Recovering From COVID-19: Why Philanthropy And Impact Investing Need To Join Forces
Due to the ongoing economic, human, and institutional pressures, the need for philanthropy and impact investing has increased, it is evident that the pandemic has propelled both sectors to the forefront.
The coronavirus pandemic and the resulting economic downturn has created new realities for many, more so than ever with the global community uniting to overcome the complexities of the pandemic. Due to the ongoing economic, human, and institutional pressures, the need for philanthropy and impact investing has increased, it is evident that the pandemic has propelled both sectors to the forefront. Indeed, impact investors and philanthropists have had a critical role to play in responding to the ongoing global COVID-19 crisis.
Greek playwright Aeschylus coined the term philanthropy in the 5th century B.C., with the word meaning “love of humanity.” Today, philanthropy means generosity in all its forms, and it is often defined as giving gifts of “time, talent, and treasure” to further the betterment for humankind and the planet. When the world as we know it today is battling a health crisis, the diplomatic drive in the global ecosystem increases, and the opportunity for major innovation and change is created. The philanthropic response to the global pandemic has shown the sector at its best, from the launch of community-based rapid response funds, to the development of diagnostics and vaccines.
According to McKinsey & Company, major philanthropists had committed US$10.3 billion globally in May 2020 to respond to COVID-19. Within the GCC, for example, we have seen Saudi Arabia’s $500 million commitment to accelerate the development of new treatments and vaccines. Furthermore, the UAE directed donations through Abu Dhabi’s Authority of Social Contribution, Ma’an, which launched the “Together We Are Good” campaign to mobilize funds for the country’s pandemic response. Globally, philanthropic leaders, which includes the Bill and Melinda Gates Foundation, donated $100 million to support detection, isolation, and treatment efforts across Africa and South Asia to protect at-risk populations by also committing to the accelerated development of vaccines, drugs, and diagnostics. As such, philanthropy is evidently playing a pivotal role in filling the funding gap as governments and institutions respond to the global pandemic, with it having been the primary source for funding such social investments for centuries.
Meanwhile, impact investing is a growing asset class around the globe. According to the Global Impact Investing Network (GIIN), impact investments are “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” Keeping that in mind, philanthropy and its giving essence, coupled with the commercial preference of investing, were ultimately seen as two separate disciplines. As noted by the Rockefeller Foundation, “one champions social change, the other financial gain.” The very idea that the two approaches could be integrated in the same transaction -in principle, delivering a financial return, whilst also doing good- struck most philanthropists and investors as being far-fetched. However, the rise of the responsible investor has continued to grow across the globe and the growth of impact investing as an asset class continued to mature as an investment option for investors. In fact, GINN published the 2020 Annual Impact Investor Survey in June 2020, which estimates the current market size for impact investing is valued at $715 billion.
As seen in the case of philanthropists, we have also seen an increased response to the pandemic by impact investors to curate solutions and long-term rebuilding structures from the Response, Recovery, and Resilience Investment Coalition (R3 Coalition) launched in May 2020.
One crucial competent of the R3 Coalition is the delivery of market intelligence on financing needs and effective strategies to address those needs. Many impact investors have already demonstrated a commitment to address the emerging needs and challenges arising from the COVID-19 crisis. Given this scenario, philanthropists and impact investors must continue to work to rebuild communities together, and to support nations in protecting their most vulnerable citizens, while also accelerating the development of tools to bring the pandemic under control, and work as a key pillar alongside governments and the private sector. For impact investors, people and planet are central to investment decisions, and for philanthropists, a direct response to a problem is crucial. Arguably, many long-term problems can be fixed by market-based investable ideas and structured as impact investing transactions (think renewable energy, affordable housing, or innovation within healthcare), but there are many global issues that will always be dependent on generosity and an immediate need to react, which is where philanthropy plays a significant role. Both sectors can thus essentially play a complementary role, with both rapid response philanthropy and impact investors able to invest in community development, as well as in emerging innovations that can bridge capital gaps to help rebuild a sustainable economy over time.
