Rich & Richer: Golden Age of Philanthropy

A golden age of philanthropy is dawning.

With the stock market booming and the super-rich getting even richer, charitable organizations are already seeing a wave of new money. The trend was already apparent before Warren Buffet pledged 85% of his $44 billion fortune to charitable foundations - the bulk of it to the Bill & Melinda Gates Foundation.

While it is difficult to capture a completely accurate picture of charitable giving in the U.S., some of the segments commonly used by the wealthiest individuals such as donor-advised funds and private foundations are seeing an influx of new contributors.

For example, giving by the nation’s 71,000 grant-making foundations last year rose 11.7% to $40.7 billion, according to estimates by the Foundation Center, a leading authority on philanthropy. The gain followed a 14.3% increase from 2004 to 2005.

Independent and family foundations, which account for the nearly nine out of 10 foundations, increased their giving by 10.3% in 2006, the Foundation Center said. That’s the first double-digit gain since 2001.

“It really is a golden moment where we are seeing a convergence of demographics and other trends,” said Council of Foundations President and Chief Executive Steve Gunderson.

The tide of new money, fueled, in part, by strong gains in the stock market, shows no signs of stopping as new foundations are being created at a pace that has not been seen since the tech boom of the early 2000s. And foundations are only one piece of the activity.

A New Approach

There is growing interest in microfinancing, or offering loans to poor people to start-up self-sustaining businesses. This type of giving is very popular among a new breed of entrepreneur such as Pierre Omidyar, the founder of eBay, and the Omidyar Network. Still well under 50-years-old, Omidyar is very committed to putting his large fortune to work to create social change.

Others in this group include Larry Page and Sergey Brin, the founders of Google, who are using the company’s new charitable arm and Google.org to support a number of social and environmental causes. Google’s charitable arm is even forgoing tax deductions it could qualify for in order to have the freedom to invest its funds more freely.

Microfinancing is also popular among the hedge fund set, whose rapidly growing fortunes have catapulted some of them into the ranks of the super-rich. This group is just beginning to make its mark, according to those who advise the wealthy on such matters. Some of them have already formed foundations  -- at a relatively early age -- and those funds will undoubtedly swell.

Super rich, rich, or simply wealthy, a generation of giving is on the way.

Paul Schervish and John Haven of the Center on Wealth and Philanthropy at Boston College, estimate the aging baby boom generation has accumulated trillions of dollars in assets and will likely donate a portion of this bounty to charities. Schervish’s and Haven’s model estimates from 1998 through 2052 some $41 trillion will change hands and some $6 trillion of this amount will go directly to charities in the form of bequests.

However, these donors could give some $15 trillion to $28 trillion over the course of their lifetimes during that same period, according to Schervish.