Bill and Melinda Gates brace for rain during their visit to the town of Khayelitsha on October 25, 2019 in Cape Town, South Africa.
Brenton Geach | Gallo pictures | Getty Images
A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. Sign up to receive future issues, straight to your inbox.
While donations to charity are on the rise, the pool of donors is shrinking, as philanthropy has become highly concentrated among a small group of wealthy megadonors, according to a new study.
A new report from Altrata finds that ultra-high-net-worth individuals (those worth $30 million or more) now account for 38% of all individual donations in the world. In other words, 400,000 people represent more than a third of the world's philanthropy.
It's even more extreme when you look at billionaires. The world's 3,200 billionaires (or 0.00004% of the world's population) account for 8% of individual philanthropy.
Giving from those at the top is of course a positive thing. While it is worth debating whether the wealthy are giving enough (see the recent annual letter from Gates Foundation CEO Mark Suzman on how the wealthy need to step up giving), overall giving continues to grow.
The overall level of giving from high-net-worth individuals in 2022 was 25% higher than in 2018, even though it was a down year for financial markets, according to Altrata. North America remains the most generous country on the planet, accounting for nearly half of global giving from that top tier.
The challenge for wealth advisors and nonprofits is adapting to a new, highly taxing landscape of philanthropy. Nonprofits, which for years have benefited from a wide range of donors, now have to rely on a smaller group of large donors, who are already bombarded with requests. Charitable causes will rise and fall depending on the interests and goals of a small group of major funders. Overall giving will become more volatile, because the generosity of billionaires and the super-rich is driven largely by stock prices.
The so-called “high dollars, low donors” phenomenon has prompted nonprofits to rethink their fundraising and strategies, says Amir Bacik, dean of Indiana University's Lilly Family School of Philanthropy.
“A lot of nonprofits are focusing more on those major gifts and trying to figure out how to reach wealthy donors and foundations,” he said.
At the same time, some nonprofits are trying to funnel wealth and use technology and more creative outreach programs to tap a larger community of smaller, younger donors, he said.
“It's a Catch-22,” he said. “Everyone is rushing to the top of the pyramid, but it has become so focused that they may overlook the importance of connecting with tomorrow's donors.”
According to Ultrata, today's super-rich megadonors are largely male, mostly over the age of 70 and enjoy a higher share of liquid wealth (i.e. cash) than the broader high-net-worth population. However, women are a rising force. While women make up 11% of the high-net-worth population, they represent 22% of major donors, according to the study.
Today's super-rich donors also prefer to donate through private foundations and donor-advised funds – which gives them more control – rather than simply writing checks to the Red Cross or United Way. Assets owned by private institutions have more than doubled since 2005, to more than $1.2 trillion, according to Federal Reserve data.
Nearly 1 in 5 ultra-high-net-worth individuals have a private foundation, and 30% of those worth $100 million or more have a foundation, according to Altrata.
The giving priorities of the wealthy also differ from those of the broader public, which may result in more money flowing to causes specific to the wealthy or even a subset of a small number of individuals. The top reason for philanthropy for wealthy donors was education (at 54%), according to Ultrata. Followed by arts and culture (32%), health care and medical research (28%), social services (23%), and environment/conservation/animals (14%).
While debt is the most important charitable cause for Americans, Ultrata said religion did not rank among the top seven causes of the wealthy, although Ultrata noted that because giving to religion is often “anonymous and variable in nature,” the number may be The real is actually higher.
“There is some evidence that high-net-worth populations have different skews than the general population,” Basic said. “This can also be distorted by a small number of very large gifts to a single cause.”
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