Giv­ing Back

ALTHOUGH PRI­VATE WEALTH IN ASIA IS GROW­ING AT THE FASTEST RATE IN THE WORLD THERE ARE MANY SO­CIAL PROB­LEMS TO REM­EDY. RU­PERT WALKER EX­AM­INES HOW PHI­LAN­THROPY IS BE­COM­ING AN IN­TE­GRAL PART OF WEALTH MAN­AGE­MENT

Hong Kong Tatler - - Giving Back -

Shiv Nadar, the bil­lion­aire en­tre­pre­neur who cre­ated the In­dian tech­nol­ogy firm HCL, had a clear guid­ing prin­ci­ple when he set up his epony­mous ed­u­ca­tional char­i­ta­ble foun­da­tion in 1994. Its em­pha­sis was “cre­ative” in con­trast to “cor­rec­tive” phi­lan­thropy, and Nadar points to early 20th cen­tury bene­fac­tors Rock­e­feller and Carnegie as his in­spi­ra­tion. It is an ap­proach that al­lows in­sti­tu­tion­alised phi­lan­thropy for long-term, high-im­pact so­cio-eco­nomic trans­for­ma­tion. In recog­ni­tion of his foun­da­tion’s achieve­ment in build­ing, fund­ing and ad­min­is­ter­ing schools in In­dia, last year Nadar was awarded the BNP Paribas Prize for In­di­vid­ual Phi­lan­thropy by the bank’s wealth man­age­ment sub­sidiary.

The tim­ing of the award is sig­nif­i­cant. Although Asia has a long tra­di­tion of char­ity based on cul­tural, re­li­gious and so­cial re­spon­si­bil­ity, it has tended to be in­for­mal, of­ten anony­mous and usu­ally un­sys­tem­atic. Yet to­day, phi­lan­thropy, de­fined as the or­gan­ised process of mak­ing, mon­i­tor­ing and eval­u­at­ing fi­nan­cial do­na­tions to achieve spe­cific ob­jec­tives is de­vel­op­ing rapidly within the re­gion.

In­creas­ingly, it is be­com­ing an in­te­gral part of the wealth man­age­ment ac­tiv­i­ties of Asia’s af­flu­ent in­di­vid­u­als and

fam­i­lies. As a re­sult, pri­vate banks have stepped up to of­fer new ser­vices and ap­pro­pri­ate ad­vice.

HSBC Pri­vate Bank now man­ages over US$1 bil­lion of as­sets in more than 100 char­i­ta­ble trusts in Hong Kong. And last year, the pri­vate bank and its high-net worth clients do­nated HK$234 mil­lion (US$30,165,000) which almost matched the size of the Hong Kong gov­ern­ment’s HK$273M (US$35,192,000) com­mu­nity chest.

“The Pri­vate Wealth So­lu­tions di­vi­sion of­fers a com­plete ser­vice in con­junc­tion with its clients, pro­vid­ing ex­e­cu­tion, mon­i­tor­ing, man­age­ment and ad­min­is­tra­tion,” says Cyn­thia D’an­jou-brown, head of phi­lan­thropy ad­vi­sory, North Asia and fam­ily gov­er­nance ad­vi­sor, Pri­vate Wealth So­lu­tions for HSBC.

It ad­vises on how to for­mu­late strate­gic goals and ap­pro­pri­ate projects for in­di­vid­u­als and fam­ily of­fices to chan­nel their char­i­ta­ble do­na­tions, she adds.

HSBC is not alone. BNP Paribas set up an ad­vi­sory ser­vice called the “Fon­da­tion de l’orangerie” to help its clients with their phil­an­thropic en­deav­ours in 2008; UBS has been of­fer­ing ded­i­cated phil­an­thropic support to key clients world­wide for over a decade; and Credit Suisse main­tains a phi­lan­thropy team and has hosted a fo­rum in Sin­ga­pore each year since 2011.

Asia Pa­cific’s ris­ing wealth over the past two decades has been a ma­jor cat­a­lyst for this fo­cus on giv­ing. Last year, it was the world re­gion that recorded the big­gest in­crease in high net worth in­di­vid­u­als (HNWIS), with the num­ber ris­ing by 17.3 per cent com­pared with 2012, ac­cord­ing to Capgem­ini’s 2014 World Wealth Re­port.

