At the recent WealthMatters conference in Hong Kong, organised by the publisher of this news service, delegates and panelists wrestled with some of the subtle differences between philanthropy and investment.

Attendees at the recent WealthMatters conference in Hong Kong, organised by the publisher of this news organisation, explored issues of philanthropy among industry clients, and whether charitable donations and social enterprises can be, and should be lumped into the same category.

Chairing the panel was Bruce Weatherill, chairman of ClearView Financial Media, along with Ignatius Chong, chairman of Coutts Institute in Asia; Michelle Chow, a consultant at Withers; Cynthia D'Anjou-Brown, head of philanthropy advisory, north Asia and family governance advisor, and private wealth solutions at HSBC; Philippe Legrand, chief executive at London & Capital Asia; and Richard Norridge, head of Asia private wealth practice at Herbert Smith Freehills.

The headline sponsor for the conference was Coutts; other sponsors included HK IFA; smartKYC; Association of Private Bankers in Greater China Region, Offshore Red, and Compliance Matters.
D'Anjou-Brown highlighted the difference between philanthropy and charity and said the stark reality is that industry clients wanted to see measurable social change, and sustainability of the work in part to counter being asked for recurring donations.

"Philanthropy is thought of as strategic, high engagement, and scalable interventions with impact, and usually attacks the structural causes [not symptoms] of societal problems," she said.

"But there are people making philanthropic investments with both a social/environmental and financial return. It's still a social return. The most common are social enterprises and there are hundreds of these in Hong Kong like Dialogue in the Dark and Diamond Cab, and generally the local efforts provide a higher social return. But unlike a one-off charitable donation, they are sustainable," she said.

Picking up on D'Anjou-Brown's foray into the myriad terminology in the philanthropic sector, Norridge, of Herbert Smith Freehills, said the definitions of philanthropy and social enterprise need to be made explicit or there may be a mismatch of expectations.

"In Hong Kong, for the last six or so years, there has been a Law Reform Commission looking into charities. The latest report has recently come out, and in very broad terms they are not proposing a charity commission but they are suggesting more centralised regulation. Every charity which is trying to collect money from the public or wishing to benefit from tax exemptions will have to be registered, but this will leave a whole sector of charities out of the registration requirement," Norridge said.

Highlighting other regulatory difficulties, he also mentioned an example he had heard in Asia where nuns turned up at a bank with suitcases of cash well into the millions who had to be turned away due to compliance issues.

Chong, from Coutts Institute in Asia said: "Charities are not seen as mainstream business. We have a specialised charities team as our background means we can build on our existing philanthropic [ventures].

Sharing Coutts' philanthropic history, Chong noted that it was a family business owned by Angela Burdette Coutts, who became the wealthiest woman in England following her inheritance. She gave away most of her fortune to the poor and funded facilities for the working poor, bringing clean and safe drinking water to parts of London and collaborating with Charles Dickens in one of the first social enterprises, in line with D'Anjou-Brown's sustainability argument.

Philippe Legrand, of London & Capital Asia, said: "Philippe Legrand, of London & Capital Asia, said: "Philanthropy in Asia is at a nascent stage. Some people want to do philanthropy but don’t know how they want to approach the subject. They start by meeting the philanthropic teams set up within their private bank but from then on, the pace of the process might not be the one the individual or the family is ready or willing to follow. To avoid that situation, they sometimes opt for a less structured approach, providing more flexibility and commitment as they discover and get familiar with the overall process."

Structured Collaboration Audience member Helene Li, managing director, head of strategic planning and brand and communications for Asia Pacific at BNP Paribas Wealth Management, offered an observation.

"Philanthropy is part of the overall toolkit in order for the next generation to carry forward this meaningful cause, but we do need to have more cross-sector collaboration. It's more than what lawyers, investment bankers and experts can do on their own. Perhaps more research around index rankings will give more than what pure data can," Li said.  

While wealth is passed on from one generation to the next, there is a staggering amount of money locked in funds as second or third generations struggle to select a foundation of their choice.

Chow, a consultant at Withers, said people give for different motives and when people give, they want an impact.

"In Asia, the first generation businessmen in China made their fortune in the 50s, 60s and 70s, later setting up their own foundation putting in a lot of their money to give back to their villages in China or Hong Kong. As they educate the second and third generations, most likely abroad, they come back and want to do a bit more as they are more business-minded in their philanthropy," Chow said.

"The Million Dollar Donors report by Coutts, which includes Hong Kong in the latest edition, says that apparently younger donors seem to be more interested in measuring the impact of their giving and there appears to be a shift towards high impact philanthropy as they are most likely to see an immediate change,” Chow said.

Chong, of Coutts Institute in Asia, said at the most sophisticated level, big donors want to ensure the work they do is not just for the short term or restricted to  immediate impact, but also sustainable and scalable.

"The next generation is getting much more sophisticated and wants to do it systematically. An example is the Sun Hing Foundation which won the 2013 Coutts Prize for Family Business, in the category of Philanthropy. They focus both on the young and the elderly. For example, one specific area is Alzheimer's and degenerative memory problems. At a relatively low collaboration cost with universities forming a specific programme of mental exercises, you can measure and improve memory, which is philanthropy at the most systematic and advanced level," said Chong.