Most people intuitively want to donate for a good cause. For those who have a higher personal capacity to give, it is increasingly being felt their giving could be much more effective if they have the backing of a professional structure and advice.
And so, for high networth individuals and family offices, that would mean approaching philanthropy as a more targeted investment, providing them high returns in terms of high impact — saving millions of lives mired in poverty and disease — for their money in a transparent way.
Geneva Global is among a growing number of for-profit companies that are providing advisory services to donors. For several years now, one of its clients is Dubai-based Legatum Foundation. The foundation is the philanthropic arm of Legatum, a private equity firm set up by two billionaire brothers from New Zealand, which has in the past decade contributed more than $60 million (Dh220.68 million) for community causes throughout the globe, touching 17 million lives.
Philadelphia-headquartered Geneva Global helps to actively manage a portfolio of grants for their high networth clients. They also design the portfolios of "giving" projects so that they match their client's intent and achieve the goals that they care about, catering to the underserved causes in which there is lack of capital.
"They act like investment managers and they are looking for high impact projects with high returns," said Alan McCormick, managing director of Legatum. "And they help us to do the due diligence with reporting. They also help bring transparency to the whole granting process and then help to report on it at times."
Many of Legatum's projects take three to five years to play out and so, McCormick pointed out, it is important to carry out baseline studies before they start and then go on to find out what the results are, which is still not common in philanthropy. That's where Geneva's services come in.
Geneva's head of international advisory Warren Lancaster who recently visited the earthquake ravaged Haiti found a high impact, high return project for one of his clients who asked him what was the best way to help the victims.
With no electricity available in the aftermath of the natural disaster, they distributed 8,000 solar panels that would provide one watt of power to connect to a light, which has a 30-hour life without recharge as well as four charges for mobile phones, which are ubiquitous in Haiti. Every one has a mobile in Haiti, no matter how poor you are.
Benefits
"Not only people have light but they can charge their mobile phones for free," said Lancaster, during a seminar on family businesses and philanthropy this past week in Dubai. "A lot of people have gained light and security. The thing about this is it's more about human security and I think that's inspiring."
In Geneva Global's experience and experience of the sector, wealthy donors are particularly interested in high impact and scalable initiatives. They are interested in low-cost and sustainable projects.
So, as philanthropists increasingly focus on solving social and economic problems, "it doesn't have to be done at the scale of Bill Gates and Warren Buffett because there are simplified solutions at a very low cost," Lancaster said, pointing out that it just costs $10 to buy a set of solar lights. "That's very low cost and a solar panel is indestructible. It's a good low cost investment in a humanitarian catastrophe."
The current favourite issue to address among donors is neglected tropical diseases, he said. "Basically for one dollar you can cure a person from the five most prevalent neglected tropical diseases, particularly in Sub-Saharan Africa. That's a very good buy. One dollar a person and you can cure an individual but also reduce the public health risk of a country for a very limited investment."
Three elements define Geneva's approach to advising philanthropists: inspiration, information and metrics.
Inspiration goes beyond just feeling good about giving to a cause. "It's more than just simply an obligation to give or sense of responsibility, although the research shows that many people who do give, give because of a sense of responsibility or an obligation or a religious belief and the like. But somehow it's also means touching the head and hearts," said Lancaster.
Information is the key element in both the selection of a project as well as in evaluating the performance. A new Boston Consulting Group report looked at social impact of projects and found pre-intervention research must be done to make grants effective.
"Intelligent and intelligible information — insightful information — really creates a lot of opportunities for people," Lancaster added. "[With the information] you can address real need. You got the evidence for it and you make evidence-based decisions."
Metrics or measures to evaluate the impact of the intervention made is the third important element. "Impact has to about quantity, quality and time," he said.
Cost of professional advice and service
Geneva Global charges consultancy fees on an hourly basis. The fees range but for example, for Warren Lancaster, it is $2,000 per day.
Also, if people contribute to the ‘funds' Geneva has established, then the fee is between 10 per cent and 15 per cent. If it sets up a totally customised programme with multiple development projects and a complete package of services, it is around 15 per cent in the first year and then 8 to 12 per cent in subsequent years. This would be for a investment programme of around $500,000. "Our services result in results that are up to 30 times more effective than traditional means of philanthropic giving such a child sponsorship," Lancaster claims.
Private sector, stocks, bonds and ETF options
. Sustainable participation from the private sector could also address the needs of the poor, according to the head of Saudi German Hospitals Group, Dubai.
Big names such as theirs not only have a lot of purchasing power, but also a brand name, the knowledge in their field and trustworthiness. Add to that a professional and transparent structure, said Engr. Sobhi Batterjee, founder and CEO of the group, which is building not-for-profit hospitals for the poor in Africa and Middle East.
"Leverage private sector knowledge to provide services and products that are addressed to the needs of the poor," he said. In fact, GE is providing equipment at zero cost and several pharmaceutical companies have promised to provide medicines for free.
Batterjee believes such companies could also be listed. "They will be able to attract funds, based on how much good they do and the benefits of this social business is great and even reflects back on those organisations' values. This is the solution for poverty in general."
