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Planning with Purpose: Philanthropic Intent

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America is in the midst of dramatic cultural and demographic shifts, which will indelibly reshape the future of philanthropy.

Even the words we equate with philanthropy are changing. Increasingly, terms such as “social good,” “impact” and “social innovation” are being used in its place. Impact investing, an umbrella term that includes benefit corporations, program-related investments, social enterprises and sustainable investments, has provided opportunities for philanthropists to go beyond traditional grantmaking and leverage the power of financial markets to drive social impact while generating monetary returns.

Coming to Terms with Impact Investing

Benefit corporations are traditional corporations with modified obligations committing them to higher standards of purpose, accountability and transparency. For more information, see www.benefitcorp.net.

Program-related investments are those in which the investments significantly further a private foundation’s exempt purposes. The production of income or appreciation of property, however, are not priorities and efforts to influence legislation or take part in political campaigns on behalf of candidates are not pursued. For more information, see www.irs.gov/charities-non-profits/private-foundations/program-related-investments.

Social enterprises are defined by the Social Enterprise Alliance as “organizations that address a basic unmet need or solve a social or environmental problem through a market-driven approach.” For more information, see www.socialenterprise.us.

As baby boomers prepare to transfer wealth to their children, we explore the likely impact women and Millennials will have on the philanthropic landscape and share strategies for you to consider as your family’s philanthropic legacy becomes an integral part of your wealth transfer plans.

Trend #1: Female Philanthropists Taking the Reigns

Currently, a third of total U.S. household financial assets – more than $10 trillion – is controlled by women.1 That amount is expected to triple, as a significant amount of private wealth changes hands over the next few decades. We expect female-driven philanthropy to be an important catalyst for change as philanthropy evolves over the coming years. For example, ten of the wealthiest women in the United States are committed and consistent philanthropists.2 Similarly, specialized women’s funds and foundations are going beyond making financial grants to achieve impact and are leveraging personal relationships to establish valuable partnerships and pursue broader social change through policy advocacy.

Trend #2: The Impact Generation

Millennials are on the cusp of a massive $30 trillion wealth transfer – and they plan to direct their newfound resources to philanthropy. Research has shown that Millennials think quite differently about how financial resources can and should be used to affect positive social outcomes. The generation’s desire for greater flexibility, transparency and meaning in their work is reshaping how the nonprofit sector expects them to take part in organized philanthropy.

For example, Millennials are more interested in supporting causes they care about and less concerned with preserving institutions that have been around for decades. They are less interested than their parents and grandparents in the arts, health and youth-related causes, and more interested in civil rights, social justice, the environment and basic human needs. Younger philanthropists are demanding measurable impact for their philanthropic dollars: to understand what goals will be achieved; and how will their gifts of time and financial resources be used to affect lasting social change. In fact, impact metrics tend to drive younger donors, not social status or peer expectations.

Younger generations increasingly believe for-profit social enterprises and hybrid corporations hold the keys to solving seemingly intractable social issues.3 And younger wealth holders are more likely to approach philanthropy by investing in ESG (environmental, social and governance) strategies or through a charitable LLC mechanism that allows them to make both charitable donations and investments in socially driven enterprises.

To learn strategies for building an enduring philanthropic legacy, download the whitepaper.

Dive Deeper

Purposeful Philanthropy

Strategies to build an enduring philanthropic legacy.

Multigenerational Families

Articulate Your Philanthropic Intent

Build an enduring legacy with intentional planning.

THE NORTHERN TRUST INSTITUTE

Proven Advice for Moments that Matter

  1. Pooneh Baghai, Olivia Howard, Lakshmi Prakash and Jill Zucker, “Women as the Next Wave of Growth in U.S. Wealth Management,” McKinsey & Company, July 29, 2020.
  2. As of June 9, 2020, the ten wealthiest women were: Mackenzie Bezos, Laurene Powell Jobs, Abigail Johnson, Julia Koch, Ann Walton Kroenke, Nancy Walton Laurie, Jacqueline Mars, Blair Parry-Okeden, Alice Walton and Christy Walton.
  3. A hybrid corporation or organization is a fairly new type of corporate entity that blends features of nonprofit and for-profit corporations.

Disclosures

This information is not intended to be and should not be treated as legal advice, investment advice or tax advice and is for informational purposes only. Readers, including professionals, should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel. All information discussed herein is current only as of the date appearing in this material and is subject to change at any time without notice. This information, including any information regarding specific investment products or strategies, does not take into account the reader’s individual needs and circumstances and should not be construed as an offer, solicitation or recommendation to enter into any transaction or to utilize a specific investment product or strategy.

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