In study of next generation donors, good news for start-ups, social entrepreneurs and innovators

Even as there are reports outlining how young Americans could live their entire lives strapped with debt, there is a cohort of the younger generations, particularly Generations Y and X, who stand to inherit an unprecedented amount of wealth — somewhere in the neighborhood of $40 trillion.

So, what do they plan to do with it and which types of entities stand to be the recipients of their largesse?

A report released by the Johnson Center for Philanthropy in partnership with the nonprofit consulting firm 21/64 sought to begin the process of finding out.

The report, titled “Next Gen Donors: Respecting Legacy, Revolutionizing Philanthropy,” is a survey of the group of individuals deemed “next-generation donors,” with the respondents among some of the highest capacity donors and split roughly evenly between Generation X and Generation Y/millennials.

“These generations ... have the potential to be the most significant philanthropists in history and we really don’t know that much about them,” said report co-author and sociologist Michael Moody during a conference call Wednesday. Moody also serves as the Frey Foundation chair for Family Foundations and Philanthropy at the Johnson Center.

“This is a crucial moment for the field of philanthropy to begin to adapt — to understand how to work, partner, educate, support, train, invest with this next generation of donors," said Sharna Goldseker, Managing Director of 21/64 and also a co-author of the study.

This cohort, according to the survey, wants to get its hands dirty, prioritizing direct relationships with the entities they donate over merely writing checks. This rejection of “checkbook philanthropy” is one of two findings Moody found most surprising. “They want to get their hands dirty, to serve in meaningful ways, not just sit on boards or party planning committees,” said Moody during an e-mail exchange Thursday. “They want to be taken seriously — not only in the future but now — as talented partners with organizations, who bring skills and expertise to the table.”

Moody was also surprised by the coming generation’s unwillingness to do away with past traditions. “They are certainly enthusiastic about innovation and willing to take risks and try non-traditional approaches to philanthropy,” said Moody Thursday, “But this doesn’t mean they want to discontinue all traditional forms of giving, that they give to radically different causes or for radically different reasons, or – most notably perhaps – that they care little for the family legacies they are inheriting.”

Asked why the report was initiated now, Moody said, “They hold the future of major philanthropy in their hands. As they start to engage more in that future, we need to know more about how they think about, learn, and practice philanthropy.”

That said, where do their interests currently lie? The report finds that health care and the arts are, at least for now, taking a back seat to the environment, civil rights and advocacy:

They are more likely than their families to give to civil rights/advocacy and environment/animals causes, and less likely to give to arts and culture, religious, community development and “combination” organizations, such as the United Way or Jewish Federations. Clearly, though, the most dramatic difference is in giving to health-related issues. And perhaps the most surprising similarity is in giving to international organizations, as the next generations are thought to be relatively more focused on global causes versus domestic.

The next generation of high-capacity donors are also “very excited about the possibilities of social entre­pre­neur­ship,” said Moody, and those with experience in impact investing and supporting social enterprise start-ups were “were often very passionate about that new approach, and even evangelical about it, telling their peers and going ‘all in’ behind a new innovation.”

“Buzz about cool new models,” continued Moody, “spreads quickly in next-gen peer networks. Many who have not had the chance to pursue a new social innovation are still excited about doing so when they have the chance.”

“They often see new ventures that combine the virtues of business and charitable forms as the best of both worlds.”

That said, Katherine Lorenz, president and treasurer of the Cynthia & George Mitchell Foundation, voiced a word of caution over the buzz surrounding impact investing and social entre­pre­neur­ship among younger philanthropists.

“Some social issues you cannot make a profit with,” said Lorenz during the Wednesday call. “There are some things that truly do need grants. And I hope philanthropists don’t forget that.”

Lorenz also cautioned against deeming impact investing as “a silver bullet of the day,” and worried that, should it fail to produce the impact expected, it would be tossed out entirely. “I think both of those could be tragedies for the sector. But I do think it’s really great to see the excitement around it, and hopefully it will move forward in a way that really pushes the field forward in a positive way.”

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© 2012-2017 Cynthia and George Mitchell Foundation.