Why Philanthropy Needs to Be More Than Granting

Hayley is Executive Director of the Morris Group, and also leads her family’s philanthropy and impact investments through the Morris Family Foundation. She is the co-founder of Sustainable Table and founder of carbon software business, Impact Sustainability. She remains the Chair of Sustainable Table and is a founding board member of the Impact Club. Through her board roles, Hayley has a strong focus on advancing regenerative agriculture in Australia.

There is no question the world is facing the collapse of functioning ecosystems that gift us with the ability to create food, clean water and breathe fresh air. Without these fundamentals, civilisation as we currently know it will be collateral damage. Of all sectors within the economy, arguably philanthropy should know this reality the best. Yet, even in the world of “doing good”, we can still find powerful ironies that maintain and support a broken economic system.

One of the biggest failings of philanthropy is the siloed nature in which granting, and investing are managed.

In Australia, the most common form of philanthropic fund is called a Private Ancillary Fund (PAF). A PAF owns a portfolio of assets, of which 5% of this value must be donated each year to registered charities.

Why 5%? Because a reasonable investment strategy should produce more than a 5% return, meaning the PAF can last into perpetuity and the family can keep giving away for generations to come and feeling good about themselves. Therefore, the advisors assisting with the investments, are generally looking to achieve above 5% returns, so the assets of the foundation can grow and more money can be given away.

Doesn’t sound like a bad idea... Or is it?

A standard diversified investment portfolio is generally relying on the economic system addicted to growth, whereby growth means extracting from the environment and producing vast amounts of waste and totally outsourcing the associated costs to society. The very issues and work that philanthropy is trying to solve are exasperated by business as usual. On one hand, we are giving away to fix environmental and social problems, whilst, on the other hand, we indirectly contribute to them through our investments.

The idea of investing with a different paradigm, where we can align our investment values with our granting values, is not a new idea. There are positive signs with the growth of ESG funds and impact investing opportunities. However, the lack of take-up of investing with intention and purpose within traditional philanthropy is particularly concerning. It suggests that the need to keep our philanthropy going and growing is more important than solving the problems our philanthropy is supposedly trying to fix.

Every NGO (and philanthropic organisation by extension) should have a vision for a future where they no longer exist. This would mean the problem they are working on has been solved. This concept is almost too much for most to face. One gets to step into a philanthropic board meeting and feel good about oneself for doing good in the world. Why would we want this to stop?

Because there is another way. We can feel good about the way we operate our businesses or the way we invest without needing our philanthropy to be “offset” for the rest of our business life.

This does require a new paradigm of investing, where growth is not the main indicator for success. If we are really wanting to slow down and divert our planet from the crash course we are on, quite frankly, it is the only option we have left.

We need to reframe our out-of-date paradigm that tells us we can stay addicted to growth and still solve the world’s problems.

Don’t get me wrong, philanthropy is still hugely important. I am not saying we don’t need it; we need it more than ever (more than our 5%!). I am also not arguing that some investments can do excellent things for the world and still make great returns. But when we are really working to change a system, when we are up against powerful system lock-ins and vested interests that are supporting the current system, we have to question what is more important to us.

Maintaining our philanthropy to hand over to future generations in an uncertain future? Or, questioning our expectations of endless growth?

This article is an extract from Regenerating Investment in Food and Farming: A Roadmap.