August 19, 2008
Giving vs. Investing: Does It Matter What Donors Call It?
More donors today consider their charitable gifts to be “investments.” What are the implications of this new mindset for charities?
Sean Stannard-Stockton, a financial adviser to wealthy donors, describes a few of the implications on his blog Tactical Philanthropy. Among his observations on why it matters that donors are seeing giving as investing, rather than spending:
- Donors may start thinking about philanthropy as a percentage of their assets, rather than of their income. This could translate into a big jump in giving among wealthy donors, many of whom have assets that are far larger than their incomes.
- Donors take a longer-term approach. They are “‘investing’ in the continued success” of a charity, rather than “‘buying’ the right to feel” as though they’ve helped someone.
- Corporate donors see “corporate social responsibility” as an investment in a community where they derive profits, rather than a cost they seek to minimize.
- Charities begin viewing donors not as “customers” who they must “separate from their cash,” but as investors and stakeholders in the organization.
- Wealth managers start advising the philanthropy of their clients, as they realize that giving is not “a cost that should be minimized” but an “asset-allocation question that is directly intertwined with their clients’ broader wealth-management needs.”
What do you think?
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The distinction is an important one. If we believe philanthropy is simply about the transfer of wealth to support good causes, then the word giving is sufficient. However, if we believe we are actually pursuing the creation of long-term value, than investing is the better term since it speaks to issues of capital structure and performance absent from the term giving. Sean’s blog further addresses many of these issues and its great to see the continued discussion of these critical topics!
— jed Emerson Aug 20, 02:16 PM #
All wrong. Investing implies you expect something back. It also means you retain control over your money. This is NOT philanthropy. There is nothing long term about donors who are investing; quite the opposite. They want to be able to measure in one to two years the “good” they have done so they can move on to another project. Even worse, the investing mindset is pushing support toward new services, leaving little for current services, which are disparagingly called “operating support.” I guess it is not a good investment to feed the hungry, clothe the naked, or house the homeless. So it matters alot whether it is called philanthropy or investment, the latter is not necessarily the former.
— Allen Proctor Aug 20, 04:40 PM #
“Philanthropy” needs to be turned into a verb.
— anonymous Aug 20, 06:13 PM #
Allen raises important concerns. Whether they call it giving or investing, most donors need education about how to be effective and respectful givers: to stay with an organization over time, to support existing programs and organizational costs, to understand that addressing social problems is very different from selling a product.
I agree with Sean: when donors think of their gifts as “investments” it actually helps them grow into better givers. And Allen, the best “investors” in non-profits DO get something back: greater meaning and purpose to their lives.
Anne Ellinger, co-director, Bolder Giving in Extraordinary Times
— Anne Ellinger Aug 20, 09:11 PM #
Jed & Anne, it is nice to have support from such luminaries. Thanks!
Allen, semantics aside, I think you and I probably agree on a lot. For instance I’ve written a lot about how operating costs are key and how “investors” should be willing to support them. I’ve also written about how investors in for-profit companies rarely exert control (I’m generally an advocate of unrestricted grantmaking).
In for-profit investing, investors should expect to get back personal financial gain. In nonprofit investing the donor and the public should expect to see a real social return on the donated dollar.
I think the kind of “investing” framework that you suggest is often imposed by inexperienced donors. On my blog today I wrote about the emergence of donor education due to the new investment framework: http://tacticalphilanthropy.com/2008/08/paying-for-philanthropic-advice
— Sean Stannard-Stockton Aug 21, 12:04 PM #