Close Close

Financial Planning > Charitable Giving > SRI Impact Investing

Global Philanthropy Sector Is Growing Fast: Harvard Study

Your article was successfully shared with the contacts you provided.

New research funded by UBS shows that three-quarters of the world’s private foundations were established in the last 25 years, but their resources are highly concentrated in certain sectors and coordination between foundations is limited.

The Global Philanthropy Report, conducted by researchers at Harvard Kennedy School’s Hauser Institute for Civil Society, said several forces were driving the sector’s rapid expansion: global economic growth and the enormous increase in private wealth accumulation; persistent economic and social inequalities; and governmental and private efforts to encourage and support philanthropic institutions and giving.

The study identified 260,358 foundations in 38 countries and Hong Kong, which it said represented only a partial picture of the sector. These foundations were highly concentrated, with 90% located in the 25 highest-income countries as classified by the World Bank:

  • Europe (23 countries): 154,271
  • North America: 91,850 (U.S.: 86,203; Canada: 5,647)
  • Asia (three countries and Hong Kong): 13,170
  • Latin America (six countries): 859
  • Middle East (two countries): 161
  • Africa (two countries): 47

Combined assets of the foundations in the study approached an estimated $1.5 trillion, but nine in 10 had assets less than $10 million. Half had no paid staff and budgets of less than $1 million.

Identified foundations’ assets were also highly concentrated, with 60% in U.S. institutions and 37% in European ones.

Around the globe, education was the foundations’ number one philanthropic priority. Health, human services, social welfare and, to a lesser extent, arts and culture were also top priorities for many philanthropic institutions.

In North America, education was the main priority for 93.6% of foundations, followed by health, 88.3%; human services/social welfare, 87.4%; arts and culture, 80.9%; and philanthropy and nonprofit, 71.4%.

The study found that philanthropic organizations were using a variety of social investment strategies to maximize their impact. In the U.S., foundations are nearly synonymous with grant-making organizations.

In other countries, most foundations use their philanthropic capital to operate in-house programs, something only 3% of American foundations do.

In interviews with philanthropists and experts, the Harvard researchers found that in many countries, donors are moving beyond this either-or framework, and are embracing a range of strategies aimed at achieving their goals.

Among 699 foundations in 12 countries and Hong Kong, 16% make equity investments, 11% provide loans and 8% engage in impact investments.

Collaboration is another trend among foundations striving to maximize their impact. However, researchers discovered in interviews that such alliances can be difficult to create, manage and sustain. Indeed, 58% of global foundations do not collaborate with their peer organizations or government to achieve impact and scale.

A number of interviewees in several countries said a partnership with government could be important as a way to legitimize philanthropic initiatives. Others, however, said such collaboration could be difficult and should be approached cautiously, pointing to “public optics” of a partnership with the state.

UBS said the report findings were a call for philanthropists to work together to scale their impact, given that the world is falling well short of raising the $5 trillion to $7 trillion of annual investment needed to achieve the UN’s sustainable development goals.

“This report takes a much-needed step towards understanding global philanthropy so that, collectively, we might shape a more strategic and collaborative future, with philanthropists leading the way towards solving the great challenges of our time,” Josef Stadler, head of ultra-high-net-worth wealth at UBS Global Wealth Management, said in a statement.

Foundations in the study also showed growing interest in impact evaluation and outcome measurement, some saying they felt both internal and external pressure to adopt these measures.

Others said a lack of impact evaluation, particularly when financial transparency was also at a low level, could lead to public mistrust of the charitable giving sector and get in the way of achieving long-term goals.