Quand la philanthropie devient un secteur d’investissement

The new philanthropists

For several years, sector specialists have observed the rise of a new kind of philanthropist that we have been encountering increasingly often. Who are they?

Whatever their age, they have often had an experience as a company leader, sometimes as a founder or executive manager. All are very involved in managing their business and determined to succeed. They are decision-makers, clever strategists, used to numbers and reports. Yield and profitability are their key performance indicators.

Unlike traditional philanthropists, they are close to NGOs, charities or philanthropic foundations. They are also keen to forge real partnerships rather than simply remaining donors. In some cases this might involve co-building a tailor-made philanthropic programme just for them. In return, they will put their money, but also their contacts, their skills and always their time, at the service of the partnership.

Whatever their story, or the triggering factor of their generosity, they are all struck by the fact that something is missing, be it a social vacuum or a failure of the state, and they want to bridge this gap. They will therefore define a strategy, evaluate the resources needed and ensure above all that the initiatives launched are efficient. Their expectations are similar to those of an investor: they view their donations as an investment, the social yield being one of the ways to measure the efficiency of their generosity.

Bill Gates was a pioneer in this field with his Foundation, and was followed by the initiatives of many other leaders. Recently, Alexander Mars, the serial entrepreneur, set up with the Epic Foundation, an organisation to evaluate on a continuous basis, the impact of the charities he supports. Another example is Maurice Tchenio, the founder of Apax Partners, whose Alpha Omega foundation acts as an investment fund for a portfolio of charities he supports, determined to help them grow.

Whatever their story, or the triggering factor of their generosity, they are all struck by the fact that something is missing, be it a social vacuum or a failure of the state, and they want to bridge this gap.

Measuring the social impact

Simultaneously philanthropic players are getting organised and increasingly using reporting and impact measurement tools. It is a real change for some of these organisations that do not always have the resources required to collect and analyse data. They sometimes have the impression they are sacrificing resources that would be more useful in the field. Most organisations observe nevertheless, that this allows them – even if, sometimes, it is a bit expensive – to take a step back, review the situation and naturally to adjust a course of action. With identical resources this approach increases their efficiency in the field.

Furthermore they all agree that analysing the impact of their actions allows them to attract individual philanthropists and to increase private donations when public resources are declining. Some organisations – the largest ones – sometimes even use external consultancies to provide them with advice on social value.

The organisation of the philanthropic sector has also led to the creation of social impact bonds. These financial products offered to investors (mostly institutional investors) were created to pre-finance a social initiative carried out by an NGO that is mandated by a public institution. Following the investment, the public institution that launched the programme repays the investor, the rate of this repayment depending on the programme’s success. The public institution and the NGO must therefore agree on performance indicators and success thresholds.

These innovative products that combine investment and social initiatives were first launched in the United States and more recently in the main European countries (United Kingdom, France, Holland, Belgium, Germany, Austria, Finland, Portugal and Switzerland). Other similar investment products in which the social impact takes precedence over yield considerations have appeared. Mainly designed for institutional investors, these products could, with certain changes, be offered to “philanthropy investor” clients.

In this philanthropic environment, which is now organised like an investment sector, and where the social impact is the measure of efficiency, Societe Generale Private Banking offers its clients the support they need to make their philanthropic investments. We provide, in particular our expertise in terms of selection criteria or impact measurement and arrange introductions with “experienced” philanthropists. If you would like to learn more please contact your private banker.

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