We talk to law firm Farrer & Co and a lawyer working in the charities area about the kind of themes emerging in the philanthropy sector in the UK.
A UK report, published in 2023, showed that people are increasingly using donor-advised funds as their primary philanthropic instrument, it highlighted that DAFs can mitigate the risks which a self-built charity might face, a legal expert says.
The 2023 UK Donor-Advised Fund report, published by National Philanthropic Trust UK, found that contributions to DAFs have grown for a tenth year in a row. Grants from DAFs to charities rose by 21 per cent in 2022 to £554.7 million ($705.7 million). That figure reflected a long-term trend in the growth of DAFs, the authors of the report said.
“Running your own charitable foundation brings a lot of legal responsibilities,” James Maloney, partner at law firm Farrer & Co told this publication recently.
DAFs are popular because they enable donors to outsource some of this [responsibility], he continued. “They [potential donors] can be surprised at how heavily regulated this sector now is.”
As told to this news service by others, such as here, would-be philanthropists are increasingly interested in making an impact, rather than having names on the wall of a building or putting themselves into to the limelight. There is also a desire to “scale up” philanthropy and work with established charities, avoiding the need to add fresh cost layers and complexities. Examples include how UBS clients, for instance, can plug into the UBS Optimus Foundation and its roster of charitable/impact activities.
Maloney, as perhaps one would expect from a lawyer well versed in the charities sector, knows that donors must guard reputations.
Philanthropists can become more prominent and attract attention, not all of which is positive. One way that people can seek to mitigate the focus on an individual is moving towards “place-based” philanthropy where the cause is linked to a particular community, Maloney said.
Attitudes to the tax side of philanthropy are changing. “Some clients tell me `I don’t want anything that looks remotely as if I am trying to avoid tax.’”
A big trend he sees is the blurring between the boundaries of business and philanthropy. For many HNW individuals, business owners and philanthropists, these areas are “less compartmentalised,” he continued. “Philanthropists are more strategic in how they give and they want to have more impact…this is not just about writing a cheque.”
“People who are already making money by tracking measurable outcomes are attuned to this,” he said.
Getting the balance right when a philanthropist is focused on results isn’t easy.
One of the tensions is the desire for philanthropists to have measurable results and for them to understand the long-term, patient commitment to a particular charitable mission. Some organisations don’t want donors placing certain restrictions on them. Another point to consider is that charities may not want to receive donations from certain businesses, such as those involved in fossil fuels, he said.
This refusal of donations can be controversial sometimes. Orlando Fraser, the chair of the Charity Commission, reported (9 November, Guardian) that it may intervene where trustees have rejected or returned donations simply because their “personal worldviews or preferences” were incompatible with those of the donor.
Debates about climate change and the use of fossil fuels have been a touchy area, for example. A year ago, the Royal Opera House confirmed that it had ended its sponsorship relationship with BP after more than three decades. Climate activists have criticised the UK-listed energy firm for its sponsorship of the Science Museum.
The sometimes fraught political and cultural issues that can arise from philanthropy were explored by this news service following the recent publication of a book about the role of philanthropy advice in wealth management.