Good growth

  • Author : Betsy Brill
  • Author : Susan Winer
  • Date : December 2012
ABOUT THE AUTHORS: Betsy Brill TEP and Susan Winer are cofounders of Strategic Philanthropy Ltd. Betsy is President of Strategic Philanthropy Ltd, and Susan is Senior Vice President, Business Affairs. Betsy is a member of the STEP Philanthropy Advisors Special Interest Group

The learning curve for advisors to high-net-worth clients never seems to end. This is particularly true when it comes to supporting and protecting a client’s charitable giving. Philanthropy is continually evolving, and generational interests are often relevant to deciding where charitable dollars go. According to the 2012 Giving USA Study of charitable giving, the one bright spot in an otherwise gloomy global economy is that the amount of money donated to support critical social and community needs has not decreased significantly. In fact, total giving in the US grew by 4 per cent in 2011. But of particular note is that the most significant increase in giving appears to be international. Contributions were 7.6 per cent higher in 2011 than in 2010. This is the second year in a row that international giving has increased. From 2009 to 2011, international giving has grown by 15.2 per cent – the largest increase across all of the subsectors the study tracks and reports.

While cross-border giving is growing in the US, of even greater interest is the overall growth in giving internationally. Credit Suisse and Forbes Insights recently released a report, Next-Generation Philanthropy, attesting to this trend. According to the report, 73 per cent of the 264 philanthropists surveyed say philanthropy has become a more dominant topic of conversation, particularly in emerging economies. In Latin America, annual wealth growth is expected to average 12.1 per cent for the next five years. In Asia, the population of ultra-high-net-worth individuals (UHNWIs) is expected to exceed the US by 2025. In India, according to Bain & Co’s India Philanthropy Report 2012, the average contribution to charity among HNWIs is up from 2.3 per cent of total income in 2010 to 3 per cent in 2011, and more than half of those surveyed expect to boost their donations again in 2012.

The growth in international giving can be attributed to many things: increasing digital access to global information, a growing number of international giving networks, and a heightened awareness of the relationships between global communities. But even with these evolutions in information and access, international giving is complex for donors and their advisors. With no uniformity of regulations, no standard tax incentives, and frequent sociopolitical and economic constraints, it can be hard to navigate government rules and regulations. An example of this is action in the past year by the governments of Russia and Canada to pass laws prohibiting certain classes of civil society organisations from receiving foreign funds.

Encouraging international giving

But significant changes are proposed and under way to encourage international giving.

The law firm McDermott Will & Emery recently released the preliminary findings of a global report on tax incentives for philanthropy, which will encourage new legislation and mobilise support for a new UN resolution calling for a global campaign for a culture of philanthropy. A key component of the campaign is to encourage wealth holders around the world to advocate for laws that make charitable giving easier and more tax friendly in their home countries. While tax breaks for charitable giving have long been part of the culture in the US, most member states in the UN system do not have such laws. However, this is beginning to change. In Brazil, for example, legislation is being crafted to create a framework to encourage philanthropy.

On 24 September 2012, US Secretary of State Hillary Clinton announced new Treasury Department and Internal Revenue Service guidelines aimed at lowering the legal barriers and administrative costs associated with cross-border philanthropy in support of civil society worldwide. This includes revisions to ‘equivalency determinations’: the process by which a US grantmaker evaluates whether an intended foreign grantee is the equivalent of a US public charity. It is expected that these new regulations will pave the way for the creation of centralised equivalency determination information repositories, such as NGOsource, that enable US-based foundations to streamline their international grantmaking processes.

All these proposed and pending changes bode well for the future of international giving. The number of natural and humanitarian disasters that have occurred in the past few years has created awareness of how small the world is and the interdependency of economies and people. This has led to a more invested philanthropic community seeking to make philanthropy more accessible in their own countries and more relevant and responsive to real and immediate needs.

Young wealth creators who are motivated to find new ways to make a difference are emerging as philanthropic leaders and philanthropic risk-takers. For example, we are seeing an explosion in innovative philanthropy, such as investing in social enterprises and donating to high-impact organisations regardless of where in the world they are located.

As philanthropy changes and as younger, more knowledgeable global donors become more prevalent, there will undoubtedly be changes in terms of what is expected from advisors. We need to ensure we have the most immediate and complete information about the cultural, political and legal challenges our clients may face. We need to ensure that we know what options and opportunities are available and how best to help them navigate the global landscape so that their charitable intent and their philanthropic dollars achieve the desired outcomes with minimal risk.


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