Michael Bloomberg’s $1.8 billion donation to Johns Hopkins University this week was earmarked for financial aid to admit students regardless of their ability to pay. It came on top of $1.5 billion Mr. Bloomberg has already given to his alma mater.
Mr. Bloomberg, among the 10 wealthiest people in the world, has the staff, money and time to focus on giving big institutional gifts, like the one to Johns Hopkins, and also smaller grants to social change groups, like a $1 million gift this week to two Florida cities, Coral Springs and Parkland, for an art project around gun violence.
But a new report by the Bridgespan Group, a philanthropic consulting firm, suggests that wealthy philanthropists who want to make a large gift that will have an impact on social change are limited in their options.
Large organizations like universities and hospitals are well equipped to accept a donation of just about any size, but bigger amounts could paralyze smaller nonprofit groups that provide social services, like helping the hungry or providing educational support for children in need.
“Hats off to the great universities and the great hospitals in our country that have the fund-raising teams and balance sheets to access high-net-worth folks,” said Thomas J. Tierney, the chairman and a co-founder of Bridgespan and a contributor to the report. “But if you wanted to put $1.8 billion to work to drive social change, how would you do it? It’s hard.”
The Bridgespan report notes that many ultra-wealthy donors struggle to find social change organizations that are large enough or mature enough to accept a sizable donation. So the donors end up giving to more established nonprofit groups instead.
The report found that ultra-wealthy donors, which it defines as people worth more than $500 million, gave only 1.2 percent of their assets to charity in 2017. By comparison, the S&P 500’s average annual return was 9 percent over the past two decades. The authors said that if a wealthy couple wanted to give away their fortune in their lifetime, they would have to increase their giving to 11 percent a year over the next 20 years.
That level of giving would be more than double what a private family foundation is required to donate annually, which is 5 percent a year. The report said raising the giving rate to just 2.4 percent would add $45 billion in annual giving.
But there’s no guarantee that the money would go to social change organizations, and the authors of the report say that if social change organizations do not rethink their model, they would be left out.
“There is by all indications a sign of intent by the superwealthy to increase their giving to social change,” Mr. Tierney said. “But we haven’t invested in the pathways to let them do this in a productive way.”
The report detailed four strategies to change this and make it easier to give money to social change organizations.
Band together to build a network
Going it alone can be daunting. But several funds have been created that bring together both dollars and donors, who can discuss issues as equals.
The Robin Hood Foundation has been gathering hedge fund managers to give to various charities since it was started in 1988. A newer effort is Blue Meridian, a philanthropic fund created by the Edna McConnell Clark Foundation to invest $1 billion in nonprofit organizations working to help poor children.
Stanley Druckenmiller, founder of Duquesne Capital Management, said he and his wife, Fiona, focused on causes like the Harlem Children’s Zone, which works to educate disadvantaged children. But with a net worth in excess of $4 billion, he is also aware of the risks of giving too much money to a small organization.
“If you swamp the wrong people with money, it’s going to be inefficient and it might mess them up from a viable path to an unviable path,” he said. “They could change their speed and lose their focus.”
But if donors find the right organization, he said, their philanthropy can help the group focus on its mission and not have to worry about fund-raising.
Jeff and Tricia Raikes, two early Microsoft employees, helped bring together their own network, the Building Equitable Learning Environment, which aims to help poor and minority students close the learning gap between them and their wealthier peers.
In doing so, the couple chose large partners, like the University of Chicago, that had expertise in an aspect of the project but were also able to handle large donations.
Find ways to direct charitable giving
The Bridgespan report argues for the creation of a “community foundation for America” that would be able to accept large bequests and donations and then find small nonprofit groups that need the funding.
But the community foundation would have a specific mandate to make grants that help social change organizations and even a time frame to spend the money.
It’s still in the idea phase, but there are options now. Michael Lear, a vice president and financial adviser at Bernstein Private Wealth Management, said he had advised wealthy clients who wanted to make a large gift to a social service group to consider putting the money into a donor-advised fund and parceling out the money over a few years.
“They can have the tax break this year and make giving decisions in future years,” he said. It also gives the client the chance to find smaller organizations that are doing good work but would be overwhelmed by a multimillion-dollar gift.
Create high-quality support services
Without the help of a private foundation, finding smaller nonprofit groups in the social service sector can be a challenge. “If it’s a wealthy couple alone, it’s simply hard to do without a large staff,” said Mr. Tierney at Bridgespan.
Every private bank and adviser that aims to court wealthy clients does so with an offering of philanthropic advice, but Mr. Tierney said it was not all worthwhile.
“Do you think anyone is going to get a giant bonus because they helped a client give away $1 billion?” Mr. Tierney said. “They’re not aligned for true philanthropic services. Your banker wants you to make a lot of money, not give it away.”
He said that these advisers — which would arguably include Bridgespan — needed to show philanthropists that there was a need to give now, to address current problems, and not wait until later in life to give.
Provide access to qualified recipients
Philanthropists need organizations working in the social sector that have proved their approach can work but also have an infrastructure in place that allows them to grow. Some groups have found areas consistent with their mission where they can grow or share what they’re doing with other groups.
Gregory Silverman, a former chef, is the executive director of the West Side Campaign Against Hunger, a food pantry in Manhattan that was started nearly four decades ago. When he joined in 2016, he decided to shift the organization’s focus. He has been working to get better, fresher food for the pantry’s clients and steering them away from processed foods.
But his bigger project is working on a collective buying program with three other large food pantries in New York. Their goal is to reduce their food costs and share storage space and transportation in order to increase the number of people they can help.
Mr. Silverman says this can change the model of the food pantry. “It’s about us helping New York City community members get lifted out of food insecurity,” he said. “It’s not about our poundage; it’s about our impact.”
The collective buying program was funded with a $70,000 grant from Robin Hood and SeaChange Capital Partners, which provides grants and loans to nonprofit groups working together. But Mr. Silverman said he knew exactly what he would do if he ever received a large grant.
“I have a very clear vision of what I could do to replicate and fight food insecurity in New York City and across the country,” he said. “It’s about putting systems in place and having well-researched models — and stopping putting money into models that don’t work.”
