Reflecting on 20 years of philanthropy with the UBS Optimus Foundation.

The following article is from Phyllis Costanza, the chief executive of UBS Optimus Foundation, a philanthropy group set up by the Zurich-listed bank to dispense its own funds and those of clients to particular causes. (See articles about it here and here.) Costanza writes about what has been learned over the past two decades of the foundation’s existence, examines trends in philanthropy, and considers what is around the corner. We have been running a number of articles about trends in philanthropy. 

This news service is pleased to share views with readers and invites readers’ responses. Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

When we talk about philanthropy, there are a lot of conventions dictating what we can and cannot say. Philanthropy is not a business, or at least, we can't call it that. Telling stories of real people in need while also discussing return on investment or risk assessment is generally seen as tactless. Even the etymology of the word (from Greek philanthropia) is tied to thoughts of altruism and self-sacrifice. When we talk about philanthropy, we don't like to use the word profit.

It's an unfortunate convention. And it's also a destructive one – mainly because it has inhibited the development of effective, sustainable funding mechanisms. After all, if we cannot have conversations about how philanthropy might generate capital, we also cannot have conversations about the ways philanthropy can propagate beyond an initial investment. So we need to change the conversation.

The UBS Optimus Foundation has a unique and significant role to play in changing that conversation. We are part of UBS – the world's largest global wealth manger and the largest Swiss banking institution globally. We have an unparalleled network and are the only foundation linked to a global wealth manager staffed with philanthropy experts serving clients. As a result, we are able to approach philanthropy with a storehouse of financial knowhow and innovative thinking. We are able to have frank, productive conversations about what makes a programme a good candidate for investment, how capital could be generated and refunneled into other philanthropic programmes and how impact might be more transparently measured and quantified. In short, we get to be a little tactless in our conversations. And we also get to do a lot more good.

Today, the foundation is celebrating its 20-year anniversary so it seems a good time to reflect on how we have questioned traditional notions of philanthropy, where these conversations have taken us, what they have allowed us to achieve and where they may lead in the future.

Pioneering social change through social finance
Since the beginning of the UBS Optimus Foundation, we have believed in backing scalable solutions that show high growth potential. And we’ve driven these solutions forward with pioneering social finance, government buy-in and advocacy. We’re laying the groundwork for social finance structures that can open new opportunities for social investors.

To take just one instance, in 2015 we launched the first development impact bond (DIB) in education. DIBs are results-based contracts in which one or more private investors provide pre-financing for social programmes, implemented by partners/NGOs and one or more outcome funders (e.g., public sector agencies, donors, etc.) who pay back the their principal plus a return to investors if, and only if, these programmes succeed in delivering social outcomes.

Our Educate Girls DIB set out to improve the delivery of core skills teaching in Rajasthan, India. It was a three-year programme wherein performance and goals were regularly assessed. So when certain strategies were not effective, the programme organisers were able to find out quickly and adapt their approaches. The model led to a raft of innovations – at the heart of it, an improved child-centric curriculum. In the end, the Educate Girls DIB achieved 116 per cent of the enrolment target for girls and 160 per cent of the learning target for both boys and girls in its final year. All funds returned to the UBS Optimus Foundation are being recycled into other philanthropic programmes.

Moreover, we were able to use knowledge gained from the Educate Girls DIB to build and launch a new and much bigger education DIB. Our Quality Education India DIB aims to change the lives of 200,000 primary school children in India. Partnering with a coalition of public and private partners, as social investor we have provided SFr2.9 million ($2.93 million) in upfront working capital to three local NGOs for improving education quality.

What we've learned and built in 20 years
Today, we have built a global network of ultra-high net worth philanthropists and partnered with organisations and individuals across an incredibly diverse range. Our 20 years of experience have shown us that solving social problems requires collaborative initiatives to make real impact on a large scale. In essence, partnering is vital for effective philanthropy. We identify high-potential initiatives, build long-term collaborations, and work in partnership locally, nationally and globally to achieve significant, sustainable change, bringing the best of the private and public sector together.

Working with our clients, we have granted more than SFr500 million funds to date (45 per cent in healthcare programmes, 24 per cent in education programmes and 20 per cent in child protection programmes, and the rest in other essential areas such as early childhood development and emergency response). We have improved healthcare, education and child protection systems for close to 10 million children in the past five years. Most recently, we’ve also expanded our offering to cover the area of environmental and climate philanthropy.

Where we are going in the next 20 years
One thing we can say for sure about the future – it's going to be an interesting, and probably somewhat challenging, time for philanthropy. Issues, such as global climate change are demanding collective action on an unprecedented scale and technology is rapidly changing human life in both positive and negative ways, allowing us to connect with each other and assemble ideas broadly and rapidly while also presenting openings for whole new types of crimes and ways to enact pre-existing ones.

Another thing we can count on about the future? Philanthropy isn't going away. In fact, it's going to get bigger.

Seven years ago, we were giving away $12 million with our clients. In 2018, we were at $65 million. And this year we expect donations to reach 80 million. Next year, we’re aiming for $100 million. The existing level of private philanthropic capital (currently $1.5 trillion) could rise by 200 per cent in the next 10 years. Young people are encouraging older generations to think differently about philanthropy in terms of activism – focusing on strategy and involvement rather than simply writing cheques. Across the board, clients are increasingly expecting to be able to follow their money, see change and directly link results to their donations.

Looking at the future, there is a lot we have to be optimistic about. The foundation has proven that doing good financially and doing good for the world around you are not mutually exclusive. That, in reality, they strengthen one another. And we will continue to prove this. If we want to tackle the concerns currently facing us and make use of our growing capabilities, we must continue to innovate and evolve funding mechanisms. We must not be afraid to challenge the way we talk about and develop philanthropy. And we may have to get comfortable with being a little tactless.