THE MATHEMATICS OF GIVING

When three partners from Goldman Sachs decided that they wanted to channel some of their gains from the firm's IPO into good causes, they found the charity sector not geared for investment.

With no sufficient due diligence, no formalised measurement of the social return an investment yields and no professional advice, making significant donations seemed like a haphazard and risky process.

UK high-net-worth individuals are becoming an increasingly important funding source for the country's charity sector. According to the Sunday Times Rich List, total annual donations from the 30 biggest givers has grown from £299 million (€376 million; $531 million) in 2004 to £2.4 billion in 2008 – an increase of more than 800 percent.

With this in mind, Peter Wheeler, Gavin Davies and John Aisbitt formulated an idea: create an organisation which would research charities and methodically measure their positive impact on society. From this idea New Philanthropy Capital was born in 2002.

Initially NPC focused wholly on research. Much like a financial equity research firm, it published a series of reports into various sub-sectors of the charity spectrum, such as healthcare, education and the environment, examining where specific needs lie, where funding is lacking and whether investment can make a difference. It has now published over 40 reports, all available free online.

Three years ago NPC added an advisory arm to offer potential donors bespoke guidance on how they can approach their giving.

Requirements for this consultancy service vary from a full portfolio service, for which NPC recommends a selection of charities that have been subjected to its due diligence, to a purely advisory role for those who want to be more active in their charity selection. The fees generated from the consultancy go toward running NPC.

There are obvious advantages for charities to be on NPC's radar, and as such they seek the firm's recognition in the same way that listed companies might court equity research analysts. Recognition and research lead to increased investment.

“At the end of the day we all have the same goal of helping increase charity funding, but we have to remain independent,” Sue Wixley, NPC's head of communications, told PEI. “In many instances we have to say ‘don't call us, we'll call you’”.

NPC has benefited charities that have a tangible social impact, but are not necessarily appealing to unsophisticated donors.

The Lucy Fai thful l Foundation is one such organisation: a child protection charity which, instead of focusing on the victims of child abuse, provides free-phone counselling for those who worry that they are potential abusers. Accessing this target audience helps prevent child abuse before it happens.

The effect of NPC's work, however, is not restricted to those charities which are sophisticated enough to demonstrate their positive social impact.

The due diligence process NPC exercises on organisations can prove a useful guide for charities looking to improve their operational efficiency and measure the impact they have.

Which leads on to the next stage in NPC's evolution. The organisation is becoming more active in helping charities to communicate their successes. It has developed a series of webbased tools for charities which help with a variety of challenges, such as procuring government funding, analysing success and standardising reports.

All of which makes the following question almost too gloomy to contemplate: with the ten year bull run well and truly over, is there a risk individuals will reign in their good will? NPC chief executive Martin Brookes thinks not.

“There is still a huge, untapped market of people out there wanting to give effectively. And with charities facing increasing demand for services because of rising costs and higher unemployment, there will be lots of gaps where donors can make an impact,” he says.

CHINN FREES UP TIME FOR CHARITY
Sir Trevor Chinn, prominent City figure and adviser to CVC Capital Partners, has resigned from his role as chairman of Aurora Russia, the private equity investment vehicle listed on London's Alternative Investment Market, to devote more time to his role as chairman of the Mayor's Fund for London, the goal of which is to relieve poverty in the UK's capital city. Chinn, who has chaired Aurora Russia since the firm's inception in March 2006, has for a long time been an active philanthropist.

He was involved in the Variety Club of Great Britiain, has chaired the Friends of the Duke of Edinburgh Award Scheme and received his knighthood in 1990 for his work with London children's hospital Great Ormond Street. The Mayor's Fund, which will launch before the end of 2008, will raise money from high-networth individuals and call on London residents to commit their time to help young people in deprived areas of the UK's capital. Chinn will be succeeded at Aurora Russia by Dan koch, who joined the firm as non-executive director earlier this month. koch, a Russian resident, is currently chairman of Deloitte and Touche's CIS operations.

DELIVERING A CASH BOOST
Future Builders, the £215 million (€271 million; $384 million) UK government-backed investment fund, has partnered with The Royal Bank of Scotland's commercial banking division to offer increased financial support to third sector organisations. The two firms will refer potential clients to each other as well as offer co-financing options to companies working in the charity sector. To date, Future Builders has offered over £140 million in investment to more than 280 organisations.

MATRIX BRAVES THE COLD
London-based fund manager Matrix is offering one amateur adventurer the chance to spend 80 days in temperatures of minus 35 and 100-miles per hour headwinds in a re-enactment of Sir Ernest Shackleton's 1908 to 1909 Nimrod South Pole voyage. The Matrix Shackleton Centenary Expedition will help create an endowment fund of £10 million for the Shackleton Foundation, which supports individuals of all ages, nationalities and backgrounds in any endeavour which seeks to make a difference, particularly to the “less advantaged”. The expedition team will be accompanied by Shackleton's great-grandson, Patrick Bergel, and Tim Fright, the great-great-nephew of Frank Wild, the only explorer to accompany Shackleton on all his missions.

SOCIAL INVESTMENT FORUM EXPANDS TEAM
The Social Investment Forum, the US association for the socially and environmentally responsible investment industry, has appointed board member Meg Voorhes as the organisation's new deputy director and head of research. The group has also appointed Rachel Macknight as director of communications and marketing. Voorhes was previously head of environmental, social and governance research for the financial research and analysis division of risk consultancy RiskMetrics. Macknight has a diverse mix of marketing and public relations experience, ranging from healthcare issues to the environment. The team's expansion reflects “the growth of the public's awareness and interest in socially responsible investing”, according to SIF chief executive Lisa Woll. SIF is a network dedicated to progressing the concept of responsible investment in the US, and its members include the likes of CEI Ventures and Satori Capital.

PEF MOVES INTO GERMANY
The Private Equity Foundation, the venture philanthropy fund aimed at empowering young people, has made its first German investment: a €180,000 donation to the Hamburger Hauptshulmodel, an organisation that sources apprenticeships for school leavers. Alongside the money, PEF will provide pro bono business expertise to help raise awareness of the scheme amongst both leavers and prospective employers. The PEF had been impressed by the organisation's “ability to coordinate regional commercial businesses, employment agencies and educational institutions”.

FAIR TRADE FOR IMPETUS
UK venture philanthropy group Impetus Trust has entered a second phase of investment in the Fairtrade Foundation, a group of organisations seeking to grow the UK market for Fairtrade products. Impetus, together with co-investor the Charities Aid Foundation, will provide the Fairtrade Foundation with a funding package of £400,000 (€505,000; $726,000) over a fouryear period and strategic counsel. The aim is to grow the sales of Fairtrade products in the UK by 30 percent year on year.