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Investing in Early Childhood Education Current Trends in Global Philanthropy by Roger Neugebauer
I just attended the Nexus Global Youth Summit at the United Nations in New York City. This meeting was attended by 800+ millenials who want their wealth and wits to make the world a better place. It was a real eye-opener for me; in this trend report I will share some insights I gleaned. At the Nexus Summit I encountered four types of participants . . . Young inheritors — individuals from families who are passing down from one generation to the next significant finanicial resources in trusts and foundations. A Nexus presenter observed that between 1988 and 2052 over $41 trillion will be passed on from one generation to the next. The result is a huge cadre of young adults with large fortunes that they, in many cases, intend to use to make a difference in the world. At the Summit, many of these young adults I met had a clear idea of how they would invest their fortunes, while others were still defining a vision for their wealth. Serial entrepreneurs — individuals who have built up and sold numerous businesses before the age of 35. Those attending Nexus had found that they were not achieving happiness through the fortunes they were accumulating,
and were determined to use their talents to solve the world’s problems (see ExchangeEveryDay, “Happy Dollars,” on page 40). These individuals are working to make a difference through: recycling wasted food; focusing attention on the role of oceans; building low-cost housing; distributing safe, economical cooking stoves; curing skin cancer; and advocating for social justice. Donor advisors who provide guidance to wealthy individuals wanting to achieve maximum impact with their charitable contributions. Some worked in large investment firms; others worked as individual consultants. These advisors help donors identify their values and match them to non profits that share this vision. The next generation of donors are hungry for deep relationships with organizations, combined with hands-on experiences. Social impact investors — people looking to invest their own money, or the money of others, in double bottom-line businesses — businesses that accomplish measureable social objectives while spinning off a profit. In the past decade, impact investing has grown from a niche market to a really hot idea. One presenter indicated that as of 2012, nearly $200 billion in assets had been committed to impact investing.
My Unofficial Observations Philanthropy is big business. Peter Buffett (son of the billionaire, not the singer) pointed out that in the United States alone, philanthropists give away just under $500 billion annually. With all these assets directed at solving the world’s problems, one would think that nirvana is just around the corner. However, this is what Buffet observed: “As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to ‘give back.’ It’s what I would call ‘conscience laundering’ — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity. “But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.”
TRENDS IN PHILANTHROPY
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Philanthropy is highly competitive. At the 2010 World AIDS Conference in México City, I asked a presenter from a large NGO if his organization tried to improve the overall results in diminishing the impact of AIDS in South Africa by sharing their goals and strategies with other NGOs working in the same space. His answer shocked me: “No, of course not; we can’t share our plans with our competitors.” Many foundations and NGOs compete just as aggressively as for profit enterprises for publicity and donations. Locally driven philanthropy works best. In the early childhood arena, we know that when the curriculum is driven by the children it is much more effective than when it is driven by adults. The same is true in the world of philanthropy. Over the years, members of the World Forum community have shared numerous stories of large and small NGOs moving into communities
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and building schools, wells, and latrines without consulting the end users, with the result that facilities are never used nor maintained. On the other hand, at the Nexus Summit we were presented with many examples of philanthropists and social entrepreneurs who start their work by engaging the local leaders and experts, with dramatic positive results. Impact investing has its limits. When I was invited to attend the Clinton Global Initiative in 2009, I found myself at a table of investment bankers from around the world, all of whom had been entrusted with hundreds of millions of dollars to invest in double bottom-line projects. However, they were all frustrated by the fact that, beyond microloan programs, they were unable to find many projects that accomplished good and made a profit. At one session at the Nexus Summit the presenters asked participants to write a
brief description of their pet projects and then to post them on a continuum of projects requiring a 100% philanthropic contribution (no resulting profits) to projects spinning off large profits. The result was that 90% of the projects fell in the 100% philanthropic end of the spectrum. Martin Fisher, the founder of Kickstart International, used this to demonstrate that in dealing with most serious challenges, there is not going to be a profitable result for many years, if ever. He expressed the fear that with the high popularity of impact investing, money will be gravitating from philanthropic pockets to impact investing pockets, shortchanging many critical projects. Grassroots organizations and causes often operate under the radar. Many grassroots organizations are becoming savvy at getting their stories in front of investors, but the vast majority of organizations doing really great work with limited resources remain invisible to the
Traditional Sources of Philanthropy Not significantly represented at the Nexus Summit were five traditional players in the philanthropic world: International quasi-governmental bodies such as UNICEF, UNESCO, the World Bank, and the World Health Organization. These organizations get their mandate and their funding from multinational covenants. They work primarily through national governments. National governments — primarily members of the G20, that set aside part of their national budgets for foreign aid (sometimes in the form of military aid, but also significant aid for challenges of health, education, poverty, and infrastructure). Nations do this because they may believe it is the right thing to do, but also sometimes to win the support of the powers that be in the nations receiving aid. Large foundations such as Gates, Buffet, Ford, and Kellogg, which safeguard and distribute the wealth of their founders. While many of these foundations can be approached by non profits looking for support, more and more they are funding projects initiated by their own teams. International NGOs such as Save the Children, ChildFund, Plan International, and Mercy Corps. For the most part these organizations consolidate donations made by individuals and businesses and fund projects implemented by their teams around the world. Some focus on responding to disasters, and others on confronting ongoing challenges. Multinational corporations such as Boeing and Proctor and Gamble that make contributions, either out of their marketing budgets or out of their charitable arms, in countries where they have a presence. These donations are made either to provide positive public relations for its companies, to meet the work/life needs of its employees, or sometimes just because the CEO wants to do the right thing.
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work together in ways that redefine the next generation of philantrhopic and non profit work. Let’s begin the story.
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Happy Money July 31, 2013
Though we travel the world over to find the beautiful, we must carry it with us or we find it not. - Ralph Waldo Emerson The closing speaker for the 2013 Nexus Global Youth Summit at the United Nations, Michael Norton, co-author of the book Happy Money: The Science of Smarter Spending, talked about the relationship between money and happiness. His research team at the H arvard Business School performed a series of experiments in which they gave individuals walking down the street, on sports teams, and on sales teams, envelopes with $20 bills. Half of them were told to spend the money on themselves in the next five hours, and the other half were told to spend it on someone else or on a teammate. Then at the end of five hours the researchers called and asked them if they were happier, less happy, or the same as they had been five hours before. Every time the experiment was conducted, whether in the US, the UK, or in Uganda, the results were the same. The individuals who were told to spend the money on themselves were no more happy or less happy than before — their level of happiness did not change. Those individuals who were told to spend it on someone else ended up being more happy than before. Interestingly, when individuals were told to spend the money on teammates, not only did the individuals spending the money feel happier, but also their teams performed better over a sustained period of time. Norton’s conclusion is that money can bring you happiness if you spend it on someone else. Giving money away is more satisfying than spending it on yourself.
holders of wealth. Likewise, while social entrepreneurs are taking a bite out of highly-visible challenges, many of the challenges facing the youngest children are not so obvious: providing educational and health services at the same time, providing services to children impacted by AIDS, and providing safety for children in zones of violence and conflict.
With this last challenge in mind, the World Forum Foundation has made a commitment to work with the Nexus Global Youth Summit to find ways to connect their wealthy, talented, and committed members with the readers of Exchange and the members of the World Forum community. Together, with a shared vision, we can hopefully
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