This recent article by Geoff Nudelman in Barron’s caught my eye as it has shed light on a significant trend in the world of philanthropy. The article reveals that philanthropic giving is not only increasing but also evolving, with a notable surge coming from the ultra-wealthy—individuals with a net worth of US$30 million or more. This cohort contributed US$190 billion to philanthropic causes in 2022, marking an almost 25% increase from 2018. Among these generous donors, the world's 3,200 billionaires played a significant role, accounting for 8% of all individual giving.
The growth in philanthropy among the ultra-wealthy aligns with the expansion of this group's population, which has increased by more than 40% over the last decade, reaching over 400,000 people in 2023. Their cumulative net worth has soared to US$48 trillion, underlying the immense financial power behind their philanthropic endeavors.
This shift in philanthropy is characterized by a move towards more personal and impactful contributions, as opposed to traditional donations through established public institutions and foundations. The report highlights a growing desire among younger donors, who are becoming a larger part of the world's wealthiest individuals, to make a visible and transformational impact. This evolution presents both opportunities and challenges for nonprofit organizations aiming to engage these younger donors, who often have different perspectives on giving compared to their older counterparts.
So, what can the smaller nonprofit out there do?
Adapt to the Changing Landscape of Philanthropy: As the demographics of wealth and philanthropy evolve, it's crucial for leaders of small nonprofit organizations to understand these changes. Engaging younger donors requires adapting your approach to highlight the direct impact of their contributions. Emphasize transparency, measurable outcomes, and the specific changes their donations will make.
Focus on Relationship Building: For smaller nonprofits, building personal relationships with potential donors can be a key differentiator. Personalized communication, tailored to the interests and motivations of individual donors, can foster a deeper connection and commitment to your cause.
Leverage Technology and Social Media: Utilize digital platforms to share stories of impact and engage with a wider audience, including younger donors. Social media, in particular, can be a powerful tool to showcase your organization's work and the difference it makes, appealing to those seeking to make a visible impact.
Encourage Transformational Gifts: While younger donors may not have the wealth accumulation of their older counterparts, they are interested in making significant contributions. Encourage the idea of transformational gifts, whether through financial contributions or by leveraging their skills, networks, and influence to benefit your cause.
Emphasize Diverse Causes: The report found sports, education, arts and culture, and healthcare and medical research to be popular philanthropic causes. Nonprofits should highlight how their work intersects with these areas of interest or explore partnerships that align with these popular causes to attract ultra-wealthy donors.
Women as Philanthropists: With women making up 11% of the ultra-wealthy population and showing a higher likelihood of giving to causes, there's a clear opportunity to engage with female donors. Tailoring your outreach to address issues and causes that resonate with women can be an effective strategy.
Understand the Importance of Foundations: Nearly 20% of ultra-wealthy individuals have established foundations, with the number rising among those worth more than US$100 million. For small nonprofits, understanding how to work effectively with foundations, aligning your projects with their objectives, and maintaining robust communication can be pivotal.
In conclusion, the landscape of philanthropy is shifting, driven by the growing influence and changing preferences of the ultra-wealthy. For leaders of small nonprofit organizations, staying agile, embracing new strategies for donor engagement, and fostering a culture of impact and transparency are key to navigating this new era of giving. Embrace these challenges as opportunities to make a more profound difference in your cause and the world.