In a recent study conducted by Altrata, it was found that donations to charity have been on the rise, but the pool of donors is shrinking. The world of philanthropy is becoming increasingly concentrated among a small group of ultra-wealthy mega-donors, with ultra-high-net-worth individuals accounting for a significant portion of all individual giving. To put it into perspective, 400,000 individuals, each worth $30 million or more, contribute more than a third of the world’s charity. This trend becomes even more extreme when considering billionaires, as the world’s 3,200 billionaires make up 8% of individual philanthropy, despite accounting for only 0.00004% of the global population.
The Impact on Giving
The generosity of these top donors is undoubtedly positive, but it raises questions about whether the wealthy are giving enough. While there are ongoing debates about the philanthropic efforts of the ultra-wealthy, overall giving continues to grow. In 2022, the total level of giving from ultra-high-net-worth individuals increased by 25% compared to 2018, even during a down year for financial markets. Notably, North Americans are the most philanthropic group globally, contributing nearly half of the global giving from the upper echelon of donors.
The shift towards a top-heavy landscape for philanthropy poses challenges for wealth advisors and nonprofits alike. Organizations that once relied on a broad base of donors must now navigate a landscape dominated by a smaller group of super-donors. These mega-donors are inundated with requests, making it crucial for nonprofits to develop new strategies to engage with them effectively. Charitable causes are now subject to the interests and goals of a select few individuals, leading to potential fluctuations in overall giving.
Adapting Strategies
Amir Pasic, dean of the Indiana University Lilly Family School of Philanthropy, highlights the need for nonprofits to pivot their fundraising efforts and strategies. Many are focusing on securing major gifts from wealthy donors and foundations, while also exploring innovative approaches to engage a broader community of smaller, younger donors. However, the concentration of wealth at the top poses a dilemma, as organizations may overlook the importance of cultivating tomorrow’s donors in their pursuit of mega-donors.
According to Altrata’s research, today’s ultra-wealthy mega-donors are predominantly male, with a majority over the age of 70 and a higher share of liquid wealth. While men have historically dominated philanthropy in this demographic, women are emerging as a significant force. Despite representing only 11% of the ultra-high-net-worth population, women account for 22% of larger givers. Additionally, affluent donors are increasingly opting to channel their contributions through private foundations and donor-advised funds, granting them greater control over their philanthropic endeavors.
The giving priorities of ultra-wealthy donors differ from those of the broader public, potentially leading to more funding directed towards causes that resonate with the wealthy elite. Education emerges as the top charitable cause for these donors, followed by arts and culture, health care, social services, and the environment. Interestingly, religion, which is a significant cause for charitable giving among Americans, does not feature prominently among the top causes for the ultra-wealthy. However, Altrata suggests that religious giving may be underreported due to its often anonymous and decentralized nature.
The landscape of philanthropy is evolving, driven by the increasing role of ultra-wealthy mega-donors in shaping charitable giving. As nonprofits and wealth advisors adapt to this new reality, striking a balance between catering to the needs of top donors and fostering a broader culture of giving will be essential to ensure a sustainable and diverse philanthropic ecosystem.