x Abu Dhabi, UAETuesday 23 January 2018

Philanthropists guided to intelligent charity

Wealthy charity givers are paying more attention to how their money is spent, and one firm is helping them get up-close and personal.

The Legatum Foundation, the charitable arm of the Dubai-based investment firm Legatum Group, funds the Access Project in Rwanda, which treats more than 4 million children for tropical diseases.
The Legatum Foundation, the charitable arm of the Dubai-based investment firm Legatum Group, funds the Access Project in Rwanda, which treats more than 4 million children for tropical diseases.

Alan McCormick believes in supporting charitable causes. As the managing director of Legatum, an investment firm based in Dubai, Mr McCormick, who is 35 and from the UK, feels that making money isn't enough. He stresses that it's also important to bring about change to help others. "You recognise that in life, you tend to reap what you sow," he says. "We have a desire to make a difference, and believe we can work to make the world a better place."

This ideology led his firm to launch a private equity fund that invests in companies with a focus on social progress, while his personal charitable giving is directed at the Legatum Foundation, a unit of his company that receives a portion of Legatum's investment profits. So far, Mr McCormick's organisation has put a lot of its largesse to work combating tropical diseases, mainly worm-based infections in places such as Burundi and Rwanda.

It has also helped the poor start businesses through microcredit loan programmes in India, and aided recovery in Haiti following the earthquake in January. While all of these are noble causes, the fact that he gives to charities in no way makes Mr McCormick unique. What makes this businessman exceptional is the research he conducts before signing checks. According to Mr McCormick, most of his fellow philanthropists don't really know how their money is used, or if it has truly improved the lives of others.

"I call that type of giving 'fire and forget'", Mr McCormick says, a reference to missiles that don't require guidance after launch. In other words, most donors, once they give money away, walk away, never giving it a second thought. Mr McCormick, on the other hand, knows that the donations from his foundation, thus far totalling more than US$50 million (Dh183m), have improved the lives of 17 million people.

That's because he works with Geneva Global - an organisation dedicated to helping philanthropists distribute their donations responsibly. In fact, Legatum founded Geneva Global, in 1999, with the aim of bringing an investment mindset to philanthropy. Geneva has thus far served more than 70 foundations and individual donors, and dealt with charities and organisations in 109 countries. During this time it has facilitated more than US$81m in donations to 1,650 projects around the world.

Mr McCormick says that Geneva has taken principles of fiscal responsibility from Wall Street and applied them to the world of international aid and development - a largely unmonitored sector in which concerns have long been raised about just how much of a donor's money actually reaches its intended recipients. Doug Balfour, the chief executive of Geneva Global, says his clients appreciate the extra information his company provides.

"We are big believers in transparency," he explains. "We provide clients with investment bank-level reporting, and due diligence and service, but within the philanthropic sphere. When a project fails, or doesn't perform as well as has been claimed, we write that up and explain why." Geneva Global identifies worthy charities for its clients, monitors project performance and publishes reports on the findings, helping philanthropists decide whether to continue funding an organisation.

The reports create a sort of marketplace for charitable giving, Mr McCormick adds, giving philanthropists options for allocating funds based on effectiveness. Now, Geneva Global is turning its focus to the Middle East. Beginning this month, the organisation will hold workshops for some of the UAE's family-owned businesses to gauge their interest in broadening their international philanthropy. According to the World Wealth Report by Merrill Lynch and Capgemini, there were an estimated 79,000 millionaires in the UAE in 2008.

"It's an untapped market," Mr Balfour explains, referring to the potential pool of money in the country available for charitable projects. In addition, Islam holds giving as a sacred duty, teaching Muslims that everything comes from God and is on loan and that no one really owns anything. One of the religion's five pillars is zakat, which calls for giving to the poor 2.5 per cent of one's wealth, measured in cash, gold or silver (interestingly, farmers are required to give 5 per cent of their produce from irrigated land, but 10 per cent of the produce grown on rain-watered fields).

