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The issue of fundraising costs is always a tough one for the profession. It’s a very emotional issue, as we’re talking about dollars that donors have given away freely of their own will with the expectation that they’re supporting a charitable cause.

It’s also a very nuanced issue. As the old saying goes, it takes money to make money, and that adage is proven time and time again in charitable fundraising. Given all of the various factors that affect fundraising, it’s impossible to devise one universal, set-in-stone fundraising cost limit that would apply to all organizations.

Fortunately, governments are starting to realize this. For example, the Canada Revenue Agency, in its fundraising cost guidelines that were developed last year, specifically acknowledges that fundraising costs can vary dramatically annually and that organizations with higher costs aren’t necessarily unworthy organizations.

Unfortunately, some media outlets still don’t do the research or simply don’t have the interest to understand the nuances of fundraising costs. A good example is a recent article by the CBC on fundraising contracts by for-profit solicitors, or as the article terms them, third-party fundraisers.

There’s SO much to not like about the article—inaccurate comparisons between costs and funds raised, complete misunderstanding of the difference between fundraisers and solicitors, lack of discussion about telemarketing fundraising costs, and key information about the scope of telemarketing by solicitors buried in the middle of the article. AFP responded to the CBC with this letter, and has also developed some talking points that fundraisers can use for their own responses or when speaking with donors and members of the public.

The issue of fundraising costs is always a tough one for the profession. It’s a very emotional issue, as we’re talking about dollars that donors have given away freely of their own will with the expectation that they’re supporting a charitable cause.

It’s also a very nuanced issue. As the old saying goes, it takes money to make money, and that adage is proven time and time again in charitable fundraising. Given all of the various factors that affect fundraising, it’s impossible to devise one universal, set-in-stone fundraising cost limit that would apply to all organizations.

Fortunately, governments are starting to realize this. For example, the Canada Revenue Agency, in its fundraising cost guidelines that were developed last year, specifically acknowledges that fundraising costs can vary dramatically annually and that organizations with higher costs aren’t necessarily unworthy organizations.

Unfortunately, some media outlets still don’t do the research or simply don’t have the interest to understand the nuances of fundraising costs. A good example is a recent article by the CBC on fundraising contracts by for-profit solicitors, or as the article terms them, third-party fundraisers.

There’s SO much to not like about the article—inaccurate comparisons between costs and funds raised, complete misunderstanding of the difference between fundraisers and solicitors, lack of discussion about telemarketing fundraising costs, and key information about the scope of telemarketing by solicitors buried in the middle of the article. AFP responded to the CBC with this letter, and has also developed some talking points that fundraisers can use for their own responses or when speaking with donors and members of the public.

High fundraising costs are definitely an issue, and I have no problem with the CBC investigating them. In fact, I think it would be interesting to find out how many of these high-cost contracts involved percentage-based compensation, which AFP finds unethical. But it would also be nice to have some discussion of the role of telemarketing and the costs associated with it.

Those of us from the nonprofit world, especially those involved in fundraising, need to respond aggressively to articles like the CBC’s that paint an inaccurate and misleading picture of the fundraising environment.

Generally speaking, Hedge Funds are viewed as opportunistic investment vehicles using complex strategies involving a mix of assets and investment practices, while Sustainable Investing seeks to generate profit by integrating social and environmental factors into financial investing practice. The two are seldom considered together.

In fact, they are often deemed at odds with each other: Hedge Funds as evil while Sustainable Investing is good.

Recently, I have come to believe that aspects of Fundamental hedge fund investing may be consistent with, though distinct from, Sustainable Investing. Specifically, practices such as adoption of a long‐term investment horizon, consideration of off balance sheet risk represented by environmental and social factors, heightened transparency, a focus on governance and other investor considerations are synergistic.

How did I get here?

In 2008 when I first joined Uhuru Capital Management (an investment firm which offered a fund of hedge funds product and intended to allocate 25% of its performance compensation through a foundation funding nonprofits working to build the field of social entrepreneurship), we were focused upon making a commercial return for our limited partner investors and then using some of the Firm’s returns to make impact investments through our Foundation. While interested, we were not focused on Sustainability.

