Using cutting-edge financial products to empower hands-on philanthropy and sustainable investment

Modern philanthropists are, more than ever, eager to be closely involved in the process of conducting philanthropy. From the initial offering up of capital all the way through to assessing the impact it has in real, tangible terms, findings indicate that the philanthropists of today want to be more involved in the process from start to finish. ‘Cheque-book philanthropy,’ in which an individual simply makes a donation to a cause or charity that they have little influence over, appears to be on a downward trend. 

Along with a personalised approach from wealth managers, the modern philanthropist also needs access to financial products, structures and vehicles that can offer this level of influence.  

A variety of these are available, an example of which is the Guernsey Foundation, an innovative philanthropic financing mechanism which was introduced in Guernsey in 2013 in response to a growing benevolent demand. The foundation is a hybrid between a company and a trust. It is usually established with a particular purpose or mission, often including charitable and philanthropic giving. It has neither members nor shareholders and has a legal personality, enabling it to act and exercise powers and be bound by obligations in the same way as a corporate trustee. 

The Guernsey Foundation has risen in popularity among philanthropists, in part because it enables the individual to maintain a great deal of control over how their wealth is funneled into a cause or a third-party charitable organisation. 

Other characteristics of an effective foundation include low registration fees, simple and quick establishment and a structure that is robust but flexible to enable philanthropic giving.  

High standards of governance and transparency are also key advantages in this context, something of seemingly ever-growing importance to the modern philanthropist. 

When domiciled in jurisdictions such as Guernsey, these structures drive a considerable proportion of philanthropic activity into the UK.  According to a recent report by independent research house Frontier Economics, this philanthropic and other investment funding creates significant social value for the UK, whether that is through funding medical research, developing social housing or investing to protect biodiversity.  

And when further considering the needs of the emerging generation of wealth holders, ESG and impact investing also seem to be pertinent. 

A PAM Insight report titled ‘Managing Changing Families’ found that primary wealth management considerations for under 35s include a greater focus on sustainable and impact investments, with 86% of survey respondents citing being a ‘good global citizen’ as important (35%) or very important (51%).  

The world’s first regulated green investment fund product, the Guernsey Green Fund regime, enhances investor access to the sustainable investment space by providing a trusted and transparent product that contributes to the internationally agreed objectives of mitigating environmental damage and climate change.  

As of Q3 2023, there were 12 ‘Green Funds’ authorised or registered with Guernsey’s regulator, the Guernsey Financial Services Commission, with a collective gross asset value of £5.5 billion. The Guernsey Green Fund designation endorses schemes through which investments into various green initiatives can be made, and the funds must be established with the objectives of: 

The same Frontier Economics report concluded that Guernsey’s finance sector provides over £3 billion social value to UK. Aligned with UK policy, Guernsey funds are supporting small and rapidly growing businesses in the UK as well as investing in infrastructure such as green power generation assets and facilitating improvements to the housing stock. 

One example of an accredited Guernsey Green Fund can be found in the NextEnergy Solar Fund (NESF), which was awarded the Green Fund designation in February 2020. NESF invests primarily in solar power plants in the UK (~85% of its asset base). As of December 2022, NESF owned 91 UK operating solar assets which collectively accounted for 830 MW of Solar PV assets. 

These investments are directly contributing to the development of a resilient, low-cost, low carbon power sector, giving investors peace of mind that their capital is genuinely creating an impact, aligned with international green objectives.  

With the changing needs of modern wealth holders adapting constantly, wealth managers must stay cognisant of new innovative products on offer, ensuring they are well-prepared to meet the individual philanthropic and impact goals of their HNW clients.