off’s between maximizing social and/or environmental impact and financial returns.

Incentives

For the most part, incentives for directors of companies remain financial and share-value based.

Career progression-related incentives are similarly largely driven by measures of financial success. At the major fund management firms, individual fund manager and fund performance is typically based on benchmarking that fund’s performance against its peer group (we are back to alpha) and growing the AUM of the fund and so the fees the fund generates for the firm.

Even in the world of impact investing, performance incentives based on impact rather than financial success remain relatively rare. Remuneration in the fund management industry therefore reinforces shareholder rather than stakeholder primacy. 

Alternative corporate forms

There are alternative corporate forms that allow for greater balance between stakeholder and shareholder interests. All of these different corporate forms are growing in number, but they remain a small part of the overall private sector.

For example, in the US, Public Benefit Corporations are for-profit entities that call for decisions to be based on balancing shareholder and stakeholder considerations and for profits to be based on delivering positive societal or environmental impact. However, these PBCs remain few in number with c 10 publicly listed and some 4000 overall9. PBCs are authorized by laws in many US states and so offer an established and “enlightened” corporate form; rapid expansion of PBCs (and their equivalents in other countries) might allow business to play a far greater role in addressing our environmental and social challenges. 

bcorp logo

The BCorp movement is a well-regarded accreditation process that allows companies to seek certification as a responsible business. However, BCorps do not have the force of company law behind them. In the UK, the Employee Ownership Association lists 730 employee-owned businesses, John Lewis being the largest and most well-known example10. Such businesses will, of course, focus on employee interests as opposed to those of other stakeholders. 

In the impact investing world, most funds seek market-based returns. This leads to them operating within the same constraints as traditional investors. There are however a few funds that place impact first, offering investors a lower but “sufficient” financial return in the belief that this allows the fund to help generate greater impact.

I ran one such fund; the key challenge lies in making transparent the judgments and trade-offs between financial and impact returns. I was also fortunate as the fund performed well (above its’ financial target of 9% p/a net return to investors), so we never had to face the challenge of maintaining impact returns in the face of weaker financial ones. 

My argument is therefore that current legal and incentive structures serve to reinforce a shareholder primacy that limits wider stakeholder considerations to those that do not jeopardise the ability to maximise financial returns. The good news is that alternative models exist; we need to see their widespread adoption.

So, what can philanthropists and private wealth do?

The above article has given a brief overview of some of the key challenges and debates within the responsible business and investment communities. Views will vary on all of the above points and the role that business and investment can and should play in addressing our environmental and societal challenges.

Among the actions that philanthropists and investors might take are the following:

  1. To engage with the debate about corporate purpose, corporate legal form and the opportunities, limitations and challenges of our current economic system.
  2. To scrutinise wealth managers, funds and companies in which one invests to understand how they address the stakeholder/shareholder primacy question.
  3. To engage with the measurement of impact and to push for as much transparency on this as possible.
  4. To consider the trade-offs inherent in investment portfolios and the extent to which one can allocate (part of) a portfolio to higher impact investments.
  5. To consider* whether a change of statute/corporate form or BCorp certification would be helpful in building long-term value and delivering greater environmental and/or social impact.

*in a business the philanthropist controls.

References

  1. Throughout this article I use ‘responsible investing’ as the overarching term for ethical, sustainable, impact and social investment. It therefore incorporates investing that uses Environmental, Social and Governance factors to inform decision-making.
  2. Morningstar Direct 2020 data.
  3. Phenix Capital Jan 2021 Impact Fund Universe Report.
  4. For example see Morgan Stanley “Sustainable Reality” 2019 or an older systematic review “ESG and financial performance: aggregated evidence from more than 2000 empirical studies” by Friede, Busch and Bassen Journal of Sustainable Finance and Investment 2015.
  5. McKinsey 2020 “The ESG premium: New Perspectives on Value and Performance.”
  6. For example, see Scientific Beta 2021 “Honey I Shrunk the ESG Alpha”.
  7. EU SFDR phase 1 became applicable in March 2021.
  8. McKinsey November 2019 “Five Ways ESG creates value.”
  9. Forbes June 2021.
  10. See John Lewis’ Employee Ownership Association

Scott Greenhalgh

After a career in private equity, Scott started working 12 years ago with a number of wonderful not-for-profit organisations that opened his eyes to the scale of social inequality and need in the UK. In 2016, he was fortunate to be able to combine these “two worlds” and lead Bridges Evergreen Holdings from inception. Evergreen is the UK’s first long-term capital investment vehicle for social impact investing. Scott stepped down from this role earlier this year.

The views in this article are the author’s own and expressed in a personal capacity.

Philanthropy Right Now: The Power of Community – by Marie-Louise Gourlay

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Philanthropy Right Now:

The Power of Community

‘Philanthropy Right Now’ is a periodical column for Beacon Collaborative by Marie-Louise Gourlay, Managing Director of Europe for The Philanthropy Workshop.

The power of community: a topic that’s risen time and again over the last 18 months. The twin pandemics of Covid-19 and the profound racial injustice that spurred the Black Lives Matter movement simultaneously tore us apart and flung us together.

Who were we when shut in our homes, hooked to the news? Was our community our household, our neighbourhood, our country? Or had our community expanded – a single community bound by a global pandemic, with a collective urgency to tackle the world’s issues?

For me, the notion of community has always been more a feeling than a tangible set of parameters. Dictionary definitions all feel overly passive, such as “the condition of sharing or having certain attitudes and interests in common”. It’s precisely that passivity that we wrestle with when we think of philanthropy. When does a shared attitude or interest progress from being passive to being active? And it’s fair to say that community can and does influence behaviour change.

Since Covid began, we’ve turned to one another in ways never seen before – seeking and sharing advice, advocating for trust-based approaches, and even informing one another about strategies which have proven successful – and those which have failed. It led me to question whether community is only formed out of necessity; when each of us needs something from one another in order to survive.  With greater urgency, and an increased openness to the value of cross-border learnings and solutions, it seems this necessity has allowed the door to philanthropic collaboration to creak open.

Knowledge comes in many parts – and community is one of those parts. It’s often not the obvious interactions that are most fruitful – but those that are serendipitous, or fleeting, that lead us to explore, to challenge, to question and to innovate. For when we stop innovating, we become redundant. The last 18 months have taught us that having a community of ever-evolving thoughts and ideas, of support and of critical challenge, truly is irreplaceable.

At The Philanthropy Workshop, whilst our community was previously a long-standing, strictly enforced ‘no pitch zone’, increasingly members are seeking opportunities to co-fund, putting aside their individual strategies and recognising the role that collective action can play in multiplying impact, as well as acknowledging the power which must be ceded to enable that.

Long-term behavioural shifts take time. But the hope is that the movement towards collaboration and away from isolationism will continue in the direction that it has started. Reflecting further, I wonder whether the active shift we ultimately make will take philanthropy from being a community to being a movement, in order to achieve the changes we seek in the world.

We flourish when we’re part of something bigger than ourselves. We should be asking ourselves not only what we gain, but what we contribute. For there is a place in philanthropy for everyone.

Marie-Louise Gourlay is the Managing Director of Europe for The Philanthropy Workshop. Find out more about The Philanthropy Workshop’s activity here.

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