HOW I SEE PHILANTHROPY: GIVING BACK VS TAKING FROM SOCIETY?
Is giving back the best way to fix society?
When I think about Philanthropy, I imagine very wealthy entrepreneurs, like Bill and Melinda Gates, who make large gifts to charities, projects and those in need.
Philanthropy is a part of giving back. However, it depends on an individual creating a lot of wealth. Entrepreneurs must first create highly successful businesses. They must reach a stage at which their wealth becomes significantly greater than their needs. It is only at this point that they can transition into the domain of philanthropy. This process assumes that only once financial success is achieved can you concentrate on charity, that in order to give back to society you must first in some way take from it.
Is this an accurate visualisation of philanthropy? Is it true that philanthropists have taken something from society? Has their taking motivated their giving? Is it correct to think in terms of giving back? Is it acceptable to think of money accumulation in terms of a capitalistic model?
In the last few years we have begun to talk about ESG, CSR, sustainable supply chains and fairness in the workplace. However, the model of capital accumulation in which we operate is really about maximising shareholder value.
Therefore, wealth needs to be reallocated. Philanthropy works in this reallocation space. It helps society in redistributing capital, but often times it does so from within an inadequate model. Why do people choose to become philanthropists? Perhaps it is out of generosity, or guilt? Or a bid to be recognised as doing good while also having a successful career? Maybe we should ask them…
The positive impact of philanthropy
At the same time, I see philanthropy as a very useful tool for effectively solving difficult situations in the short term. For example, when a catastrophe occurs, there is no time to wait for business models to emerge or start-ups to be created in order to act quickly and effectively. As we can see now with the COVID-19 crisis, philanthropic actions and donations have a huge relief impact. However, in the long term, work has to be done, and capital has to flow to build a more sustainable and resilient society. As UN secretary general António Guterres declared, “Everything we do during and after this crisis must be with strong focus to building more equal, inclusive and sustainable societies that are more resilient to pandemics, climate change, and many other challenges”.
In my opinion the current societal system is incentivising individuals and organisations to make more money and creating a society that is not in balance.
I see Philanthropy as how wealthy entrepreneurs use their excessive capital to fulfil what their hearts feel, whether driven by generosity, guilt or reputation. However, this philanthropic outlook is still about operating in a system that is not sustainable.
I am not trying to judge or condemn what philanthropists are doing. Nevertheless, I feel philanthropy is too often reinforcing an imperfect model. A model in which there is a disconnection between money and doing good, and where making money is not necessarily connected to promoting wellbeing.
We imagine the stereotypical, successful business leaders as very clever, pushy, greedy and commercially minded people. These qualities all bare negative connotations. Philanthropy on the other hand carries the opposite positive undertone of helping others, giving back and doing good.
Philanthropy does good by mitigating poverty, climate change and market failures. But trying to fix the consequences of an unsustainable system can actually perpetuate the system whereas what we really need is to change it.
I am not saying that philanthropy is not useful, on the contrary, but the potential to really make a difference will come when making money and doing good are really combined, when making money becomes a consequence of doing good.
And this is how I see Impact Investing.
Impact Investing is needed to bring systemic change
My personal journey has brought me to believe that to sustain and accelerate a systemic shift, reconnecting money with its impact, our way of thinking has to change urgently. I see a huge opportunity in starting the change at a personal level, developing a higher level of consciousness, as well as within the business and financial world.
In my opinion, the biggest change we make is not necessarily by giving back to society but by changing our behaviour, how we perceive money and the way that businesses behave. This is why a new way of thinking about finance and business is so important. This is why I promote Impact Investing.
Impact Investing aims at generating measurable social and environmental impact as well as financial return. Beyond this classic definition, I believe impact investing is about using our capital and our talents consciously to achieve the expected results. We should probably call it conscious investing (please read Tim Malnick’s article on this). This surpasses just keeping in mind people and planet. Impact entrepreneurs and investors promote a sustainable future for our society by consciously deciding what to do with their time, talent and money. That is the power of impact investing and I see this as a greater priority than the current vision of philanthropy. Yet the two need not be stand-alone initiatives, in the sequel to this article that will be released next week, I’ve written about finding the nexus of Impact Investing and Philanthropy to achieve a common goal: helping others.
https://www.linkedin.com/pulse/impact-investing-vs-philanthropy-which-one-save-world-alessandro-mele
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