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.