How to give away £100m
Call it the philanthropist’s dilemma. John Stone made a huge fortune in the City and wanted to give it away. There was just one problem – he had absolutely no idea who to give it to.
The resultant philanthropic journey took him around the planet to some of the poorest and most destitute regions of the world, in an effort to find where his money would make the biggest impact.
Stone, the co-founder of Lombard International Assurance, enjoyed immense success in the estate planning and wealth management business. When he came to sell Lombard, Stone had in the region of £100 million that he wanted to give away to charitable causes. It was then that he realised his dilemma. “I found myself in the situation where I had far more money than I knew what to do with. If you are not going to spend it on a hedonistic lifestyle or leave fortunes for your children, what are you going to do with it?” he says.
Former National Ambassador for Philanthropy Dame Stephanie Shirley says this is not an unusual conundrum for would-be philanthropists. “Any form of giving makes wealth significant,” she says. “However, the first thing you have to consider is what you want to achieve through your giving; do you want to plug short-term gaps or do you want to fund long-term innovative projects? What is the best way to use your money and who will use it the wisest?”
Some funders, she adds, will have an emotive motivation or a personal connection with a particular cause, which obviously helps to narrow the selection process. Dame Stephanie, for example, has allocated a fair portion of her £67 million of donations to research into autism, having lost her son, who suffered with the condition, in 1998. However, this wasn’t the case for the Stone family. “I wanted to give something back to society, but I had no passion for any particular cause. What I had was a blank piece of paper,” he says.
Like any good businessman, Stone wanted to make sure that his millions were going to be put to good use. So he set up the Stone Family Foundation with the idea of providing long-term funding of around £5 million a year over several decades to support innovative, entrepreneurial projects. He then set about looking for causes to fund.
Scouring the world
His task was made all the more difficult by the fact that, despite recent efforts, data still remains scarce in the charitable sector. Caroline Fiennes, director of Giving Evidence and adviser to City Philanthropy, which promotes charitable giving in the City of London, says: “There is no Bloomberg Terminal for charity performance. Charities have to start to supply evidence that is comparable and findable.”
But City executives like to have numbers to consider, according to Cheryl Chapman, director at City Philanthropy. She says: “Funders often approach charity in the same way as they do investing. They want to know the clear impact.”
In Stone’s case, he enlisted the help of New Philanthropy Capital – one of a growing number of organisations that help connect funders with charities to achieve the greatest impact. “We drew up a list, and chose a pilot portfolio of 10 charities across Africa and Southeast Asia working in three very different sectors: water sanitation, girls’ education and microfinance.”
After providing initial funding for specific projects, Stone and his wife took the next three years visiting far-flung and far from salubrious corners of the world to see for themselves how their money was being spent. “We ended up in places where we would never have been to before; where few visitors would go,” says Stone. “Remote villages in the jungles of Cambodia or urban slums in Ghana. It was eye-opening to see how some people live.”
After meeting the local charities and seeing the effect each project was having, Stone felt that those in the field of water sanitation and hygiene, or WASH, were having by far the most positive impact on the local community. “Girls’ education is a worthy cause to support, but if the children are walking for four hours a day to fetch water, then they aren’t at school,” he says. “There is also far more scope for entrepreneurial endeavour in WASH. I felt I could use my experience of building a business to help them build their own.”
In 2010, the Stone Family Foundation decided to commit three-quarters of its funding – around £4 million a year – to support market-based solutions in WASH and carefully chose initiatives that would use the funding most effectively. The foundation has now made more than 20 grants and provided nearly £10 million of funding to the sector. “We wanted to back projects that could become self-financing and sustainable. We needed to know that it could work as a business. It was more about venture philanthropy than just signing a cheque.”
Dealing with data
Importantly, information on the impact of investment can be provided in this area.
In the slums of Kumasi, Ghana’s second biggest city in the south of the country, the foundation is backing a project called Clean Team, which provides chemical toilets at low cost with a paid-for service of waste collection that returns the initial cost of the toilet within 18 months. In the rural areas of Cambodia, the foundation supports three initiatives providing sanitation equipment to poor farming communities (see picture above). “When you see the reduction in the number of cases of water-borne illness among the children and the value of providing clean water to a whole community, you can see the real impact of your funding,” says Stone.
Even so, Stone says, data on other factors such as general health and productivity was harder to gather. This is one of the underlying problems with the current systems of measurement, suggests Angela Kail, head of funders team research & consulting at NPC. “Softer” factors such as well-being or mental health cannot be measured in the same way, as say, employment figures or cost per unit. Therefore, organisations dealing with social or psychological factors, such as art or sport therapy, for example, often struggle to present clear impact data. Small charities also struggle to present themselves well, with very small charities less likely to have embedded impact measurement in their work – almost half of all charities below £100,000 in income do not measure impact at all, according to the NPC 2012 survey Making an Impact.
What many funders and charitable organisations are calling for is a more standardised approach to presenting evidence. This may seem impossible, given the diversity of the sector, but Kail at NPC says it simply takes a shift in the way people think about it. “Fifty years ago, no one thought that a bank and a whisky producer, for example, could be audited in the same way. Now, everyone uses the same system of accounting. There is a way of measuring everything. It just might be more complicated and not recognised as yet.”
In the US, recent efforts have been made to develop a standard rating system, known as the Charity Navigator. The online portal is broad, covering thousands of charities, and allocates a star rating to charities based on specific indicators such as financial health, transparency and accountability. Fiennes says that this might be the solution to the UK’s data drought. “This could be something that would be very useful here. After all, the City lives and dies on data.”
For “beginner” philanthropists, Stone says that the key to getting the most bang for their buck is to get a thorough understanding of what they want to support. It can take time, but the more rigorous they are, the more potential impact their giving will have. “It took us three years and thousands of air miles to find the projects we wanted to back, but that helped us choose the best initiatives,” says Stone. “After all, as [wealthy industrialist and philanthropist] Andrew Carnegie said: ‘It is more difficult to give money away intelligently than to earn it in the first place.’”
• Getting the most bang for your buck
In her book, It Ain’t What You Give, It’s The Way That You Give It, Caroline Fiennes lists some “strong and established organisations” that have a history of finding good charities which use funding to get the most effect. Here are a few of her suggestions:
Innovations for Poverty Action
Innovations for Poverty Action runs rigorous research and its Proven Impact Initiative supports the most effective work it has found. IPA passes the funds to the operating charities, taking no cut itself. It funds work, which has been proven effective by the most rigorous tools available, and avoids the risk of “going stale” because the set of charities that benefit can change over time.
GlobalGiving was founded by two former World Bank executives and enables donors to find vetted projects in more than 100 countries worldwide. The website lists projects with a description and the cost of various activities and specialises in projects that can make a difference with tiny amounts of money. For example, one organisation, which supports poor elderly people in Guatemala, lists the following:
•£7 will feed an old person for a month; •£91 will feed an old person for a year; •£101 will buy a maize crusher to make tortillas
Focusing on micro-loans to entrepreneurs in less developed countries and the US, non-profit organisation Kiva lists entrepreneurs, usually individuals, who are in need of small loans to grow their businesses. Kiva works through local microfinance institutions, which receive repayments and pass them back to the lender. Kiva claims a repayment rate of about 98.81%, meaning that loans can be used again and again on different projects. Since it was founded in 2005, Kiva claims to have facilitated $627,485,650 in loans.