The Million Dollar Charitable Gift Givers
A post from James V. Toscano
Building on their annual Million Pound Donors Report, the Coutts Institute in Britain, in combination with Indiana University’s Lilly Family School of Philanthropy have issued a report covering million dollar charitable gifts from six geographic regions: the US, UK, Russia, the Middle East, China and Hong Kong. Gifts of one million or more totaled $19 billion in these six areas in 2012.
The lion’s share came from the US: $13.96 billion; Britain, £1.35 billion; Russia, $239 million; Middle East, $727 million; China, $1.18 billion; and Hong Kong, $877 million. Estimates go from relatively accurate in the first two to more or less accurate or at a beginning methodological level as we go down the list.
One interesting development is in Russia, which for 70 years had a social and political system that did not have any systematic way for people to give charitable contributions on the scale of this report. Culture and societal system help determine charitable giving, as we know from this society’s experience, although we are now seeing the rise of voluntary, charitable activity throughout many different places in the world. Please see the full report for a survey of these six areas in some depth, along with glimpses of the donors involved.
Overall, 1955 donations of $1 million or more were recorded from 1249 donors. Higher education received the most money, with variation in percentages among the regions reporting. However, in Russia, millions went to societal benefit, and, in Hong Kong, the highest amount funded the establishment of foundations.
Variation Among Sources
In the US, the average gift was $9.9 million, with 35% of the total coming from individuals, 52% from foundations and 13% from corporations and corporate foundations. Contrasting the US numbers were those from the UK, where 22% of these major gifts were from individuals, 71% from foundations and 7% from companies. Certainly, tax law is part of the reason for the variation, but what else is going on? Culture?
While foundations gave the largest number of million plus gifts, individuals gave more money. In the US, gifts were at a five-year low, 17% below the year before. There were almost 1000 less million dollar gifts in the US than at their peak in 2008.
What is happening? Since 2008, we know that many wealthy people, often based on advice from advisors, have reduced overall giving and focused what giving they are doing. There was hope that the pre-2008 pattern would re-emerge and there is still some hope that it will happen.
Since the increase in federal income taxes for the very wealthy in January, followed by increases on the same groups in some states, word on the street is that there will be less money for donations, which themselves may not all be eligible for existing deductibility.
Also interesting is that some of these donors of high net worth are actually giving more now than previously while the others are cutting their total giving. What is the difference? Behavioral characteristics rather than age seem to explain these difference.
The Rise of Impact Investing
The most interesting shift in donations, most prominent in the UK and US, is a move to impact investing. In Britain, there are a number of experiments in combining governmental, private financial and charitable resources to achieve beneficial impacts in the society. From social impact bonds to direct investments in double and triple bottom line businesses.
Similar trends are noted in the United States, echoing the earlier reports of the Money for Good reports. Investors and philanthropists, often the same, are starting to put million dollar gifts into this area. While critical mass is still a way off, we are now hearing and reading about such gifts, propelling, perhaps, a self-fulfilling prophesy.
This is clearly the first significant empirical confirmation of what many have been writing about and predicting. What will it mean for nonprofits, government, philanthropists and for profit businesses?
Specific nonprofits should benefit, those chosen by impact investors because of the track records.. Many will be able to demonstrate measurable progress, if not solutions, in the areas in which data-gatherers flock: education and health care.
Social Impact Bonds and Beyond
What about other major areas of the nonprofit sector? Most of the thrust of the case for societal impact focuses on the social sector. Britain has seen the creation of the social impact bond as a way of involving investors, government and social service agencies.
Now exported to the US, social impact bonds have gained the interest of the Obama administration and a number of major organizations, so we should expect million dollar gifts to increase in this area from private sources.
Impact investment will go beyond the social impact bond and may attract that segment of high net worth individuals willing to accept higher levels of risk. Examples abound where impact investments result in ex-felons being trained at the same time as working for better positive self-images and self-sufficiency, with high levels of success. Another program intervenes with teenager girls who would wind up in the juvenile justice system, with very positive results for the teenager and considerable savings for government.
The next few years will see a growing percentage of the million dollar gifts, and perhaps, many more major gifts going in this direction. Expectations are high. With the requisite due diligence and the metrics, this should add a positive, powerful force in our goal to find solutions to major societal problems.