Charting philanthropy’s new 'age of exploration'

One of the most common questions we get from philanthropic clients or philanthropists-to-be is, "What are others doing?"

As a trusted advisor to many of the world's most prominent philanthropists, we are positioned to see what is happening globally. What we are finding is that this is a great age of exploration in philanthropy, with many answers to the question: What works?

Exploration man with telescope
RubberBall Productions | The Agency Collection | Getty Images

Philanthropists have long dedicated substantial financial resources, time, heart and thought to helping communities, countries and the world. What's changed is the tremendous variety of approaches employed today. Indeed, the most striking feature of the modern landscape is that no one method leads the way.

What is happening is both more interesting and complex. New models are being tried, and innovations from recent decades are being field-tested and disseminated.

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Philanthropists may deploy any number of methods, often at the same time.

Many philanthropists, for example, are applying business methods to their efforts, utilizing one or more of three primary models: venture philanthropy, impact measurement and evaluation, and socially responsible investing.

"Impact measurement and evaluation are classic business methods. In philanthropy, they focus on ascertaining the real results of charitable efforts rather than simple outcomes."

Venture philanthropy has been around for decades, but in recent years it has become far more established globally. This approach uses the tools of venture capital funding to promote start-up, growth and risk-taking social ventures.

In many respects, it is a response to some of the historical issues associated with the nonprofit world, primarily a lack of operational capacity and the ability to grow and become financially sustainable.

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One defining characteristic of venture philanthropy is the high engagement between philanthropist and the not-for-profit, ideally creating an active, symbiotic relationship between the two.

One of the most vigorous and effective philanthropists with whom we work has refined her efforts by using more venture capital techniques and focusing on fewer organizations to maximize impact. Her strategy: seed-funding a program and engaging like-minded philanthropists to bring the effort to scale and ensure an exit strategy so that she can move on to develop other programs.

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Impact measurement and evaluation are classic business methods. In philanthropy, they focus on ascertaining the real results of charitable efforts rather than simple outcomes.

For example, a freshwater initiative might have previously counted the number of wells dug, but a more important measurement would be the reduction of waterborne diseases in the area. More and more, benchmarks are established to judge performance.

Socially responsible investing is not philanthropy per se, but its goals are similar. With SRI, also often called "impact investing," investments are made with the intention of generating both measurable social/environmental returns for society and financial returns for the investor.

J.P. Morgan has estimated that by 2020, the global social impact market could potentially reach $400 billion to $1 trillion in invested capital, and $183 billion to $667 billion profit.

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The G8's Social Impact Investment Task Force in 2014 published guidelines to help measure impact. And one of the world's leading proponents, British financier Sir Ronald Cohen, says that when we can accurately measure social returns so that they can be financially rewarded on a pay-per-outcome basis, investors will be able to fairly judge impact investments against traditional investments.

Philanthropy's evolution has grown up alongside the current "age of the entrepreneur," attracting and influencing an entirely new generation of wealth. From the first tech millionaires of the 1990s to today's tech billionaires — along with new money in media, investing, health care and other emerging industries — philanthropic organizations have ramped up efforts to engage the entrepreneurial set, finding eager, innovative partners ready to make a difference.

One issue that many philanthropists are increasingly hands-on in tackling is the age-old problem of poverty. From Ethiopia and Afghanistan to Mexico and the U.S., there are new efforts to lift communities, regions and countries out of the cycle of poverty.

Writing checks is not enough for these philanthropists. They are creating countrywide awareness campaigns, raising funds and often, literally, working on the ground, working to see that progress is made. They are interacting closely with locals, listening, learning and understanding their needs.

Today's philanthropists are oftentimes acting as innovators, testing potential programs and solutions. And once they find something that works, they are persuading governments, which have greater resources, to bring their answers to scale.

These methods of sharing best practices and learning from others truly enables what's most exciting about philanthropy today: the broad palette and the potential each and every philanthropist has to make the kind of difference that changes lives and the world.

—By Diane Whitty, global head, The Philanthropy Centre, J.P. Morgan Private Bank