As a 501c3 non-profit with the mission of improving economic outcomes in the middle of the country, we at Heartland Forward often find ourselves grappling with how our work, and indeed the giving of our philanthropists, can make the most impact.
Lukas Walton, Founder and CEO of Builders Vision and Board Trustee, Walton Family Foundation, recently spoke at the Philanthropy SW conference in Colorado Springs, CO. The panel, Next Generation Philanthropy and Opportunities for Lasting Impact, included Katherine Lorenz, President, Cynthia & George Mitchell Foundation and granddaughter of the founders and Hali Lee, Foundation Partner, Radiant Strategies.
In a riveting discussion, the three panelists spoke of their roles in philanthropy and how it should evolve going forward and we’d like to take this opportunity to share their insights with others. Here are two main takeaways:
- All agree that the philanthropists of today and more importantly, of tomorrow should be more purposeful, collaborative and less risk averse in their giving.
- They also agreed that the unprecedented amount of wealth transferring generations over the next 5 years should be used to help solve massive social issues that government nor corporates alone cannot.
Experts predict that a ‘Great Wealth Transfer’ between now and 2027 of approximately $8.8 trillion will be the largest handoff of intergenerational wealth in US history. By 2045, it will total over $84 trillion. Of that total, $72.6 trillion in assets will go to heirs and $11.9 trillion will be donated to charities. That’s a lot of money. For perspective, the 2021 US GDP was $21 trillion.
Today, households with $5 million or more in wealth are giving away about $120 billion annually, and their donations could exceed $200 billion a year by the end of the 2020s. Sports, technology and philanthropy are the most popular interests among today’s wealthy who are under-50 according to the Wealth-X report.
How are philanthropists thinking about their donations?
Given these staggering numbers, the panelists were asked how the next generation can be held accountable yet be innovative with philanthropy.
Builders Initiative, Lukas Walton’s philanthropic entity, is dedicated to climate change. He believes donors must listen to those on the ground, the thinkers and doers, who work to solve problems as they are closest to the all the issues. “Their work is at the center of our vision because they have the history, relationships, know-how, perspectives, and experience to make change possible.” In his work with the Walton Family Foundation, as board member and Chair, Environment Program Committee, he strives to create transparency and to have strong feedback loops from the doers on the ground all the way up to board members. Lukas believes philanthropy should be the risk capital to get projects done that otherwise would not get done. He tells his team “Risk On!” and to think entrepreneurially as that is where innovation truly happens. “Give the people on the ground room to explore.”
“We must support that risk and trust our programs team. It’s ok to adjust along the way and even pivot midstream. We must deploy capital in a way that shifts markets and minds. We must engage with entrepreneurs in the risky early-stage economy and be more oriented towards sustainability.”
Walton continued that non-dilutive philanthropic capital can be transformational and instrumental to entrepreneurs’ success and is where philanthropy can be more effective than other types of capital.
Katherine Lorenze, named the “leader of the Next Gen of the Giving Pledge” and who Inside Philanthropy named one of the most powerful heirs in philanthropy in 2021, is the granddaughter of Cynthia and George Mitchell. Lorenze states they work to ensure that there is an environment of trust for their program officers and grantees to take on risk. She adds philanthropy should be a safe place to take on risk. “We must encourage our teams to take on risk without the fear of getting fired if a project fails.”
Hali Lee, of Radiant Strategies, has spent her career democratizing philanthropy and giving voice to philanthropists of color. She adds it is expected in the venture capital community that many, if not most, opportunities will fail. “Yet philanthropy currently does not allow for that. We unfortunately hold social entrepreneurs to a harder set of expectations, and we must change that mind set.”
She too believes that it is the people on the ground who are taking the most risk. Being the philanthropist is safe and she works to change that up: “Let’s have a reset. Let’s see that it is not the donor who is the hero but the people on the ground deploying the programs, who are taking the real risk, are the heroes.”
The follow-on question for the panelist was: How does integrating philanthropy and capitalism become the fuel for change in the future and how do they work together?
Walton’s impact investment arm, Builders Vision, focuses on clean energy transition, sustainable food and agriculture and sustainable utilization of ocean resources. “I bring same kind of entrepreneurial mentality from our impact investing into how to explore philanthropy as a tool kit for economic creation and innovation.”
He uses the example of the Colorado River being in a 1,200-year drought cycle due to water mismanagement over consumption and development. In tandem to their investment strategies, he has given exploratory grants to look at crop switching to help with water conservation. For instance, he asks: “Should we be growing alfalfa which is water intensive and exporting it to Saudi Arabia?” Walton continues, “we are using exploratory philanthropic capital to work with researchers at universities and farmers to engineer crops that require less water, are revenue generating and carbon neutral. We also structure partnerships with corporations that want to source sustainably here in the US rather than across the world. For example, Firestone and other US tire manufacturers source rubber from SE Asia. We are exploring using guayule plants which are native to the US southwest and contain rubber. For the alfalfa farmers, switching to growing guayule plants would mitigate the water use by 50% – so it’s de-risking an opportunity for farmers and helping corporations say they are sustainably sourcing their rubber.”