Figures for the amount of charitable giving in the Arab world are hard to come by, but one recent study found that the region's donors are looking for more opportunity and diversity when it comes to putting their money to work. The study, entitled From Charity to Change, focused on non-governmental organisations (NGOs) in Jordan, Egypt, Palestine and Lebanon. It found that the NGOs are seeking to do a better job of measuring how effectively their work is actually benefiting individuals. The study was sponsored by the Arab Philanthropy Establishment, a body created in 2008 by members of the royal houses of Dubai, Jordan and Saudi Arabia to "push to establish laws and policies to encourage giving throughout the 22 Arab nations across the Middle East and North Africa".

Traditionally, the US has dominated international giving. The country's charitable donations totalled $307bn in 2008 - and about 75 per cent of that amount came from individuals, according to the Giving USA Foundation. Mr McCormick says his exposure to the power of individual philanthropy began at home. The source of inspiration? His mother. "During my childhood she assisted many of the Vietnamese boat people relocating to the Derby area," he says. "And in India, she would volunteer with the Sisters of Mercy looking after street children."

As an adult, Mr McCormick has continued his mother's charitable ways. One of the Geneva Global projects that Legatum sponsors is Speed School, a programme that helps children in West Africa pass public school entrance exams. The initiative - which is operated in Mali, Burkina Faso and Niger - is designed to provide access to schooling for those who are excluded from classrooms due to poverty or geographical isolation. It has changed the lives of 36,000 youngsters since its inception in 2004.

The cost of this life-changing programme is just $200 per student, a bargain by anyone's reckoning. Another Geneva project, the Beautiful Tree Education Fund, focuses on establishing affordable private schools for the poor in countries with underfinanced public education systems, including many in Asia, Latin America and Africa. According to Geneva, in 2007 53 per cent of the grass-roots organisations it funded achieved their stated goals, while 23 per cent outperformed their goals.

A focus on "high-performance philanthropy" is not limited to Geneva Global and its clients, of course. According to a report issued this month by the Economist Intelligence Unit (EIU) and sponsored by Société Générale Private Banking, the global financial crisis has sparked a "trust crisis" among the world's wealthiest individuals. As a result, philanthropists are assuming greater control over their investments and demanding more accountability for their charitable spending.

"The very wealthy want to understand more than ever where their money is going," says Jason Sumner, a senior editor at EIU. "They may have different goals for investments, philanthropy and spending, but in each arena the downturn has driven them to be more sceptical, ask more questions and, in some cases, take a more direct, hands-on role." While largely maintaining their levels of giving, the wealthy are now more focused on verifying that the projects they are endowing are actually creating positive societal change and ensuring that the organisations they deal with are held accountable, the report said.

"The very wealthy want to make sure that their money is going to the people who need it most, having seen examples in the last two decades in which good intentions did not always match the actual outcome," EIU said. In 2007, the American Enterprise Institute (AEI), a Washington, DC-based political think tank, cited Geneva Global as an example of an organisation that "aims to make old-style charitable giving better". Other groups recognised by the think tank include GlobalGiving, also based in Washington, The Clinton Foundation, which was established by Bill Clinton, and the Brenthurst Foundation of South Africa, founded in 2004 by the Oppenheimers, the family behind the De Beers diamond mines.

"They are pioneering methods, inspired by the private sector, to identify good projects and assess the impact of charitable giving," the AEI said, referring to the groups. To become involved with Geneva Global, a new client will meet with Mr Balfour and his team to identify his or his passions and interests. Deciding on a country - or countries - to aid often comes down to where the client was born or where his or her spouse has ties.

Once a subject or theme is identified - for example, helping orphans in Africa - the team then assesses which organisations would provide the best value for the client's money. "We won't very often recommend a big international charity - we know full well the costs," Mr Balfour says. "The most efficient way is to engage people closest to the problem, and they know the local problems best. A grassroots NGO, for example, has lower salaries, and is run by people from the community. Therefore, the local groups understand the situation better, and they won't go away and leave. They are there forever. So generally, you get a bigger bang for your buck."

To keep its clients updated, Geneva Global issues annual reports on the status of their "investments". For its efforts, the company charges a fee equivalent to 10 to 15 per cent of a client's donations, which many find a small price to pay to help ensure that their charitable goals are accomplished. Regardless of the monetary cost, however, individuals should never overlook perhaps the greatest benefit of helping others.

"Giving makes you happier," Mr McCormick believes. "Often in the giving process we neglect the fact that the giver's life has changed, as well as the person implementing a programme and the recipient." igale@thenational.ae