But as the firm staffed up and fully launched in 2008, a funny thing happened on the way to the capital markets—well, actually, not so funny in that those markets imploded! Suddenly institutional and individual investors who had been making consistent returns had lost twenty, thirty and forty percent of their assets; while some portfolios of “social investments” returned four to six percent (which was a bit of a shock for mainstream investors now being told the new “up” was a 20% loss!). Last fall, the financial world as defined by traditional measures of risk and return was rolled on its head—and we saw how intricately social capital was woven through supposedly “objective,” rational markets with the rise of investor panic, market uncertainty and, in some cases, a betrayal of trust shutting those markets down.

As Uhuru Capital Management was a start-up, we were not yet invested in the 3rd quarter 2008. While we waited for the dust to clear, our CIO and I began a dialogue regarding the nature of Fundamental hedge fund investing practices. As we explored those practices and I learned more about how he approached hedge fund investing, I was struck by how many of the aspects of Fundamental investing (as described to me) were similar to investing practices of Sustainable finance. Not the same, mind you, yet quite similar nevertheless.

Simultaneous to this internal dialogue, an external dialogue evolved with investors that Uhuru was engaged with around our work. These investors raised a related question: While they appreciated the attributes of our core Fundamental strategy, they asked if we couldn’t create a truly “sustainable” fund of hedge funds product. What they sought was a “Long/Short” investment strategy pursued in a manner consistent with an investor’s commitment to Sustainability. Was such a thing possible?

These conversations became the genesis of a paper I then wrote to explore that question: Beyond Good vs Evil.

Now, I do not believe Fundamental hedge fund investing alone meets the sustainability bar for many investors. I do not believe Sustainable investing alone will save capital markets and asset owners from their worst inclinations as either individuals or investors. Yet I continue to believe it is worth exploring the various ways sound mainstream investing practice and Sustainable investing are in fact two parts of a single, evolving pursuit of Value.

What I sought to present in the paper was not “an answer” to the challenge Sustainable investing poses to hedge fund investors, but rather a set of questions and issues I believe worthy of our attention. If you do get a chance to read it, I would appreciate your feedback.

With the interest surrounding the recent investigation of the City Harvest Church in Singapore, I have been pulled into quite a few discourses on the subject of churches as charities.

It seems to me that the subject can be tackled on two levels: general (should churches be charities?) and the specific (which churches should not be charities?).

In this blog post, I will focus on the general question: Should churches or, for that matter, religious organizations, be designated as charities?

My short answer is: theoretically, “no,” but, practically, “yes.”

Let me explain.

For the theoretical answer, we need to go back to an understanding of what charity means. If you ask the man in the street, he will likely say that charity is about helping the poor, the disadvantaged and the needy of society. This is the most common understanding of what charity is about.

Using this yardstick, it is hard for most churches (or religious institutions) to qualify as charities. To be sure, church congregations include some, maybe even many, who are poor and needy, but that is just a coincidence. Membership of churches is not based on an individual’s particular station in life; rather it is based on a person’s subscription to certain religious beliefs.

Of course, many religious organizations are charitable in that they can be kind and giving towards the poor and needy – they raise money from among their followers to give to the poor and needy, and they have specific programmes such as shelters and soup kitchens for those in need. In such cases, these particular arms of religious institutions can properly qualify to be charities, but not the main institution which caters to a more diversified membership base.

Why, then, do the authorities generally allow a church to register as a charity?

The answer is historical. Sharifah’s chapter on “Different kinds of kindness” in the book provides a good historical account of how the definition of charity has evolved.

The significance of this legal definition is that the reach of charity was expanded from being merely about the alleviation of poverty (the first category and what most people understand charity to be) to include all and sundry causes that benefit the community. Over time, Commonwealth governments have used the last category (“other purposes beneficial to the community”) to specifically add new causes. For example, Singapore added sports as a charitable cause in 2005.

There are, however, unintended consequences of broadening the definition of charity. First, community resources and support that could have benefited the poor are diverted to other more glamorous but non-poor causes. Secondly, it reduces the accountability and due process for public projects that obtain money under the charity umbrella. (See here for a further read on this)

The reason for including religion as a major category of charitable clauses was that, at the time of the Act, much of the charitable work of providing for the poor and needy were being done by the Church of England. The government and the courts saw benefit in extending this feature and provided recognition for the Church’s efforts.

