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Berkshire Hathaway Chairman and CEO Warren Buffett smiles during an interview in Omaha, Neb., May 7, 2018.
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Finance & Innovation

Philanthropy: What Actually Is It, and Why Is It so Important in Achieving a World That’s Equitable?

Why Global Citizens Should Care
Philanthropy can play a key role in achieving the United Nations’ Global Goals. Global Citizen’s Give While You Live campaign encourages billionaires to commit  5% of their wealth annually to charitable causes to aid in solving some of the world’s most pressing problems now, not later. You can join us in taking action on this issue here

When Bill and Melinda Gates pledged billions in funding for research into a COVID-19 vaccine, that was philanthropy. When the cast of the hit show Schitt's Creekraised funds for food banks during the pandemic, that was philanthropy. 

When you donated a few dollars to a local charity, that was also philanthropy.

While philanthropy takes on many forms, it's fundamentally any act of charitable giving that improves the well-being of others. In Ancient Greece, the playwright Aeschylus conceived of the term to mean “love of humanity.” Today, philanthropy is most often associated with the super wealthy who have personal foundations, teams of strategic advisers, and multi-year horizons for their donations.

But philanthropy isn’t all about donating money. At the end of the day, philanthropy can mean lending your time, skills, and knowledge in any capacity — whether it’s helping out at a food bank, building a house, or tutoring students. 

You might prefer other, simpler terms like “volunteer” or “good person,” but if it's an act characterized by a “love of humanity” and a desire to see other people thrive, then it's essentially philanthropy. 

In pursuit of the United Nations’ Global Goals, philanthropy complements government spending and foreign aid to fund the projects that expand access to water, improve food security, ensure girls can go to school, and so much more. 

That’s why, as part of Global Citizen Prize 2020, a celebration of leaders and activists around the world, we’ll be presenting a brand new award — the Global Citizen Prize for Philanthropy, to philanthropist Warren Buffett, historically the most giving person in the world. 

The Prize for Philanthropy — alongside awards recognizing leaders in government, business, entertainment, among Global Citizens and young people, and more — honors a philanthropic individual or group who has shown extraordinary leadership, stepping forward to accelerate their giving in support of the world’s biggest challenges. 

Most importantly, Buffett can act as an inspiration, highlighting and driving forward the positive impact philanthropy can have in achieving the UN’s Global Goals. 

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“Philanthropy is super important in terms of fueling innovation and ensuring that local organizations have the resources they need to be a voice on behalf of the causes we all care about,” Kathleen Kelly Janus, the special adviser for social innovation for the governor of California, told Global Citizen. “Philanthropy is really critical to help seed those new ideas that can be really scaled by governments.”

For purposes of scale, efforts to encourage philanthropy often focus on the wealthy because of the immense fortunes that have accrued in recent decades. The world’s 2,153 billionaires, for example, hold more wealth than the poorest 4.6 billion people, according to Oxfam. During the COVID-19 pandemic, US billionaires alone increased their wealth by nearly a trillion dollars.

If the world’s billionaires joined Global Citizen’s Give While You Live campaign — which calls on billionaires to give 5% of their wealth annually to charitable causes — they could help fill funding gaps critical to eliminating poverty and achieving the Global Goals by 2030. 

The new Forbes 400 philanthropy score, inspired by Give While You Live and formed in partnership with Global Citizen earlier this year, found that the vast majority of billionaires in the US give very little of their wealth away to charity, while others, such as Buffett and George Soros, give extraordinary sums.

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Most of the time, wealthy individuals channel their wealth through private foundations that carry tax benefits. Globally, there are at least 260,000 charitable foundations in 39 countries that hold an accumulated wealth of $1.5 trillion, according to a report by Harvard

Leveraging this wealth in targeted ways — giving directly to charities and nonprofits rather than money pledged in the future or stowed away in a foundation or donor-advised fund — could alleviate many crises such as climate change, growing hunger, lack of access to water and sanitation, and unequal access to education.

But that’s only if the opportunities of philanthropy are realized. In the meantime, here are few things to consider about philanthropy, in the sense of wealthy individuals donating large sums of money to causes.


Why philanthropy? What are its benefits?

Think of any natural disaster over the past five years. In the aftermath, humanitarian organizations inevitably urged citizens around the world to open their pockets and donate whatever they could afford to support relief efforts. 

That’s one of the promises of philanthropy — it’s adaptable and can be swiftly mobilized. Philanthropists can immediately support a cause or organization upon learning about it. That’s not to say that governments don’t support relief efforts. On the contrary, public players are the biggest humanitarian donors. But philanthropists help to quickly fill in gaps in funding that may emerge, while also helping to get money to organizations, communities, and individuals that may be otherwise overlooked.

That’s another one of the benefits of philanthropy — individual donors can support fledgling initiatives.

Janus said that Teach for America was initially supported by Echoing Green, a social entrepreneur seed funding organization. Teach for America now has more than 58,000 alumni and a budget of $300 million as it improves educational opportunities in under-served communities.

