This section argues that the new tools for giving are going to change the way we do philanthropy in Europe.

Introduction

There is a profusion of new terminology in philanthropy. We talk about ‘impact investing’, ‘social enterprises’, ‘Social Impact Bonds’, ‘soft loans’, ‘patient capital’, ‘quasi equity’ and ‘crowdfunding’. We talk about ‘Programme Related Investment’ or ‘Mission Related Investment’ and ‘philanthropic banks’ (an apparent oxymoron, until one realises that these are foundations acting as ‘philanthropic banks’).

These and a range of other terms have been created by the new professionals operating in the non-profit space. This is a flowering of new, or substantially recycled, tools for philanthropy designed to meet the needs of the new generation of philanthropists and their advisers. As we saw in Chapter Three many of these tools are not new – social enterprises have been around since at least the 16th century, for example – but the interest in them, the level of activity around them, and above all the amounts of money now being applied to them makes them relevant to the study of high-value philanthropy in Europe.

There is a lot of money in philanthropy. A 2009 report estimated that the European foundation sector was spending around €83 billion annually, more than twice the then total expenditure by US foundations of €41 billion (Hopt, von Hippel and Anheier, 2009). But the growth in the foundation sector may not have been properly financed. A 2014 report quoted a foundation expert as saying that ‘the “foundation boom” in recent years primarily led to the founding of “undercapitalized” foundations, whose investment income alone is regularly insufficient to finance long-term, sustained activities’ (Anon, 2015c).

So how does a modern philanthropist invest in social or environmental good? In New Frontiers of Philanthropy, Lester M. Salamon (2014) identifies a range of new tools such as the corporateoriginated charitable funds we saw in Chapter Eleven.

Why have these new tools appeared now? Luther M. Ragin Jr (2014) cites five reasons:

• • The shortfall in philanthropic and governmental resources against social needs

• • The growing sophistication of professionals in the sector, and the focus on scale and sustainability

• • An understanding that some investments can create financial and social/environmental returns

• • The need for a ‘broader toolbox for social engagement’

• • The wider acceptance of market-based solutions for social challenges.