Philanthropy: Investing in the Change We Seek
The world is undeniably confronting the collapse of vital ecosystems. We have already breached six of the nine planetary boundaries—thresholds that define a safe operating space for humanity. Crossing these boundaries puts us at risk of triggering large-scale and potentially irreversible environmental changes, threatening the ecosystems we rely on for food, clean water, and breathable air.
The hard truth—one many would prefer to ignore—is that without these essentials, the survival of our civilisation as we know it is in real jeopardy. This isn’t just a concern for environmentalists. It intersects with every issue philanthropy aims to address, affecting all facets of life and society.
Among all sectors, philanthropy should be the most attuned to this stark reality. And yet, even in the business of "doing good," powerful contradictions persist. Philanthropy often continues to uphold the very extractive systems it seeks to change.
One of its greatest failings? The widespread separation of investing and granting. These two levers are usually managed by different people, driven by different goals, values, and time horizons.
In Australia, the most common philanthropic structure is the Private Ancillary Fund (PAF). A PAF owns a portfolio of assets, and is required to distribute at least 5% of its value annually to registered charities.
Why 5%? Because the standard investment strategy assumes an annual return above 5%, allowing the fund to grow and exist in perpetuity. In theory, this means a family can continue giving for generations. Investment managers, therefore, focus on achieving returns that outpace the required distribution.
At face value, this sounds like a good idea. But is it?
The typical diversified portfolio is deeply embedded in a growth-based economy—one that extracts from the environment and society, while producing harmful externalities that aren’t accounted for in the price of goods and services. The costs of these externalities often fall to governments (and taxpayers)… or, ironically, to philanthropy itself.
In this way, many philanthropic portfolios contribute to the very problems their grants aim to solve. On one hand, they fund solutions to social and environmental issues; on the other, their investments quietly fuel the same systemic harm.
The idea of aligning investment decisions with philanthropic values isn’t new. ESG investing and impact investing are gaining traction. But traditional philanthropy has been slow to adopt this shift. Why? It seems preserving the fund’s longevity often takes precedence over solving the problems at hand.
We need a new paradigm—one that challenges the assumption that perpetual growth is necessary or even desirable. One that recognises investing with intention as a powerful force for systemic change, not just financial gain.
When we align the way we invest and operate with the values that guide our giving, we stop using philanthropy as a band-aid and start addressing root causes. But this shift isn’t easy. Our current systems make it difficult for truly regenerative businesses to thrive while producing competitive market returns.
This moment demands courageous questions:
What matters more—preserving philanthropic capital for future generations, or transforming the system to ensure there’s a thriving world for those generations to inherit?