A Peak Into the Future of Private Philanthropy

To mark the tenth birthday of contemporary philanthropy in Australia – the creation of prescribed Private Fund or PPF – philanthropist and Executive Chairman of HSC & Company, Phil Hayes-St Clair, shares his thoughts on what the next ten years will hold.

This article is taken from the CSI Blog.

Remember what it was like to be ten years old? You might have been mid-way through primary schooling, beginning to work out which musical instruments or sports you favoured, starting to learn the consequences of saving and spending pocket money and working out your favourite sporting or movie hero.

Contemporary philanthropy celebrates its 10th birthday in 2011 and like a ten-year-old, it’s growing quickly and has a lot to learn from its elders (both in Australia and overseas).

A small group of prominent Australians from the community and business sectors, which for the purposes of this analogy are the ‘parents’, were responsible for bringing the Prescribed Private Fund or PPF (now the Private Ancillary Fund – PAF) into the world ten years ago. The PPF was a trust structure born from an adjustment in the Australian tax legislation that was endorsed by then Prime Minister, John Howard AC and Treasurer, Peter Costello. The move came from a recommendation tabled by the ‘parents’, more formerly known as the Prime Minister’s Community Business Partnership, a group established by Howard in 1999 to identify incentives and impediments to corporate social responsibility and encouraging a culture of giving in Australia.

The introduction of the PPF was without question a revolutionary move and the positive impact is clear. The unlocking of significant potential for individuals, families and businesses to pursue planned benefaction has resulted in over 900 funds being established with a capital value estimated to be in excess of $1.5bn. Many would say this is a solid accomplishment for a 10 year old.

Many people unfortunately buy into the poorly informed discussion about the size of Australia’s philanthropy against that of the USA and UK. Others will venture down the ill-conceived (and counter-productive) path of suggesting Australian’s aren’t charitable or don’t donate enough. What these people don’t understand is that the US and UK have considerable head starts. In the US, John Harvard is credited with the first philanthropic bequest in 1638 which led to the eventual establishment of Harvard University. The Russell Sage Foundation, established in 1907 to study and disseminate knowledge about social problems, was America’s first private family foundation. One of the UK’s earliest philanthropic trusts, dating back to the 1300s, is London’s City Bridge Trust. These organisations have helped foster a culture of giving that is sophisticated and well entrenched.

A 10 year old cannot be expected to be at the same level as others with centuries of experience.

A 10 year old can however quickly borrow and apply the learnings of its elders. In fact the PPF was a model borrowed from the US family foundation structure and closer to home much can be learned from the pioneering efforts of the Wyatt, Fairfax, Myer, Potter and Belgiorno-Nettis families (just to name a few).

Now let’s get one thing straight: Private philanthropy is complex, critical and great fun. In the year of its 10th birthday, it’s clear that it has a bright future ahead of it. So as this youngster grows through the next decade of its life (leaving a puberty analogy aside), what can it expect to encounter?

Motivations will continue to evolve

Motivations to become engaged in philanthropy (and along the way become an engaged philanthropist) will continue to be many and varied, but more predictable.

Tax related incentives (linked to liquidity events) will continue to drive an interest in establishing PAFs and other philanthropic vehicles as will the general desire by families to apply some of their wealth to address social challenges.

The Give While You Live mentality will resonate with others and they will bring forward their estate provisions and create an active foundation.

The main change we see coming in the next 10 years is how foundations will be used to introduce the next generation to the value of philanthropy (as a potential entre to the next generation managing the broader family estate). You can expect to see the mission of some foundations adjust to accommodate a new wave of social interests driven by the children of the family.

Philanthropic capital will be recognised as risk free capital

Philanthropists and trustees will further embrace the fact that philanthropic capital is, for all intents and purposes, risk free. The consequence is that this unique type of capital can be used to innovate and fund organisations and projects that corporate and government funding will not.

This realization will not only guide benefaction decisions, it will inspire Not-For-Profit (NFP) organisations to better organise their activities and align strategic priorities with different types of funders.

Old chestnuts will continue to be old chestnuts

The old NFP sector chestnuts will continue to raise concern. The top three will be: There’s too much duplication across the sector, NFP’s aren’t transparent and too much money goes to administration. Good NFP leaders understand these issues and are working to resolve them, and they’re making solid progress.

The only way to move past these perceptions is to learn how NFP’s work.

Invest some time in understanding the inner workings of a handful of great NFPs. Look for the same things you would in a healthy business – start with its leadership – and then understand what their specific needs are and the factors that drive them to operate in a (largely) subsistence environment.

Collaborative funding will become a norm

Co-funding organisations and projects will increase over the next decade. Philanthropists and trustees will increasingly look to partner with like-minded people to pool resources and back great NFP leaders who are capable and well positioned to deliver social outcomes.

This exciting development will be driven by key guiding lights in the philanthropic community who will be willing to guide new comers to the benefaction arena.

The title Philanthropist will still sound pompous

People – especially the majority of those dubbed a ‘philanthropist’ – will consider the title pompous because it usually infers an untrue position of wealth and elitism. Australian philanthropists tend to be private people who have decided the share the benefits of their opportunities with those less fortunate. For these people the title of philanthropist can encourage greater privacy about their benefaction.

This will change in the next ten years. A continuing number of people will take on the philanthropist title (while still thinking it’s pompous) to share their story and learnings and encourage others to do the same. They will talk of money being only one part of their gifting and speak of the influence, reach and non-financial resources they have brought to bear on wicked social challenges.

The Centre for Social Impact (CSI) at the University of New South Wales brings together the business, government, philanthropic and third (Not for Profit) sectors, in a collaborative effort to build community capacity and facilitate social innovation.

The CSI blog aims to provide a forum for discussion and debate on topics related to social impact. The blog features regular posts by CSI staff, as well as pieces by guest bloggers. Selected blog posts are re-published by Pro Bono Australia News – to visit the CSI blog visit www.csi.edu.au/site/Home/Blog.aspx