Philanthropy isn’t simply about making a donation anymore

Last week, veteran deal maker and investor Hemendra Kothari, the non-executive chairman of DSP BlackRock Investment Managers, made a brave pledge.

He vowed to match rupee by rupee what viewers of NDTV-Aircel’s “Save Our Tiger” campaign would donate for the cause. By the end of the 12-hour programme, viewers’ contribution had touched Rs2.43 crore, and a gallant Kothari matched their figure with an equal contribution.

For a couple of years now, Kothari — fourth generation in a family of stock brokers — who sold his stake in his investment bank to his partners, Bank of America Merrill Lynch, has played the part of an active philanthropist, investing in causes such as education, healthcare, heritage and initiatives such as saving the tigers.

“I am attempting to create these foundations, so that they can run more like institutions for a longer period of time and are capable of taking decisions on an institutional basis,” Kothari told DNA  over phone.

Kothari and others of his ilk are keen to see their philanthropic gestures go directly to a cause and make a positive impact. They are seeking to do good with their investments rather than merely looking at financial returns.

As Azim Premji, the promoter of Wipro Ltd, has chosen to do. Premji donated a whopping Rs8,800 crore to a philanthropic foundation named after him earlier this month.

The money would be used for promoting education, mainly in Karnataka. The foundation has so far focused on education of children from underprivileged sections and has covered more than 20,000 schools in a number of states.

In another recent example, a good Samaritan has proposed to make an investment through a real estate group which is into low-cost housing in Maharashtra.

The investment would go into setting up mobile healthcare units in the rural areas, where doctors are hard to find. Details of a patient’s health problems would be entered on a computer application at the unit and medicines prescribed to him on the spot.

Call it ‘impact investing’ then, going beyond the familiar ‘charity’ or ‘philanthropy’.

The new strategy involves placing capital in businesses that can make an intentional positive social and environmental impact and also generate financial returns. Just to reiterate, generating profits is a secondary motive.

K Joseph Thomas, head - research, Aditya Birla Money, points out that a section of Indians has been growing richer due to the financial markets performing well and market capitalisation expanding manifold.

“The threshold level of wealth beyond which people start thinking about socially responsible investing is also being achieved at the societal level due to rapid economic progress,” he says, adding, “India is bound to see a phenomenal rise in impact investments.”
The high networth individuals are increasingly looking to give a part of their earnings back to the society. Many prefer to donate through a non-governmental organisation or a foundation.

However, some, especially the younger entrepreneurs, don’t want to restrict this to plain chequebook philanthropy and want to see a greater impact of their dollar investments.

A Financial Times report dated November 28 quotes from a report by JP Morgan and the Rockefeller Foundation, which says, “Impact investment” —  an embryonic market in which investors aim to achieve positive social or environmental gains — is beginning to emerge as a separate asset class and should be treated as such.”

Richa Kapre, director - investments, Altamount Capital Management, says, “The world’s problems are too vast for philanthropy or governments alone to solve. Many billions spent by philanthropists around the world are not enough to make a significant dent.

Impact investment is very new among Indian UHNIs (ultra high networth individuals), although there has been inflow of funds from international UHNIs and family offices in impact areas like microfinance, healthcare and water.”

According to her, philanthropy can help spur innovation; it can be used as risk capital, to develop models for social benefit that can then be scaled through impact investing.

HNIs and UHNIs can make impact investment either in direct opportunities, co-invest with other families or invest through funds that are carrying a mandate to make impact investments.

The wealth mangers who skilfully manage this huge corpus are not allowed to recommend a specific stock or a fund, but can instead give a broader perspective about various investment opportunities keeping the family objectives and desires in mind, which help their portfolio be balanced and sound. This will usually be part of their private equity or high risk capital allocation.

“We see more philanthropic activities taking place in the educational space where the biggest challenge is acquiring land. They (the donors) involve themselves personally in setting up the institutions from scratch and we also help our clients overcome this hurdle. This industry has taken of in the last 2 years, although 2008 was a dampener,” says Rajesh Iyer, senior vice-president and head - products & research group, Kotak Wealth Management.

For all that, however, there are a number of areas where people have hitherto refrained from donating, especially when results take time showing. Examples include water conservation and healthcare solutions where charity does reach but might not take shape quickly.

But that could change going forward.

According to Thomas, greater integration with the global economy and awareness of natural and human issues are also catalysts in this process. “We may see a large number of products which may cater to this newfound desire for greater social responsibility gradually coming up.”

Already, it is possible to see some new models. There are various trusts, foundations and NGOs that accept donations in various forms either through cash or only through on-line payments. Giveindia.com, for one, allows one to donate while keeping track of how and where his money is being used. It gives the donor the flexibility of choosing not just the NGO or the cause he wishes to contribute to, but also the impact he would like to make. Contributions to GiveIndia, run by corporate professionals who have chosen to help the less fortunate, will receive tax deductions under 80G of the Income Tax Act. Details can be had from their website.