“By focusing on complete systems issues like this, we can support those on the ground with funding to test current systems or create new systems.” Another example is supporting a solar and ag collaboration in which solar panels are used to shade the plants growing underneath. Less water is used because the plants sweat less, and power is being generated.
Beyond money: what are other tools in the toolkit?
Lorenz believes money is only one tool in the toolkit and that there are so many ways to give. The adage of “Time + Talent + Treasure” should include “Ties + Tent.” Philanthropists need to be willing to open their networks to entrepreneurs and innovators for opportunities. Also, open your ‘tent’ and give them a seat at the table and at convenings to collaborate on problem solving. “Use your power and voice to say publicly what can happen to do things better and pair with academia and regulators and industry leaders to make that change. It’s not just writing the checks and staying clear of messy things. Get involved!”
Lee believes in the power of the collective – community by community – and expanding definition of who is giving to include BIPOC donors who have different interests. These are additional ways to play the long game and use capital differently and creatively by underwriting loans, build buildings that benefit community-based organizations, invest in leaders or even spent down a foundation’s assets rather than just donate the 5% required by law each year.
Finally, the panelists were asked about fostering trusting relationships, collaboration & working with different entities – what does that look like?
Walton asks the audience to think about the size of the wealth transfer – $8.8 trillion in the next 5 years – and put it in perspective as it will become part of the capital that works in an economy to solve massive societal problems.
“Let’s use that capital and leverage it many ways for broader benefit. We have an opportunity in the United States to build a new system of economic opportunity.” For instance, there will be $1 trillion put to work by the govt in the next two years: $500 billion between the Inflation Reduction Act, IHA Infrastructure Act, CHIPs, and USDA’s $20 billion in climate smart ag plus the farm bill of $490 billion. The Walton Family Foundation created the PACT -the Platform for Agriculture and Climate Transition – to help work with congressmen around the opportunity creation and advocate for the direction of this money that will Influence thousands of acres of land and how food can be environmentally sourced.
“We have also collaborated with several foundations on water infrastructure and been able to get so much more done than we could do alone. And the problem is so massive we cannot do it alone.” The collaboration was able to collectively contribute $200 mil and used to advocate for billions of dollars in federal funding. “We are able to challenge federal dollars to be more effective in infrastructure spending to support regional economies and create economic resiliency in a more climate volatile future.”
Lee’s Radiant Strategies, a boutique consulting practice that aims to widen the lens of who is practicing philanthropy added “when we expand the notion of who is a philanthropist and what counts as philanthropy, the picture becomes much more varied, more biodiverse, more spicy, deeper, more truthful, more joyful. No longer a monoculture, the story of generosity in the US is much more vibrant when we seek to include BIPOC donors and collectives.”
Lee and a research team traveled to 10 U.S. cities to conduct 90-minute conversations with donors of color who had $1 million or more in cash on hand. The interviews drew a straight line from the donors’ personal experiences — completing higher education, experiencing racism, and grappling with economic inequality — to their philanthropic priorities.
“People of color who are givers are bringing a different set of priorities to the table from their own life experience,” Lee believes this changes both the agenda of philanthropy and what’s possible for the nonprofits they support.
Donors ranked both causes in their top five philanthropic priorities. Education was the most popular cause at 65%, social justice at 44%, closely followed by women and gender rights at nearly 40% and racial justice at 36%.
“We are seeing more trust-based philanthropy. MacKenzie Bezos and Melinda Gates are leading the way in this by practicing philanthropy differently –they are fostering trusting relationships and collaboration with program managers and allowing the people who are closest to the problem solve them. These philanthropists are giving away more and expecting less in tedious reporting. Trust the program managers and those on the ground taking the risk!”
What’s Next:
Since this panel, Jeff Bezos announced he would give away his $122 billion fortune stating “It’s not easy. Building Amazon was not easy. It took a lot of hard work, a bunch of very smart teammates, hard-working teammates, and I’m finding …that charity, philanthropy, is very similar.”
Giving away massive amounts of money is difficult as very few non-profits, outside of hospitals and universities, have the capacity to absorb large amounts of money. Solving the Giving Pledge Bottleneck author Sean Davis speaks to these issues in a Worth article entitled Reimaging Large Scale Impact Philanthropy. Capitalistic tools can and should be used to move the $12 trillion coming into the pipeline from now until 2045 to solve climate, clean water, energy and shortage of housing among other issues.
Larry Fink, BlackRock’s Chairman and CEO, wrote in a 2019 open letter stating companies and their CEOs must step into a leadership vacuum to tackle social and political issues when governments alone cannot address these issues.
Collaborating around commonalities and working with a ‘stakeholder’ mentality are just a few of the ways to solve the societal issues that confront us. Let’s move forward in incorporating the three p’s: philanthropy, public policy, and private corporations.