Bill and Melinda Gates brave the rain as they visit Khayelitsha township in Cape Town, South Africa on October 25, 2019.
Brenton Geach | Gallo Images | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Sign up to receive future issues straight to your inbox.
While charitable giving has increased, the pool of donors is shrinking as philanthropy becomes heavily concentrated among a small group of ultra-wealthy megadonors, according to a new study.
A new report from Altrata finds that ultra-high net worth individuals (those with assets of $30 million or more) now account for 38% of all private donations in the world. In other words, 400,000 people make up more than a third of the world’s charities.
It gets even more extreme when you look at billionaires. The world’s 3,200 billionaires (or 0.00004% of the world’s population) account for 8% of individual philanthropy.
The giving of top talent is of course positive. While it’s worth debating whether the rich are giving enough (see Gates Foundation CEO Mark Suzman’s recent annual letter on how the rich need to step up their giving), donations overall continue to increase .
According to Altrata, total giving from ultra-high net worth individuals was 25% higher in 2022 than in 2018, despite it being a down year for financial markets. North Americans remain the most charitable people on the planet, accounting for nearly half of this upper echelon’s global giving.
The challenge for wealth advisors and nonprofits is to adapt to a new, highly top-heavy philanthropy landscape. Nonprofits that have benefited for years from a wide range of donors now rely on a smaller group of superdonors who are already inundated with requests. Nonprofits will rise or fall depending on the interests and goals of a small group of mega-funders. And giving as a whole is becoming more volatile as the goodwill of billionaires and the super-rich is determined in large part by stock prices.
Amir Pasic, dean of Indiana University’s Lilly Family School of Philanthropy, says the so-called “dollars up, donors down” movement has caused nonprofits to rethink their fundraising and strategies.
“A lot of nonprofits are increasing their focus on these large donations and trying to figure out how to get access to wealthy donors and foundations,” he said.
At the same time, he said, some nonprofits are trying to turn fortunes around and reach out to a larger community of smaller, younger donors using technology and more creative outreach programs.
“It’s a quandary,” he said. “Everyone is rushing to the top of the pyramid, but the focus is so great that it may neglect the importance of reaching tomorrow’s donors.”
According to Altrata, today’s ultra-wealthy megadonors are largely male, with the majority being over 70 and holding a higher proportion of liquid assets (i.e. cash) than the broader ultra-wealthy population. However, women are an emerging force. While women make up 11% of the ultra-high net worth population, they make up 22% of major donors, according to the study.
Today’s ultra-wealthy donors also prefer to give through private foundations and donor-advised funds — which gives them more control — rather than simply writing checks to the Red Cross or United Way. According to the Federal Reserve, private foundation assets have more than doubled since 2005 to more than $1.2 trillion.
According to Altrata, nearly one in five ultra-high net worth individuals have a private foundation, and 30% of those with $100 million or more have a foundation.
The giving priorities of the wealthy also differ from those of the general public, which could result in more money going to causes reserved for the wealthy or even a subset of a few people. According to Altrata, education was the top charitable cause for wealthy donors (at 54%). This was followed by arts and culture (32%), healthcare and medical research (28%), social services (23%) and environment/nature conservation/animals (14%).
While religion is by far the top charitable cause among Americans, Altrata said religion is not among the top seven causes for the super-rich, although Altrata noted that donations to religion are often “anonymous and varied in nature” from the actual number may actually be higher.
“There is evidence that the group of ultra-high net worth individuals has different differences than the general population,” Pasic said. “And that can also be distorted by a small number of very large donations to a cause.”
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2024-03-14 17:50:50
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