These days, so-called ‘reactive’ giving to help with disaster relief remains common, but philanthropy can also be used to pilot solutions to structural problems, both social and environmental. Indeed, the ultra-wealthy increased their philanthropic giving by 4.1 per cent in 2020, according to Wealth-X,¹ complementing what governments and corporations do, and blazing a trail to tackle some of the world’s most pressing problems. 

A commitment to climate action

With the latest IPCC report from UN scientists warning that it’s “now or never” to deal with the climate emergency, some high net worth individuals and families are choosing to redeploy their wealth to support climate change solutions to tackle the problem ‘upstream’.

The ClimateWorks Foundation reports a 14 per cent increase in philanthropic giving in 2020, driven by new donors and commitments.² Still, much more is needed: climate change-focused giving still represented less than 2 per cent of the global total that year, according to the foundation. 

The UN Climate Change Summit, COP26, prompted a surge in commitments to climate action, with several foundations pledging billions towards land restoration and food systems transformation.³ Meanwhile, a group of 29 philanthropic organisations is on track to exceed its 2018 commitment to spend USD4 billion tackling the climate emergency; it is expected to invest at least USD6 billion by 2025.⁴

Carly Doshi, Head of Wealth Planning & Advisory, Americas, at HSBC Global Private Banking and Wealth, has first-hand experience of the importance of climate efforts to younger philanthropists in particular. In many cases, it is the younger generation of a family who are pushing the climate impact conversation – often because they see themselves as the inheritors of the climate crisis. 

“Many young people today feel they have a responsibility to help protect and preserve the environment,” Doshi explains. “In one case, a family is now engaging in deep discussion about how it can help slow climate change and preserve biodiversity – a conversation being driven by the family’s youngest family members.

“This was their desired philanthropic goal, and we became involved to help them develop a strategic plan, including setting up a private foundation, implementing ESG screens within their investment portfolios, investing financially in new, sustainable technologies, and engaging in global climate impact discussions at the highest level.” 

New solutions to structural problems

Environmentalism is not the only priority among philanthropists. The pandemic and the rise of social justice movements to advance racial equity highlighted the health and social inequalities that still exist across the world, spurring different types of philanthropic activity. 

Many organisations that work towards racial justice and positive societal change saw massive upticks in giving the last two years. Candid, which tracks global philanthropy, reports that USD14.2 billion in grants and USD11.5 billion in pledges have been given towards racial equity since 2020, a significant proportion of the USD65.5 billion total recorded since 2011.⁵ Mackenzie Scott, for one, has funded the top recipients of racial equity donations in 27 US states since 2020, donating at least USD567 million.⁶

In Asia, proactive philanthropists are trying to improve access to healthcare and ensure the economic survival of those affected by COVID-19, explains Dorothy Chan, Head of Philanthropy Services & Advisory, Asia Pacific, at HSBC Global Private Banking. “There’s still a lot of work being done to make sure our communities can revive and recover from the impacts of COVID, from basic survival to longer-term health issues, both physical and mental.” 

Chan points to the impact on children’s social development and wellbeing after two years of lockdowns and home schooling, for instance. “Our clients are quite concerned about physical development, mental wellness, and social and emotional learning for children in school,” says Chan. “Those are more structural issues that take time to address, so we are seeing both local and longer-term projects increasing.” 

To tackle such issues and make decisions, philanthropists require solid information. This is where HSBC can help. “A lot of our strategic philanthropists are data-driven, so we’ve been doing a lot of research to support them. It’s really about gathering evidence, helping them map the landscape and working with them to design their portfolio.”

‘We want to build community resilience’

Many of Chan’s clients are also concerned about the people in their communities who have become unemployed or under-employed as a result of the pandemic. HSBC Global Private Banking has been working with family foundations on a community voucher programme in Hong Kong to help those who had lost a job and were struggling financially. They were given vouchers to spend in local independent small businesses. 

“Anything from a stationery store to a casual eatery or even your neighbourhood doctor,” explains Chan. “The decision to give people vouchers to spend on whatever they want has to do with dignity and empowerment. The thinking behind it is we want to build community resilience. Through this voucher system we hope that people can frequent businesses which have been impacted by the pandemic, so it’s a win-win for all parties.” 

As an added bonus, the scheme has hired women who are temporarily unemployed because of the pandemic. 

The multiplier effect

Philanthropy is about much more than just writing a cheque, says Chan. Philanthropists can amplify their impact by using their time, skills, network and influence. Many like to volunteer on projects or help with fundraising before donating, in order to get to know the organisation better, says Chan. They will then tell their network about it and involve family members, including their children, to embed their values in the next generation. 

She cites a businessman she works with who has been active in the field of climate change and conservation for decades. He has influenced his contacts with his climate change evangelism and the way he runs his private equity company to finance the energy transition. 

“If I looked into his personal donations and the financial donations from the friends and network he approached, I would say the multiplier effect is huge,” says Chan.

Start with the ‘why?’

If you have philanthropic ambitions, it’s essential to figure out what you want to achieve and the best way to go about it: understanding your values, vision and purpose. Your adviser can present a range of possible solutions, including solutions such as strategic philanthropy advice and charitable administration, and non-philanthropic solutions, such as values-aligned investing, ESG portfolios or family governance and educating the next generation.

“When we’re dealing with people on the proactive philanthropy front, we start with the question ‘why? We are looking to understand their motivation and what they are trying to achieve,” says Russell Prior, Regional Head of Family Governance, Family Enterprise Succession & Philanthropy, EMEA, at HSBC Global Private Banking and Wealth. “So, we ask: ‘Can you articulate the social change you want to see?’ and then we work backwards from there. This is really helpful in the context of being proactive, because it means you have a laser-like focus on the outcome, and it helps you think differently about the problem.”

Once your philanthropic activities are underway, you’ll need to review, evaluate and potentially modify your strategy over time to make sure it is achieving your aims.

“In my experience”, says Prior, “the return on proactive philanthropy comes in two ways. The first is the positive steps made towards the achievement of the targeted social change. The second is the personal return on their philanthropy – the satisfaction of fulfilling their motivation.”

Philanthropy is a journey, and a very individual one. At HSBC Global Private Banking, we help you create a tailored strategy to have the impact you want. Contact us today to learn more.