Philanthropic is all about giving or making charitable donations for a social cause. That benefits people and also society and improves welfare but without any monetary returns. Which distinguishes philanthropy from other investments. The only monetary benefit that philanthropists can expect is tax benefits. Which of course is never the motivation for donating but more of a fallout of the benevolence of donors. Over the centuries, philanthropy has maintained its position in society. To work the underprivileged people and also bring about societal changes that result in human welfare. Wealthy people, including entrepreneurs, find solace in giving as it is their way of paying back to society. Still, anyone who inclines giving can engage in philanthropy regardless of their monetary abilities, explains Jonah Engler, who takes an interest in human wellbeing.
Over the years, the way of giving has remained the same as philanthropists donate money. Directly for some cause through non -profit, charitable organizations, or private foundations. Either or by bequeathing which involves donating assets like jewelry, bonds, stocks. And also cash to organizations or individuals. By executing an estate plan. Normally, donating money is more prevalent in philanthropy.
Although philanthropy does not have any investment motive. Impact investing in recent times is a hot topic among donors and also financial investors. If you are not familiar with the term, this article should help you understand it in the context of philanthropy
Jonah Engler explains the impact of investing
A number of philanthropic organizations have been part of impact investing. That has grown rapidly over the past decade. Impact investing means investing capital for generating social impact in a way that provides monetary returns. Depending on the nature of the investment, the returns can be upward or downward. As compared to the principal amount. For long, philanthropists have believed in giving for social cause without expecting monetary returns and not even remotely connected. To profit-making, but impact investing use the money differently by leveraging the power of markets to create change. You can consider impact investing as a tool that you can use to address the social problems you have included in your philanthropic goals.
The modality of impact investing
Organizations that support non-profit organizations, as well as for-profit businesses that have the common goal to achieve social change, can take to impact investing. The money flows in two different channels – for-profit equity and also not for profit contributions. The for-profit equity invests money in companies that use a share of proceeds for social causes like providing clean drinking water in some regions. Bill & Melinda Gates Foundation acquired a stake in Liquidia Technologies by investing $10 million. The biotechnology company works on new ways to deliver vaccines, a social cause shared by the investor as their philanthropic goal. The foundation bought the shares with the help of a program-related investment, which entails the foundation paying for 5% of assets annually.
Impact investing is still a nascent field, and also there are concerns about the approach undermining. The supports for philanthropy that only time will tell.