The global value of philanthropic capital, for instance, is estimated to stand at more than US$2.5trn (Philanthropy and the Global Economy, Citi Bank 2022), with 73% of family offices now managing philanthropic efforts in some capacity (BNY Mellon, February 2022).

Family philanthropic efforts are becoming more professional, more sophisticated and more targeted – and there are good reasons for this evolution. 

The ‘external’ benefits of adopting such an approach are clear through the tangible impact family-driven philanthropy is having in society and on the planet. But families are also increasingly alive to the more ‘internal’ benefits of philanthropy too.

Increasingly, families are understanding that the very process of philanthropic professionalisation – from opening up conversations around philanthropy to developing and implementing purpose-driven strategies – has the potential to bring multiple additional benefits to the family, through better governance, more efficient structuring and family cohesion.

In turn, this new family approaches to philanthropy is also set to create a multiplier effect, paving the way for a number of additional opportunities.

Benefits

From an external perspective, the clear need for private capital to step up and support good causes remains strong. 

UN figures show, for instance, that if the Sustainable Development Goals (SDG) investment needs to 2030 are to be met, some $30 trillion of additional investment must be found. Private capital, including through philanthropy, will play a key part of that.

The signs are that families are aware of that need and are ready to step up. 27% of family offices, for example, emphasise giving back to society through philanthropy as a key priority, according to the UBS Global Family Office Report 2023.

Beyond these external impacts, though, philanthropy is increasingly being embraced by families to help reinforce family values and promote family cohesion. 

Whilst in the past, philanthropy might have been driven by the personal values and goals of a patriarch or matriarch, a truly joined-up family approach to philanthropy can provide a platform to help bring different voices to the table, engender better understanding between family members, and create a unified dynamic that reinforces a family’s values.

A genuinely shared family philanthropic strategy can provide a good ‘ringfenced’ channel for families to educate the nextgen. Giving them a certain amount of autonomy but with clear parameters, philanthropy can create a training ground for the nextgen, providing them with an environment to develop financial skills and better understand the environment they operate in, whilst empowering them to apply themselves to a cause they are passionate about.

Practical Outcomes

Building strong family cohesion through philanthropy can be a powerful process that can have a number of additional practical implications too.

Roles such as Head of Philanthropy are increasingly common within family offices, giving them a more formal organisational model to help develop and implement bespoke strategies professionally and with confidence. It can also provide a good opportunity to revisit governance frameworks and family charters, to ensure documentation is clear and aligned with purpose-driven values.

In turn, this is helping families undertake robust reviews around how they structure their philanthropic activities. How can they differentiate between different types of philanthropic activity – charitable giving, impact investing and seed investing, for instance? What structures should they be using to help them realise their objectives effectively and efficiently?

Seed funding or ‘venture philanthropy’ to support start-ups or higher risk social benefit projects, for instance, might require very different structuring options to more straightforward ‘pure giving’ to a charity.

There is also the question of active and direct involvement, which is becoming increasingly popular amongst families. The fact that 48% of families have established their own foundations would support this and demonstrate that families are firmly fixed on the long-term (Campden Wealth, 2023).

Meanwhile, co-projects with other families are also becoming more common as families look to pool resources where values, objectives and approaches are complementary, with a view to achieving greater impact. Further, families are also integrating philanthropy more with their wider wealth, business and investment activities, and this is having an impact on structuring options. In fact, there is growing understanding that philanthropy needs to permeate all other areas of a family’s affairs if it is to be authentic and have the desired measurable impact.

Expertise

As family approaches to philanthropy become more embedded within a family’s holistic framework, there’s no doubt that specialist advice is increasingly important. 

It’s telling that although 71% of family offices believe they have a role to play in alleviating economic inequality, just 41% have a philanthropic strategy in place to do that (Milken Institute, 2021). In that light, external advisers can be critical in enabling conversations amongst family members so they can set out their visions, agree a way forward and put that into practice through effective and robust documentation, control mechanisms and structuring. 

The complexities of risk monitoring, governance, evaluation and measurement in particular are areas where is a growing demand for specialist advisers. Having the benefit of an independent voice that can provide rational, data-driven advice can be highly valuable in an area that can be highly emotive too.

Despite these potential complexities, philanthropy continues to evolve at pace. Families taking a fresh, open and coherent approach stand to make a real impact, in multiple ways – on the world around them, on their own operation, and on their long-term legacy.