“Philanthropy plays a really critical role in fueling that kind of innovation,” she said. 

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During the COVID-19 pandemic, the usefulness of philanthropy has been on full display. The UN has warned that progress on humanitarian goals could be wiped out by the pandemic due to massive economic disruptions and growing poverty levels. 

Philanthropists have responded to the crisis with unprecedented charitable giving. Mackenzie Scott, for example, has donated $4.7 billion in unrestricted funds to nonprofits during the pandemic. 

In California, philanthropists have supported food banks, provided economic relief to undocumented immigrants, helped people find permanent housing, and expanded acccess to remote learning technology. 

These efforts are often made in conjunction with government programs. Such public-private partnerships are an effective way to address social and economic problems, Janus said. 


What are some critiques of philanthropy?

Philanthropy has been criticized as fundamentally flawed. If wealth were more equitably distributed and governments had progressive tax systems, this argument goes, then there would be no need for philanthropy, no need for individuals to fund basic human rights like access to food and water. Put another way, the reliance on philanthropy today highlights extreme and unjust wealth inequality. 

Amitabh Behar, CEO of Oxfam India, argues that many philanthropic efforts fail to approach problems in a holistic manner and therefore prevent the systemic causes of poverty, inequities, and injustices from being addressed. The writer Anand Giridharadas argues that the rise of philanthropy merely reflects how government responsibilities have been outsourced to private individuals.

The economist Robert Reich argues that wealthy philanthropists are largely unaccountable and invest in areas that reflect personal interests rather than public need. Reich also argues that the foundations through which most wealthy people direct their donations are exquisite forms of tax evasion.

“We’re at a moment in American society in which the winners in the marketplace attempt to diminish their tax burdens, both corporately and individually, as low as they can legally go,” Reich told the Atlantic in 2018. “Then, having diminished their tax burden as low as it can go, they turn around and set up a private foundation, taking a further tax break.” 

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The philanthropic community has repeatedly challenged these criticisms. Phil Buchanan of the Center for Effective Philanthropy argues that philanthropy is an essential part of a healthy civil society, by both providing a check on and complementing the work of the government. He also says that philanthropy funds the nonprofits, local organizations, and activists who play indispensable roles in fighting poverty and achieving social justice.

Darren Walker of the Ford Foundation (which recently announced a $1 billion social bond to support nonprofits affected by COVID-19) strikes a middle ground, arguing that philanthropy should be directed toward the general betterment of humanity in ways that will ultimately end the need for philanthropy. 

“‘Giving back’ is necessary, but not sufficient,” he wrote in a New York Times op-ed. “We should seek to bring about lasting, systemic change, even if that change might adversely affect us. We must bend each act of generosity toward justice.”


What do philanthropists mainly invest in?

Philanthropic investments largely advance the UN’s Global Goals, according to a Harvard review.

The top philanthropic priority worldwide is education, followed by human services and social welfare, health, arts and culture, and poverty alleviation. 

These priorities hold up in countries around the world, but there are some regional differences. In Africa, some of the top priorities include advancing civil rights and social entrepreneurship. Throughout Asia, responding to natural disasters is a top concern, while protecting the environment is popular in Latin America.

Philanthropic organizations rarely carry out work on the ground. Instead, they fund grassroots and other organizations and sometimes supply research. 

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What will philanthropy look like going forward?

The Harvard report notes that the philanthropic space is remarkably young. Nearly three-quarters of philanthropic foundations were founded within the past 25 years, researchers found. 

What that means is that philanthropy could play an even more significant role in development work in the years ahead, as philanthropists develop priority areas and become more sophisticated in their abilities to identify good investments.

“Philanthropy has changed a lot in the past year as we’ve seen the movement for racial justice and climate change grow,” Janus said. “Philanthropy is now much less about putting Band-Aids on the problems that are broken and much more about fixing the underlying systems that are causing those injustices to happen in the first place.”

The McKinsey Institute notes that philanthropic organizations are learning how to better wield data to understand complex problems, distribute funds, and identify the most effective areas for investment. 

Far too often, a lack of country-by-country data prevents resources from being effectively allocated. The improving use of data in the development sector is key to achieving the Global Goals, according to the UN

Philanthropic organizations are also increasingly following the lead of activists and community organizers who are on the front lines of economic and social change. 

“Right now there’s an imbalance of accountability in aid and philanthropy that tips heavily to benefit funders,” Alison Carlman, the director of the Evidence + Learn program at Global Giving, recently wrote. “Only when we rebalance the equation — so those of us working in these systems share the same level of accountability toward the people we intend to help — will affected communities actually experience the lasting change they seek.” 


Join Global Citizen in December 2020 to celebrate the leaders among us who have stepped up against a backdrop of unprecedented global challenges to take action for the world we want — a world that is fair, just, and equal.

The broadcast and digitally streamed award ceremony will also feature inspirational stories of human strength and unforgettable performances that will bring together artists, activists, and global leaders to remind each of us that, together, we will come out of this year stronger. Find out more about the Global Citizen Prize here

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