The to­tal num­ber of peo­ple in the re­gion with in­vestible as­sets of more than US$1 mil­lion now to­tals about 4.33 mil­lion and this year, the firm ex­pects its pop­u­la­tion of HNWIS to ex­ceed the num­ber in North Amer­ica.

Growth in the value of the re­gion’s in­vestible wealth was also the high­est in the world, surg­ing 18.2 per cent to US$14.2 tril­lion. On this in­di­ca­tor, the re­gion is set to over­take North Amer­ica in 2015. The growth was led by Ja­pan, sup­ported by strong eq­uity and real es­tate mar­kets, and the ris­ing trend is be­ing fu­eled by rapid eco­nomic growth in China, In­dia and South­east Asian coun­tries as well as the con­tin­ued pros­per­ity of Hong Kong and Sin­ga­pore as fi­nan­cial cen­tres.

In fact, Asia Pa­cific has been the main source of growth in global wealth for the past five years, ac­cord­ing to the Capgem­ini survey. Fur­ther­more, the nou­veau riche also seem to place a greater value here than else­where on achiev­ing more than sim­ply mak­ing fur­ther mon­e­tary gains. They want to have a pos­i­tive im­pact on so­ci­ety.

Pos­i­tive im­pact

Among the 25 na­tions across the world sur­veyed by Capgem­ini for hav­ing HNWIS who ex­pect their char­i­ta­ble do­na­tions to have a pos­i­tive so­cial im­pact, the top five are all in Asia Pa­cific.

In­dia has the high­est pro­por­tion of HNWIS who be­lieve phi­lan­thropy that pro­motes a so­cial im­pact is “ex­tremely or very im­por­tant” (90.5 per cent). Closely fol­low­ing are China (89.4 per cent) and In­done­sia (89.2 per cent), Hong Kong (82.1 per cent) and Malaysia (81.1 per cent).

Per­haps it is un­sur­pris­ing that th­ese five ter­ri­to­ries place

such em­pha­sis on gen­er­at­ing so­cial ben­e­fits. As emerg­ing mar­kets, they have all ex­pe­ri­enced rapid eco­nomic growth in re­cent decades that has pro­duced mas­sive wealth for some but left many more peo­ple be­hind. Vast num­bers of peo­ple in the re­gion still lack ba­sic ne­ces­si­ties, such as proper nu­tri­tion, ed­u­ca­tion, san­i­ta­tion and health­care.

In other words, although the num­ber of HNWIS in Asi­aPa­cific has risen sub­stan­tially (and in many coun­tries a bur­geon­ing mid­dle-class pop­u­la­tion has evolved too), poverty re­mains an every­day re­al­ity for tens of mil­lions of peo­ple in the re­gion.

There are sev­eral ways that re­sources can be al­lo­cated to gen­er­ate so­cial ben­e­fits. The tra­di­tional way to help oth­ers or support a cause is to make char­i­ta­ble do­na­tions or vol­un­teer your time or ex­per­tise. Donors ex­pect no fi­nan­cial re­ward but hope to do good – although they might also gain per­sonal recog­ni­tion, a mar­ket­ing edge for their busi­nesses and other in­tan­gi­ble ben­e­fits.

So­cially-re­spon­si­ble in­vest­ment is another method. This in­volves mak­ing in­vest­ment choices with the clear aim of achiev­ing a pos­i­tive so­cial im­pact ei­ther by avoid­ing cer­tain sec­tors, such as to­bacco and ar­ma­ments, or by in­cor­po­rat­ing an as­sess­ment of en­vi­ron­men­tal, so­cial and gov­er­nance (ESG) fac­tors in the in­vest­ment anal­y­sis process. This ap­proach can sat­isfy both fi­nan­cial re­turn ob­jec­tives and so­cial cri­te­ria.

A common route for fam­ily firms to spread their wealth and ben­e­fit the wider so­ci­ety has been to set up foun­da­tions. Some, such the Shiv Nadar Foun­da­tion, are highly pro­fes­sional and or­gan­ised, while oth­ers re­main wholly or par­tially em­bed­ded in the company’s com­mu­nity or cul­tural ties.

Another, less for­mal for­mal ap­proach is taken by phi­lan­thropists such as Thai bil­lion­aire Wil­liam Hei­necke, who aligns his do­na­tions closely with the cor­po­rate so­cial re­spon­si­bil­ity (CSR) ac­tiv­i­ties of Mi­nor Hold­ings, one of his suite of com­pa­nies in Thai­land.

