How to help clients with philanthropy

Spring has begun and, as we come to the end of the 2023-2024 tax year, many clients will be reassessing how best to re-align their finances with their values, and considering how to use their money to help protect people and planet in 2024 and beyond.

This is perhaps especially so now, when recent temperatures in some parts of Spain for example, have reached unusually record levels for January of 30 degrees Celsius, reminding us of the stark reality that something major needs to be done.

One of the best ways that advisers can help their clients protect people and planet is through the principle of philanthropy and giving, and there are many ways to do this effectively.

This article interviews three senior spokespeople from organisations who have stepped up to the challenge of helping advisers and their clients use their money for good, marrying principles and profit.

Stewardship

The first organisation is Stewardship, which was set up more than 100 years ago as a hub of advice and facilitation to enable clients to invest, save and donate to good causes in the best way possible. 

The term 'stewardship' has many meanings, but in terms of finances, it has connotations of care and responsibility over goods. 

Rachel Steeden, head of legal takes this further, looking at the Christian ethical roots behind stewardship that her firm works upon.

Steeden describes the principle of stewardship as “a biblical concept based on the belief that we don’t truly own anything, that everything we have comes from God and belongs to him.

"Our job is to look after the things God has entrusted us with; effectively we are stewards or custodians of all the resources we have at our disposal, from our skills, time and finances to our environment and communities.”

But this branches out more widely across society, Steeden says.

Philanthropists enjoy the lasting sense of purpose their generosity provides.Rachel Steeden, Stewardship

She believes this concept of 'stewardship' is very important for philanthropy as it can motivate those who embrace it not only to give as effectively as possible, but also to steward what they keep for their family’s needs as well as they can, so that the overall impact of their resources is maximised.

She says: “Engaging in stewardship can be very liberating. It can both motivate you to work hard to make the most of what you have and make it easier to be generous.

"Moreover, philanthropists enjoy the lasting sense of purpose their generosity provides and are motivated by seeing the positive difference they can make with their wealth.”

There are also challenges to giving wisely and Steeden acknowledges this.

She says: “The challenge of stewarding wisely can be daunting. It is easy to feel overwhelmed by the scope and scale of the needs in different areas and to wonder how any individual effort to steward well can make a material difference.

"It can also be hard to navigate the balance between stewarding well for your family’s future needs and releasing resources to support the causes you care most about.”

Philanthropists can feel burdened by a heavy sense of responsibility as they tackle the big questions, such as:

• How much and to whom should they give?
• How can they do that tax effectively?
• Should they do that publicly or anonymously?
• Who can they trust to help them administrate their philanthropy well?

Steeden says this can be an overwhelming and lonely process without expert advice to hand.

With the right support though, for example by giving with a Donor Advised Fund, philanthropists can develop a proactive giving strategy and so experience significant freedom and joy in their generosity.

A DAF is like having your own charitable foundation under the DAF provider’s umbrella, for the sole purpose of supporting charitable organisations you care about. It is a simple, flexible, and tax-advantageous way to give to your favourite charities.

You create an account that you give into and then decide which charitable causes you want to allocate your fund to. For major donors, has become one of the fastest-growing philanthropic vehicles because it is flexible, convenient and tax-efficient.

According to the National Philanthropic Trust's 2023 Donor-Advised Fund Report, there has been continued growth for DAFs, albeit at a slower pace than in recent years. 

Some data highlights from the NPT's DAF report 2023:

• Grants from DAFs increased 9 per cent to $52.16bn (£41bn) in 2022, a new high for grant dollars.
• Grant-making has increased every year since 2009 and has more than doubled in the past five years.
• DAF assets reached $228.89 billion in 2022, the second-highest value on record after 2021.

The DAF effectively partners with them in their giving, taking care of the admininstration so the donors are free to focus on supporting the causes they are passionate about.

The DAF model allows them to give anonymously if preferred. According to Steeden, Stewardship philanthropists also benefit from knowing that any charitable causes on their database have only been verified following a strict due diligence process.

For those giving more than £500k a year, there is also the option of using Stewardship’s Donor Advisory Board, which allows the donor to include family, friends and trusted advisers in their grant-making decisions, in a similar way to trustees but without the bureaucracy and legal responsibilities of trusteeship.

Global Returns Project

Another organisation taking a particularly innovative approach to working towards protecting the planet against climate change is the Global Returns Project.

The organisation was founded by a group of former investment bankers and environmentalists who decided to get together to encourage savers to donate a fraction of their net worth to a selection of charitable causes that would be carefully assessed and selected by the GRP.