Today, the situation has changed; we have a plethora of churches and religious organizations. Most are not targeted specifically at helping the poor and needy and, some are arguably not even good for the community. In such a context, one can make a strong case for excluding religion from being a charitable cause.

But, in my opinion, it would be wrong to narrowly target religion for exclusion as a charitable cause.

If religion is excluded – meaning we revert to the layman’s notion of charity as helping the poor and needy – we need to also exclude sports, the arts, heritage, animals, education, environment, healthcare and a whole gamut of other causes of “community good” that have grown over time in the broad-based legal definition of charity. In my view, many of these other causes should go first before we remove religion.

As long as we do not change the legal definition of charity from the community good to only being about the poor and needy, we should keep religion as a charitable cause. Most religions do exist for the community good. They mostly preach goodwill and kindness towards our fellowmen and their leaders are generally selected for their good human qualities. Of course, some do not meet these criteria, but that’s when we get into a discussion about which specific religious organizations should not qualify to be charities.

Once, when Ashoka Fellow Karen Tse, founder of International Bridges to Justice, was speaking in Singapore, she was asked, “Which quality have you had to develop the most during your journey as a social entrepreneur?” Karen paused, then replied, “radical self-affirmation.”
           Radical self-affirmation—Karen’s striking words express an idea we should all consider. For one who wants to make a better world, to be a changemaker, the right attitude is central to success.
            What is this attitude? I would say they are:
–          Give permission
–          Define yourself
–          Believe
            The first part is granting yourself permission to do big things—to confront a pressing human need, see a solution, and say I will allow conscience and intuition to inspire me.
            There is no ritual to giving oneself permission; no single solemn declaration. Instead it’s a habitual resolve to focus attention on what is right, constructive, effective, rewarding.
          During start up, reasons for not taking action will attack from every angle: you’ll starve; you’ll put your career at risk; you’re not an expert; the problem cannot be solved; you are led astray by idealism. Other objections are downright demoralizing, especially if such doubts come from within: Why do you think you can solve this when no one else has? What makes you so special that you can fix this? Can you handle the disapproval and conflict that will inevitably arise?
            Self permission means resolving to answer, ignore, or overcome these doubts, knowing they sprout from a fear of failure.
            Inaction is to be feared far more than failure, which is a patient teacher. So every changemaker should meditate on the question: have you given yourself permission to take on and accomplish something great?
            The second attitude is defining yourself.
            Following conscience can lead to great opportunities. The citizen sector is a wonderfully open space. The sector is growing, so there is today an exciting admixture of skill, background, and experience. Having the right attitude means defining who you are in this environment.
     Will you enter the field as an equal contributor to its great efforts and conversations? Even as a novice, could you imagine your part—perhaps sharing some existing skill or knowledge or insight?  At a summit of the world’s top practitioners, would you delight in discourse and dealmaking, or escape to a backbench seat?
            The third attitude is to believe in yourself and your dream.
            Belief that change is possible is the nucleus of social impact. Belief allows us to pose ambitious goals and expect to meet them. Consider two hypothetical vision statements in urban housing:
–          “To improve housing conditions in urban slums”
–          “To transform all slums into thriving, secure communities”
      The first vision hopes for mere improvement, not transformation. A path is assumed, along which only modest steps may be taken. By contrast, the second statement is full of optimism and offers an image of the future. Belief is the agent that enables the latter kind of vision.
            All changemakers want to have a pattern-changing impact on the real world. Just as real is the attitude you need to cultivate to do that. Habitually affirm to yourself that change is possible and that you have an important role to play. And grant yourself permission to seek great impact. Only you can do that – nobody else.

Globalization, long-term demographic trends, changing consumer preferences, and the state of public finances are driving the emergence of an “Impact Economy” for the first time in human history.
   Analogous to the New Economy, the Impact Economy will fundamentally transform business, the public sector, and civil society: A multi-trillion dollar integrated social capital market; companies who seek authentic engagement instead of PR-focused corporate social responsibility; and private risk capital funding the design and delivery of public goods are around the corner.  
   The financial crisis and the recent G-20 commitment to reducing public debt levels will accelerate the transition.
    Many new ventures and projects are under way to cover subsets of the Impact Economy. Beyond philanthropy, take microfinance, bottom-of-the-pyramid investments, clean energy and social investment banking.
   It feels like the early days of a gold rush. As in any innovation phase, some firms will succeed and grow. Many will fail without ever reaching scale.
    Meanwhile, the Impact Economy will change the way we consume, invest, and work.
   For more thoughts on the Impact Economy, see paper.

