This interview was featured on Finews Asia on 25 March 2024.

A growing number of founders are seeking alternative philanthropic structures to independent foundations. According to Lombard Odier’s Maximilian Martin, this is being driven by the adoption of a forward-looking approach to ever-changing visions.

In 2021 alone, official development assistance to support the countries of the so-called "Global South" totaled $185.9 billion, according to OECD data. While this may be a large sum, it still falls short of achieving some of the popular philanthropic objectives of the world.

"Even if these funds were allocated only to the poorest countries, development aid would barely exceed $90 a year per person," Lombard Odier’s global head of philanthropy Maximilian Martin said to finews.asia. "And this shortfall is likely to increase: in addition to the costs arising from the coronavirus pandemic, limiting climate change and international defense will continue to weigh on public finances in the short and medium term."

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Visions can evolve

As such, the philanthropic structure selected to help achieve such goals is all the more important. Independent foundations, for example, are often a popular first choice to consider but it has limitations such as inflexibility in changing the original purpose. As a result, an increasing number of founders are opting for alternatives.

"For example, it is possible to set up sheltered funds under the aegis of a tax-exempt charitable foundation, with an individual name and purpose of support," Martin explained. "The choice of structure is a deeply personal decision. In this context, in addition to all the technical questions, it is important to adopt a forward-looking approach and to bear in mind that visions can evolve and change."

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Mission-related investing

Another key factor in optimising impact is by focusing a foundation's investment strategy on its original philanthropic purpose, also known as Mission-Related Investing (MRI).

"In practical terms, if a foundation devotes 2-5 percent of its assets each year to funding projects of general interest, this means that the remaining 95-98 percent of the capital can be invested in public and private markets to generate financial returns and thus fund future projects," Martin said. "A promising way of increasing the impact of philanthropy, in addition to good support strategies, is to link all philanthropic capital to impact objectives."

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Basic principles

Aside from structure and holistic investing, Martin highlighted a few basic principles to maximise a foundation’s effect. This includes limiting the number of projects to concentrate on results and impact; verifying the effectiveness of potential beneficiary organisations and; evaluating and learning from successes or failures.

"Changing contexts and unexpected events require us all to subject our strategies to an ongoing learning process and to adapt them even as they are being implemented," Martin added. "In the field of philanthropy, such an approach makes it possible to achieve the greatest possible impact, even with limited resources."