Using influence effectively – the world-changing power of philanthropy

In the past, grants were the main way that wealthy individuals could donate to the causes they cared about. Today, this is shifting towards a much more strategic approach to philanthropy and sustainable investing. Having spent years steering businesses to success, ultra-high net worth (UHNW) individuals are using their skills and insight to address some of the world’s most pressing challenges. 

Increased financial flexibility and control are powering this shift in philanthropy, allowing people to better target their wealth towards the change they envision. Maximising the positive social impact of investments and wealth transfers requires a much more personalised approach to the way wealthy people support the causes that matter to them.  

The resources devoted to philanthropy by wealthy individuals and their families is expected to increase in the coming years. UBS predicts that the amount allocated to UHNW philanthropy, sustainable investing and impact investing will “rival the budgets of governments in some areas” ¹ . This money will likely target social and environmental issues, where the risk-taking, focus and ambition that has fuelled UHNW individuals’ success in business could make them much more dynamic actors than governments. 

The transformative effects of the innovation that philanthropy enables are clear. Over the last 40 years, most breakthrough innovations have been driven by billionaires. The PC revolution, smartphones, internet, e-commerce, social networking and GPS systems have all been pioneered by the business world. These innovations have transformed the way we live, communicate and do business over the last three decades. 

Now the great minds and deep pockets behind these game-changing developments are turning their attention to other problems. The best example of this is the significant achievements of the Bill & Melinda Gates Foundation since its establishment in 2000 ² . Over two decades of support and donations, it’s made an invaluable contribution to the virtual eradication of polio globally and meningitis across Sub-Saharan Africa.

The world faces a number of daunting and important challenges. From limiting the impact modern society has on the environment, to dealing effectively with issues like population growth and resource depletion, we are all in need of big ideas and big actions. While governments have an important role to play, UHNW individuals can make a decisive difference. With the right wealth planning, they can direct their resources much more specifically and with more agility than larger organisations. They are also able to collaborate more effectively, as part of networks that encompass individuals, NGOs, charities as well as governmental organisations. 

38% of family offices are currently engaged in sustainable investing, with 45% planning to do so in the next 12 months. With the amount of money being put towards good causes growing, having a sound underlying plan and strategy is more important than ever. 

There is a balance to be struck between financial security and flexibility. The best wealth planning recognises an important truth: that goals and strategies change over time. The goal is not to lock people into a long-term plan, but rather to give them the tools they need to best live their choices with confidence. 

Being able to use wealth to help others and benefit society is an important priority for many high net worth individuals. With the flexibility and control to direct how their wealth benefits societies, UHNW individuals could be the agents of change the world needs to effectively address its most pressing challenges. 

Sources:

[1] UBS - PwC Billionaires Report 2018
[2] UBS - PWC Billionaires Insights 2019