Fam­ily val­ues

Yet most phi­lan­thropy in Asia has a common mo­ti­va­tion: it pro­vides a chan­nel for fam­i­lies to build and main­tain in­ner unity and har­mony across the gen­er­a­tions.

“Chil­dren learn im­por­tant so­cial skills at the same time as the fam­ily bond [to­gether] through par­tic­i­pa­tion on a shared jour­ney,” says D’an­jou-brown. “It is a tan­gi­ble mech­a­nism for re­in­forc­ing and sus­tain­ing shared val­ues that in­still co­he­sion and defuse con­flict.”

An in­flu­en­tial study of fam­ily phi­lan­thropy in Asia con­ducted by Ubs-insead in 2011, found that the main mo­ti­va­tion – cited by 42 per cent of the 200 peo­ple and or­gan­i­sa­tions sur­veyed – was “en­sur­ing the con­ti­nu­ity of fam­ily val­ues or cre­at­ing a last­ing legacy.”

It con­cluded that phi­lan­thropy teaches prin­ci­ples like com­pas­sion, courage and tol­er­ance, fosters ca­pac­i­ties for lead­er­ship, in­no­va­tion and re­spon­si­bil­ity, and sup­ports fam­ily co­he­sion by pro­vid­ing a common ac­tiv­ity and goal for the fam­ily to pur­sue as a unit.

The Ubs-insead survey also iden­ti­fied another im­por­tant trend. The rapid pace of change across Asia has led to the emer­gence of fam­i­lies with sev­eral gen­er­a­tions whose ex­pe­ri­ences and as­pi­ra­tions have been moulded by rad­i­cally dif­fer­ent liv­ing con­di­tions.

The older gen­er­a­tion tends to feel more re­spon­si­ble to the lo­cal com­mu­nity and is more in­flu­enced by tra­di­tion, while young peo­ple are in­creas­ingly in­ter­ested in na­tional and in­ter­na­tional causes. Older fam­ily mem­bers will fo­cus on is­sues such as ed­u­ca­tion, health and poverty, while the younger ones are more open to sec­tors such as the arts, civil rights and the en­vi­ron­ment - and tend to be more in­ter­ested in mea­sur­ing the im­pact of giv­ing. In­deed, “im­pact in­vest­ing” is in vogue across the world, with the Gates Foun­da­tion set up by Bill and Melinda Gates per­haps the most prom­i­nent prac­ti­tioner. This ap­proach tries to gen­er­ate ex­plicit, mea­sur­able so­cial ben­e­fits as well as fi­nan­cial gains, and cash is of­ten re-in­vested in the so­cial project to en­sure its sus­tain­abil­ity, while both the so­cial and mon­e­tary re­turns are quan­ti­fied and mon­i­tored.

It is a hands-on phil­an­thropic process in which par­tic­i­pants are di­rectly in­volved through pro­vid­ing seed cap­i­tal or us­ing their business ex­per­tise and net­works to help meet last­ing, self-sus­tain­ing ob­jec­tives. The meth­ods can re­sem­ble those of a com­mer­cial en­ter­prise.

An ex­am­ple of im­pact in­vest­ing is the Green Mon­day or­gan­i­sa­tion run by David Ye­ung in Hong Kong, which aims to pro­mote aware­ness about the dam­age caused to the en­vi­ron­ment by live­stock farm­ing.

It com­bines the purely char­i­ta­ble be­hav­ior of a not-for­profit foun­da­tion with the in­come-gen­er­at­ing ac­tiv­i­ties of a ven­ture cap­i­tal firm. Fees from con­sul­tancy support the foun­da­tion. The ini­tia­tive is also very mod­ern, in the sense that it is a sin­gle-is­sue en­ter­prise for which ad­vo­cacy through pub­lic re­la­tions and lob­by­ing is a key tool.

Clearly, as the num­ber of HNWIS in Asia Pa­cific and their as­sets con­tinue to grow and the re­gion’s wealthy de­ci­sion­mak­ers be­come ever younger, more phil­an­thropic causes will emerge and the adop­tion of pro­fes­sional tech­niques is likely to be­come the norm. Pri­vate banks have al­ready recog­nised this ac­cel­er­at­ing trend and are gear­ing up to pro­vide ad­vice and support across the re­gion.

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