Giving away $100m

“If you had $100 million to give away, what cause would you give it to? And why?”
   This was the closing question that moderator Jenny Santhi of UBS posed to the panel at a UBS-INSEAD Forum on Philanthrocapitalism this past April.
   It was an interesting question. It was totally unplanned and our responses were equally spontaneous.
   Matthew Bishop, author of Philanthrocapitalism: How giving can save the world, said he would invest the money in data. Coming from the number-crunching financial world, he finds a dearth in the quantity and quality of data in the social sector. He believes that such data, if readily available, can make a significant difference to the quality of giving and the actions taken in the philanthropic and social space.
   Pushan Dutt, Associate Professor of Economics & Political Science at INSEAD, said he would use it to fund causes that are “less glamorous” and therefore attract less attention. He suggested oral re-hydration tablets for diarrhea.
   Mathias Terheggen, global head of UBS Philanthropy Services, said he wouldn’t tell anybody that he had $100 million to give away. He would get a professional to advise him and he would spend considerable time trying to figure out what he really cares about and wants to focus on in a targeted way. In doing so, he would also think about what else he can bring to the table, beyond the money, in terms of skills and capacity to make his effort impactful and sustainable.
   Me? I said that rather than a specific cause, I would put it into a fund that I would name the St. Jude Fund, after the patron saint for desperate cases and lost causes. I have seen far too many worthwhile causes such as human rights and migrant workers (both of which were mentioned by the audience earlier) that continually struggle to get the necessary money to operate. I would then find a few smart and empathetic people, put them in charge of the Fund, have them make a call for applications and let them distribute the money to those they deemed most worthwhile but that are unable to find funds from other sources.
   Of course, I am also hoping that the Fund trustees will give me some money if I need, since, as my wife will vouch, I, too, am a lost and hopeless cause.

Live Life

In the Singapore Straits Times recently, it was reported that there were 401 suicides last year compared to 364 a year ago – more than one a day. Samaritans of Singapore identified the 20-29 age group as “high risk” – 51 took their own lives, almost double the number from a year before. The increasing rate of suicides, especially among the young, is an increasing problem of developed societies like Singapore.
                I personally struggle with why these people who are jut beginning life are so desperate as to take their own lives. I wish I can advise them otherwise.
                Some friends of mine suggest that perhaps some are badly in debt and cannot see their future as bankrupts. Or they may be heartbroken over unrequited love. Or they may not want to face up to mistakes they have made. We all make mistakes but we should learn from our mistakes and get on with life.
                I believe that it is the feeling of self worth that makes a person do foolish things. We need to have a greater sense of self worth. The worst thing a person can do is to depend on other people’s perception for their worth. Doing that is allowing other people, including those with bad values, to define who we should be. It should always start with each of us. We should look at ourselves and start counting our blessings.
                The majority of us with the blessing of sight, hearing and mobility should realize that it places us way ahead of the many who are disabled. If persons with disabilities can face the challenges of living, then surely those of us with sight, hearing and mobility can do better.
                Do we judge ourselves by our possessions?  What is the use of having lots of material things but to be heavily indebted because of the overuse of credit? During the economic recession, the richest people were those who were debt free or had little debt. After all, one does not need much to have a decent life. It is not the material things which bring happiness. There are few things which we need in order to have a life – nourishment, shelter, and clothing are the main items. Most other things like cars, big houses, annual holidays and branded goods are nice to have, but they are not essential.
                People allow themselves to feel depressed when their relationships break up. They are heartbroken. That surely is self inflicted torture. Usually depression results from having formed a crutch on another individual and then feeling betrayed, feeling regret from that attachment. Love cannot be forced on others. We should love freely and true love should not be conditional upon the response.
                I find it tough to imagine what can possibly be so bad as to drive a person to suicide. I may go into a period of depression and desperation if I were to suddenly lose my sight. But I will eventually snap out of it and get on with life. After all there are millions of visually impaired persons coping well with life.
                I wish everyone will start off the day counting their blessings and be grateful for them. Waking up in the morning with sight, hearing and mobility should be enough to make us happy and be mentally ready to face the challenges out there. