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Cash-poor Millennials lead the impact investing revolution in philanthropy

By James Beech

Socially and environmentally conscious Millennials are reinventing philanthropy by merging traditional foundations with profit-making endeavours and social enterprises, a new report says.

Education remained by far the most popular philanthropic cause for ultra-high net worth (UHNW) individuals, followed by health, also according to Changing Philanthropy: Trend Shifts in Ultra-Wealthy Giving.

“Despite only holding a small amount of total UHNW wealth, with their less traditional models, Millennials can lead the way for other UHNW individuals to follow,” Changing Philanthropy reported.

Impact investing was said to be proving its worth after a decade of implementation. The innovative form of financial return-minded philanthropy was addressing problems often beyond the reach of traditional charitable foundations, the report continued.

“If well managed, the process of securing a financial return can help organisations generate measurable impact that can be scaled up and become self-sustaining.”

Researchers determined the average UHNW person was nearly 60-years-old. Given that more than 60% of those individuals were wealthy due to a self-made business, many will be considering the transfer of significant wealth for the first time, the report noted.

“Wealth-X estimates that more than 14,000 UHNW individuals are likely to pass on $3.9 trillion to the next generation in the next decade, equal to the value of the 10 largest companies in the world.”

The findings chimed with The Global Family Office Report 2016 by Campden Wealth, in association with UBS, which declared impact investing had “come of age”. Millennials were driving 61% of family offices' activity, or expected activity, in impact investing.

The Campden Wealth report also found education was the biggest beneficiary of family office philanthropy this year, replacing Children & Youth at the top spot.

The GFO Report also found succession planning was a looming priority for family offices, with 15% expecting a generational transition in the next five years and 69% in the next 15 years.

Changing Philanthropy researchers said UHNW individuals had traditionally created autonomous, independent entities to tackle dedicated issues. However, the ultra-wealthy were now tending to leverage all the resources at their disposal to maximise their return.

“Increasingly, this is leaving the area between philanthropy of the company they have founded and their personal foundations blurred, as they utilise the time and energy of their employees to tackle myriad problems,” researchers said.

Their report was commissioned by Arton Capital, produced by Wealth-X and released this week. It found major giving among UHNW individuals rose to an all-time high in 2015, growing 3% since 2014. On average, the ultra-wealthy – deemed by Wealth-X to be those with a net worth of $30 million or more – will donate $29.6 million over the course of their lifetimes, with total global UHNW public lifetime-giving estimated at $550 billion to date.

About 18,500 UHNW individuals made a gift of at least $1 million to good causes, Changing Philanthropy reported. Classed as major donors, they accounted for almost 9% of the global UHNW population.

Self-made fortunes were behind nearly 70% of the wealth of major donors who were on average more than twice as wealthy as their UHNW peers.

A growing proportion of major donors were women, although from a low base, making up only one-tenth of total major donors in 2015.

More than half (57%) of the world's major donors were based in the Americas. However, giving by UHNW individuals was found to be on the rise in Asia-Pacific. The increase surpassed Europe, the Middle East and Africa (EMEA) – both in terms of total lifetime giving ($135 billion) and in average lifetime giving (about $30 million) – even though EMEA has the wealthiest UHNW individuals on average.

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