Philanthropy remains an important activity for family owned companies across the globe. A new report finds that on average 3.1% of respondents’ wealth is invested in some form of philanthropic activity, with an average of 61% providing that capital to projects within their local community. For many businesses, giving has an ulterior, financial motive, but for some it is only in part aimed at generating improved financial returns.
In a new report, EY explores current trends within the philanthropic activities of family business owners and managers across 21 countries. The research, titled ‘The Family business philanthropy – creating lasting impact through values and legacy’, involves 525 respondents of which 67% are from family run companies with more than 500 employees.
According to the results of the research, different company sizes provide different kinds of charitable giving. Of companies surveyed with between 1 and 500 staff, 35% reported that they involve themselves in ‘impact investing’, 40% say that they involve themselves in ‘monetary contributions to charities’, while 47% say that they involve themselves in ‘service to communities’. For larger family companies, with an employee count above 501, there is a general increase in giving overall, with focus on ‘service to the community’ in the top category, as cited by 64% of respondents, followed by ‘monetary contributions, cited by 60%, and impact investing, cited by 47%.
The research also sought to identify the specific recipients of charitable giving, in so far as it is local communities or causes deemed important irrespective of geographical location, benefiting from the charitable giving. The research finds there is considerable variation between cultures. In Italy, for instance, 96% of respondents support projects in their local community. In Brazil, this stands at 86%, and in Turkey it stands at 79%. Family businesses in the US too, are for the most part focused on their local communities. In the UK, around 64% of respondents say that they prefer to support their local communities.
Interestingly, outside of Italy and the UK, many European respondents support projects beyond their borders. Switzerland and Germany, for instance, invest around 52% of their support into projects deemed most important – irrespective of location. In Spain, this hits 58%, while in Russia 65% of respondents act on importance.
In terms of the wealth invested in social impact programmes, the Middle East leads. The region, home to many of the world’s predominantly Muslim communities, operates under zakat, one of the five pillars of Islam, which specifies that a small percentage of wealth each year ought to be given to charity. Europe takes second spot, with companies leveraging around 3.4% of their wealth for social impact. In North America around 2.8% of wealth goes towards social impact, while in South America 1.7% is invested in this way. On average, across the globe, 3.1% of wealth is invested in this way.
The research also finds that, in many countries, the motivation to give – is not actually giving as such. Particularly in Japan, there is a key importance for philanthropic projects to generate financial returns. In France and South Korea too, the money is more likely to be invested into projects that generate a return for the companies involved. The UK also finds itself torn between free giving and using giving as a means.
Respondents from Switzerland, however, are the most keen to give freely, followed by China and Italy. German respondents too, are more likely to say that they mostly disagree that they expect financial returns on their philanthropic projects.
Given the large amount of capital sometimes invested into philanthropic activities, respondents were also asked whether they are happy with the oversight of projects. Across the board, around 60% of respondents mostly or strongly agreed that they are happy with the current level of oversight. Particularly Japanese, Indonesian, Belgian and Dutch respondents are happy, with all respondents above 70%. In the UK, around 58% of respondents are happy with the current oversight. Italian respondents are the most concerned, with 42% of respondents indicating that they mostly or strongly agree.
Peter Englisch, EY Global Family Business Leader, says, “While family businesses invest in a huge range of philanthropic activities to achieve a variety of objectives, it’s clear that a significant portion are now engaging in the relatively new area of impact investing. This is no surprise, as family business philanthropy is increasingly regarded as a social investment, with a clear value base and a desire to perpetuate those values through the generations.”