Investing For Charity and Charitable Causes


Historically speaking, the greatest of investors have also been the greatest of philanthropists. Today the paragon of this category is the famed Warren Buffett, who donated $31 billion to the Bill and Melinda Gates Foundation in 2006. In the Gilded Age Andrew Carnegie and John D. Rockefeller amassed huge fortunes from their industrial activities and then gave all of their money away. Carnegie created museums and libraries across the country, while today the Rockefeller Foundation continues John D. Rockefeller’s philanthropic activities.

The examples of Carnegie and Rockefeller in the previous century and of Buffett in this century point to a distinct tradition within the American rich. Recently, this tradition has been given a proper name: “philanthrocapitalism”, also known as venture philanthropy. The idea behind this tradition is that great wealth must be used for the greatest good, an admirable and noble notion. Philanthropists and investors today are both looking for opportunities to fulfill this goal.

In order to accomplish this goal, it is necessary that some ground rules be delineated in order to avoid confusion. For example, charitable giving has always been a significant part of American life. It is not until recently, however, that the modern tradition of “building wealth to give it away” has become codified and given its own name. Philanthrocapitalism promises to captivate a large number of newly rich and the up-and-coming rich.

This has resulted in philanthropists giving charities the same kind of detailed scrutiny that investors use when they evaluate investments like stocks, bonds, etc. Philanthropists want a greater say in how their money is used when they give it away. Unfortunately, this is not solely because of noble motives. Over the years there have been a number of scandals involving money donated to charities. These scandals are sometimes about administrative errors, but some involve criminal activities, which give charities everywhere a bad name.

For this reason, philanthropists have begun treating charities like investments, which is beginning to force all charities to adhere to higher standards of conduct. In fact, philanthropists have even begun consulting with their advisors as to how to get the maximum amount of value from each dollar that they spend. As a result, one of the most popular vehicles for this new breed of philanthropists is private foundations, because they allow their founders and key members to stay very involved with their investments and everyday activities.

Private foundations provide a vehicle for philanthropists to channel their money to the causes they care about most while remaining true to solid investment principles. Some philanthropists come at this field with an eye towards obtaining two types of returns, a monetary return and a societal return. For example, there are investment funds that are dedicated to certain causes, such as breast cancer or poverty. A philanthropist seeking to achieve both a monetary return and a societal return can see this happen.

They see both a return on their money and receive the satisfaction of seeing a particular cause that they champion become a reality for potentially hundreds of thousands of people.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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