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Giving and ESG must converge for more powerful philanthropy

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This is a sponsored article from HSBC Global Private Banking.

Brent York
Global Head of Trust and Fiduciary Services
HSBC Global Private Banking

Asia has a long track-record of giving and a strong idea of society. China’s clan-based charity, inspired by Confucianism, dates back a thousand years and Hinduism strongly encourages leaders to share their wealth, for example. Philanthropy as a concept, with distinct regional characteristics, has arrived on the back of the rise in private wealth.

Over the past few decades philanthropists in Asia have focused on education, medical support or poverty relief, but there has been a shift in focus to sustainability and protecting the environment for the next generation.

There is an increasing interest in understanding what the needs and gaps are. Philanthropists are now engaging different NGOs to make a bigger and more sustainable impact through innovative means. There is also a greater push for development and improvement in the application of private wealth to making substantive change. This must come from strategic long-term thinking that the ESG framework can provide.

The urgency couldn’t be more so for Asia – a region particularly vulnerable to the impact of climate change. By 2100, it is projected that over one billion people will be living in low-lying areas subject to frequent flooding – 70% of these in Southeast Asia. Potential future health and societal implications range from increased vector-borne disease transmission to poverty due to seasonal crop failures. Add to this paradigm a shift in the priorities fuelled by the pandemic, which has necessitated a more holistic approach to giving and investing.

Taking this a step further, the ESG framework — so prevalent in the strategic thoughts of companies these days — can be applied to properly ensure the effectiveness of philanthropic efforts. This belief is driven by successful examples that we have witnessed around us that show the value of strategic thought around giving.

The net-zero push
The environment is perhaps the highest-profile of the three factors not least from the push for net-zero by so many institutions. While concrete grass root actions that can be carried out broadly in society can combat climate change and are much needed, primary research helps scientists better understand the consequences of a changing climate on natural and built environments. Driving knowledge that has a long-term environmental impact is an area where philanthropy has a meaningful role to play.

A good example of this is a philanthropic foundation that funds research in a local university on how rising sea water temperatures are affecting marine cnidarians such as coral, sea anemone and jellyfish in Hong Kong. This work will help conservationists develop strategies to protect the biosphere over the coming decades. This has been made possible because of a philanthropic mindset and a structured approach through the establishment of close direct relationships with the researchers and a long-term vision to protect the biodiversity we have today.

Present and future generations

Focusing on the social aspect of ESG, a key dilemma that philanthropists face is how to balance meeting the immediate needs of the present with those of future generations. But this doesn’t always need to be a binary choice with the right mindset.

A foundation that we have supported is funding a project initiated by a student in Sri Lanka who is looking at how solar energy can help develop rural communities. He identified a local hospital that suffers from frequent power shortages and partnered with NGOs and foundations to build a self-sustaining solar panel system that reduced the hospital’s dependency on fossil fuels for power generation and solving power shortages.

Involving the NGOs as partners in process, recognising the insight they have from the front line, ensures that it is far from empty dollars. The root cause in this instance was identified in the beginning and that will have a lasting impact on the hospital and the community that will benefit from its services.

More than compliance
Governance as the third leg of the ESG stool, is perhaps the hardest to equate to the philanthropic equation, but there has been an increased understanding of its importance. The need and emotional drive to do good can outweigh the need to take a step back and consider implications. The “G” is not just about legal compliance and anti-corruption but running organisations in a transparent and accountable way. And this has extended to ideas that are also gaining significance in other fields such as responsible investing, emergency preparedness, employee welfare, and even diversity and inclusion.

Proper governance of philanthropic activities is fundamental to creating a balance between the financial and social goals of the project, from efficient use of capital and responsible allocation of resources through to risk management and checking the validity of the causes being supported.

A visionary client who saw the long-term value of prudent governance set up scholarships for NGO leaders to pursue education at leading institutions abroad and bring the knowledge back to Hong Kong. This initiative empowered NGO leaders to run their projects and organisations professionally, but also with a charitable perspective. The implications and impact of this heightened skill set to the work being done in the city is clear.

Holistic thinking
Modern philanthropists are no longer just passively writing cheques for charitable causes. They are eager to join hands with their investors and participate in project identification to ensure their philanthropic funds really create a sustainable impact on society. This is admirable and rightly celebrated, but to ensure success, adopting a model that will allow holistic thinking, analysing the issues whether environmental, social or governance driven is paramount. I am convinced this is a positive step towards helping to solve the myriad pressing social and environmental problems of our time, that are particularly significant for Asia.

We at HSBC Trustee are celebrating our 75th year working with families to ensure the successful transition of wealth over generations. We fully expect to be working with many on ensuring their philanthropic legacy in the years ahead by embracing the ESG framework.

This is a sponsored article from HSBC Global Private Banking.

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