. There's also the bond route to sponsor such projects. According to Nasser Saeedi, chief economist of DIFC, there's a project which brings together listing of bonds that then go for social or what is pro-poor type of projects.
"The benefit of that project is that it goes through all the criteria that Lancaster pointed out in terms of efficiency, effectiveness, impact. If you are convinced you buy into those bonds and then you have a formal structure and therefore you have reporting. And then you can actually auction these bonds. It's a project which we have looked at and potentially very viable," Saeedi said. .
National Bank of Abu Dhabi (NBAD) has signed a memorandum of understanding with the Global Fund to Fight AIDS, Tuberculosis and Malaria to launch an ETF on Abu Dhabi stock exchange. "We will be launching this ETF to support an organisation with an outstanding track record in financing the fight against the world's most menacing diseases," said Michael Tomalin, the Group Chief Executive of NBAD. This partnership is a direct result of our core corporate values. As a leading financial institution, we are dedicated to good and responsible global citizenship."
Information and metrics
For information and documentation, Warren Lancaster, head of international advisory, Geneva Global, outlines some basic steps to follow if you are going to make a significant philanthropic investment.
Plan it strategically: Strategic giving is the only way to think about philanthropic giving, Lancaster quotes from an anonymous source. And so, it's important to think what is it that we really want to do?
Focus on specifics: Then it is about identifying the things that you could do within that. Say you are planning some investment on education. Ask yourself what sort of education: is it best to do primary education, is it good to do vocational training education, or could we think about informal education. What would we do and how would we fund these projects is something you should be considering.
Carry out good due diligence: Most of the development projects don't fail, but ones which fail is because of poor leadership. That can be identified early in the process if you got good due diligence going.
Monitor the fund: It's about getting the money to the right place at the right time and being able to monitor how it's being spent. That is, to ensure the investment is being properly managed and also that it's sustainable — you are building the capacity of the local institution that you're funding.
Evaluating the programme at the end of it: In other words, see if it did achieve what you set out to achieve. And finally, celebrating it.
Documentation
Some of the documentations that the donor could be looking for are as follows, he added:
A sector report: Here, for example, the issues of public health are laid out, and then suggestions are given about one or two specific issues the donor could be involved in. Finally, two or three recommendations are given, potentially those that offer the best investment opportunity currently.
A landscape study: For example, Geneva is administering a project for Legatum in Northern Zambia, where there's a large proportion of blind people. It's a combination of poor diet, poor local practices, vitamin A deficiency, unclean water, all of which result in eye disease. When Legatum evinced interest in public health, Geneva narrowed it down in north of Zambia to this issue of eye disease. That's what then leads to a need assessment study.
A granting strategy: It's not to take away from the intuitive, but it's about supplementing it. And saying "Ok, if we are going to do this how would we do it? What's the blueprint? That's basically your granting strategy," Lancaster explained.
A baseline study: "You can't actually measure the improvement you made in people's lives unless you start from a baseline and work from there," he said.
Metrics or measurements
According to Lancaster, 10 per cent of research that they do in the sourcing stage of finding good projects for their clients, they reject largely on ethics issues, that is, poor governance, not good systems or procedures for handling money etc.
The second one is efficiency. In the research done among the wealthy in the UK and Europe, he added, 89 per cent of the respondents did not believe that the charities they gave to were efficient. Yet they still gave it to them. The cause was greater than the efficiency. But at the same time, 82 per cent of these respondents felt like there was a momentum growing towards greater efficiencies and that people would have to become more efficient.
Effectiveness or impact
There are essentially four levels that you want to look at when you are talking about evaluating the effectiveness of a project.
First, money that you are investing in an intervention—the input;
Two, what the beneficiaries receive—for example, as in case of Haiti, the solar panel—is the output.
Third, the effect on the lives of the beneficiaries is the impact. It's too early to tell what's going to be the impact within these homeless communities in Haiti of solar lighting and small scale solar power.
Lastly, the value creation or national value of the benefits received, but it's easier said than done, according to Lancaster.
You could have metrics over a five year period: one of Geneva's clients who was giving a significant amount of money in 2005 by investing $11.88 per person in a development project. In other words, for every life impacted by their philanthropy it was costing about $11.88 per person. At the end of 2009, it was down to $1.55 per person.
"That number may not motivate everybody because it is not a value statement of the project they are doing," said Lancaster. "It is one of the values that they had, that is, they wanted to increase the scale and the impact of the amount of money they had available. In other words, they wanted to do as much for as many people as they possibly could for this particular amount of money."
In fact, not only the cost per life changed, but the number of lives impacted through the years multiplied. This is the sort of data you could expect in metrics.
For a project, Geneva Global has extended the boundaries of metrics to something called Community Prosperity Index. There's a lot of debate within the sector at the moment about social and general investments and trying to monetise them. "It is trying to actually take that one step further," Lancaster said. "It's like intangible social factors such as dignity, empowerment, well-being and coming up with a social index."