These selected high-impact charities include:

• Global Canopy 
• Rainforest Trust 
• Client Earth
• Whale and Dolphin Conservation
• Trillion Trees
• Blue Marine Foundation.

GRP's chief projects officer Jack Chellman explains how the GRP aims to make climate philanthropy easy and convenient to donors: “The Global Returns Project makes high-impact climate philanthropy easy.

"We do the hard work, selecting, assessing and monitoring some of the world’s best climate charities so that donors don’t have to.”

He says donors value the GRP's model of distributing 100 per cent of every donation to the charities they want to support, without any deductions whatsoever.

He says: "Every six months we re-assess all our charities according to our proprietary methodology to produce detailed impact reports for all donors.

“In this way, we help people answer the question so many of us ask ourselves: ‘What can I do about the Climate Crisis?'."

Chellman believes there is a huge value in advisers offering clients the Global Returns Project as a climate care solution.

“The GRP allows advisers to fill a significant gap in their offerings to clients,” he says. “A recent report from the Charities Aid Foundation found that 57 per cent of millionaires between the ages of 18 and 34 want help with their charitable giving.

"This demographic will only grow more important for advisers over time. Within the next 30 years, £5.5trn is set to pass between generations in the UK.

Yet, according to GRP, nearly two-thirds of all advisers lack questions on philanthropy as part of their fact-find when onboarding new HNWI clients.

For Chellman, this means advisers are missing an area of serious concern for important existing and potential clients.

“By making it easy to offer climate philanthropy to clients, GRP helps advisers quickly address this shortcoming.

"Advisers who work with GRP introduce our portfolio to clients who express an interest in philanthropy, sustainability or delivering positive impact with their assets.”

This demographic will only grow more important for advisers over time.Jack Chellman, Global Returns Project

Clients donate via GRP’s website or by contacting the organisation for its bank details.

But GRP is also starting to integrate directly into investment platforms.

On Fundment, for example, advisers can act on client instructions immediately by withdrawing from a client’s account and sending a donation directly to the Global Returns Project.

With so many younger people coming into wealth through intergenerational giving, Chellman believes that there is much scope for younger people, as well as those who are more mature or in the later stages of life, to help protect the planet.

He says: “GRP helps advisers satisfy the sustainable interests of younger clients by delivering real and identifiable impact for the planet.

"Any monthly or annual donation to GRP makes a tangible difference for ocean conservation, rainforest protection, environmental law and more."

Advisers might therefore help clients start their journey of sustainable asset allocation with a donation to GRP, ensuring they receive clear six-monthly impact reports while making broader decisions about sustainable or ESG funds.

According to Chellman, this does not take much on an individual basis.

He explains: “For many individuals, donating a portion of net worth (0.25 per cent -1 per cent, for example) to the Global Returns Project annually is a complement to other sustainable decisions they make with their assets.

"From this perspective, the demand for innovations like GRP already exists.” 

Make My Money Matter

Make My Money Matter is another way that advisers can helping clients who want to use their money to do good, this time through their pension savings and investments. 

The Make My Money Matter initiative was set up to become a movement, and sees individual employees, organisations, and members of the finance sector take steps to encourage divestment of pension fund money from investments that are harmful to people and planet. 

David Hayman is campaigns director at Make My Money Matter and explains: "Across the UK, we’re seeing a growth in savers who want to make their money matter, with pensions holders increasingly expecting their cash to play a positive role in tackling the climate crisis.

"And that means advisers should get ahead of the game and support those individuals green their money.  

"For us, that means ensuring pensions stop supporting fossil fuel expansion, are committed to tackling deforestation, and are dramatically seeking and scaling investments in climate and nature solutions. 

Advisers will be able to appeal to an increasingly conscious investor base.David Hayman

"It’s what many pension savers expect, what the planet demands, where longer term financial and environmental advantages are likely to be found and where long term profits are to be made."

In terms of finding out “who’s leading and who’s lagging behind on climate action”, Hayman highlights that Make My Money Matter has released their annual Climate Action Report, which looks at the UK’s top 20 DC schemes, and rank them on a range of climate indicators – “from deforestation to fossil fuels, climate solutions to stewardship”. 

This ranking will let advisers - and the public - see who’s really stepping up on climate change, and where the industry is falling behind, he explains.

By getting ahead of the curve on climate action, and assessing clients' environmental preferences, Hayman believes “advisers will be able to appeal to an increasingly conscious investor base, the majority of whom want their money to be combatting the climate crisis, not contributing to it".

He adds: “Both they and their clients will also be able to take advantage of the growing financial opportunities associated with sustainable investing, and position themselves as real leaders on climate action."

Anita Boniface is a freelance journalist