Globally, we require the scalable and forceful power of impact investing and philanthropy to support communities and those in need to create a more buoyant and prosperous future. Based on the reaction of both sectors to the pandemic, there have been various trends in which both philanthropy and impact investing can continue to complement and join forces:
1/ Philanthropists transitioning as impact investors
A growing number of philanthropists are exploring innovative ways to maximize the value of their donations to deliver a measured, lasting, and sustainable impact. During the pandemic, there has been an increased interest from philanthropists within impact investing, primarily within healthcare, diagnostics and immunization-based investments and vaccines. For example, Dubai’s Easa Saleh Al Gurg Group, a retail and construction conglomerate contributed $3.5 million to the Emirate’s education and health authorities to strengthen distant learning initiatives and prevent the spread of the virus.
2/ A prioritization of local communities
Both sectors recognize the significant increase and acceleration of giving in response to COVID-19 and the issues it exposes, and this will require an extraordinary response with a key focus on local communities. To date, philanthropists and impact investors are drawn to global problems, leading them to invest and donate in the wellbeing of communities globally. Nonetheless, these contributions and investments are imperative to address global issues, as well as to feed into the 2030 UN Sustainable Development Goals; however, as a byproduct, the inequalities in one’s own local communities are heightened, and they continue to suffer.
According to McKinsey & Company, almost 600 state and local community funded COVID-19 funds have emerged across the United States, which has attracted contributions from private foundations and investors alike. Investing in local communities is an opportunity for impact investors and philanthropists to test, develop, and learn from a range of community-led grant-making models or funding vehicles, which can then be applied globally.
3/ Partnering with governments and the public sector
Both philanthropists and impact investors are looking to partner not only with each other, but to work with government bodies and local communities that are focused on urgent relief. A new recognition in the value of supporting the public sector may lead to new funds being directed to support governments and their initiatives to support issues exposed by the pandemic. There are numerous ways that philanthropist and impact investors can partner with governments; for example, with governments often needing support in addressing talent and employee constraints, there could be innovation in training government employees and leaders who are in fundamental positions, helping governments attract great talent, and supporting the expansion or creation of positions that fill key specific gaps, from data analytics to supply chain management.
Since the announcement of the pandemic in March 2020, philanthropists and impact investors have united together alongside all key global stakeholders to align their missions and values to guide them through this period of uncertainty. With this enhanced and redefined sense of purpose comes an opportunity to reshape priorities and practices for the next era of impact and giving. The pandemic has confirmed that both sectors are able to adapt, be agile, and pivot in a time of crisis. The challenge now is for leaders across philanthropy and impact investing to further expand and institutionalize the practices that surfaced during the pandemic for the long road of recovery ahead. There isn’t -arguably- a universal solution to overcome the issues that have emerged from the global pandemic, but collectively, with philanthropy and impact investing joining forces, it can undeniably play a pivotal role in providing both a platform for (and bridging the funding gap that is needed) the world to solve the issues that have surfaced.
As the world rebuilds itself after the emergency response, the drive to create systemic sustainable economic change continues to motivate and fuel the investment community. By measuring and optimizing the conditions that contribute to philanthropic vitality, and by taking advantage of the opportunities that lie ahead for impact investors, forward-thinking funders and investors can meaningfully improve the world’s need to restore and drive change.
Zahara Malik is co-founder and CEO of Grosvenor Capital (GroCap), a boutique advisory company headquartered in the UAE which focuses on providing clients with business strategies, capital introduction and advisory services across the GCC, Africa and beyond.
Malik has a track record of working with successful entrepreneurs and prominent figures, including royal dignitaries, heads of state, ministers, UHNWI, family offices and executives. She has built substantial experience of working in emerging and frontier markets as an investment specialist holding senior positions at Access Power, Global Investment Bank, Invest Africa and Sunbird Group.
Furthermore, Malik has worked on key philanthropy and impact campaigns with HRH The Prince of Wales, The Princes Trust and Mosaic International network. She formally chaired The Princes Trust Junior Associated Program, and is currently a trustee of Jaago Foundation, where she opened her first school in Chittagong, as well as Chief of Amplification for Girls Do Good.
Malik was also a finalist for the “Rising Star” category in 2017 for the prestigious British Muslim Awards. Malik holds a MSc in global governance from UCL, and has become a published researcher after earning a distinction in her master’s dissertation on the global issues surrounding water wars and the impact of shale gas production across the US and China.