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Wealthy individuals often say that getting a philanthropic portfolio started is a daunting task. There are many challenges to tackle, many organizations competing for funding, and measuring impact can be difficult.
This in part explains why at this moment in time, only 36 percent of the world’s ultra-high-net-worth individuals (UHNWIs, defined as having a net worth of $30 million+) are engaged in philanthropy. This means that much-needed philanthropic capital is sitting on the sidelines, waiting to be spent at a time when the need to address stubborn challenges is more urgent than ever.
The Milken Institute Center for Strategic Philanthropy (CSP) has spent the past year assessing the landscape of UHNW giving to identify trends and highlight ways in which social investors are making an impact. This landscape is shifting. While men age 50+ still hold a greater percentage of wealth, women are increasingly becoming a driving force in philanthropy. And donors are starting to give at a younger age, seeing philanthropy as part of their moral responsibility to the world.
Through research and conversations with experts and high-net-worth donors, CSP has identified a number of strategies for UHNWIs getting started in, or expanding their philanthropic portfolios.
- Lean on the philanthropic ecosystem. Wealth can be isolating, but individuals do not have to forge their philanthropic paths alone. Philanthropists can look to community leaders and other stakeholders already steeped in social change work to channel resources to where they are needed most. In addition, philanthropic support organizations and peer learning networks can offer expert advice on specific topics of interest and aid grantmaking activities.
- Diversify philanthropic portfolios. Donors already diversify their financial investments—and philanthropists should also diversify their giving in terms of their approach and supported beneficiaries. Current events are forcing everyone to learn and unlearn—and donors must also make the effort to learn about and evaluate organizations outside their usual spheres of giving. This is the best way to ensure capital is being used to right some of the systemic inequities that have led to entrenched social injustices.
- Commit to building the nonprofit sector. The nonprofit sector has stepped up to respond to emerging challenges and lead communities in taking action against systemic problems. Investments in the nonprofit sector’s people, infrastructure, and technology will allow organizations to strengthen their operations and scale effective solutions so that they can better absorb large amounts of capital and further their impact.
- Meaningfully deploy all philanthropic assets available. Philanthropy has long been lauded as society’s risk capital. Philanthropists should leverage the full spectrum of assets at their disposal (e.g., financial, social, intellectual) to make the necessary “risk investments” that generate an impact, and should follow a holistic approach to foster transformative change.
The amount of capital that is sitting on the sidelines can—and must—be put to work. And given the knowledge and due diligence available, it can go to work quickly, in a way that’s focused and strategic, tolerant of risk, and open to new mindsets and approaches.
Read more actionable insights and philanthropic strategies in our full report, Stepping Off the Sidelines: The Unrealized Potential of Strategic Ultra-High-Net-Worth Philanthropy.
By Hilary McConnaughey, Senior Associate and Sokol Shtylla, Director, Milken Institute Center for Strategic Philanthropy.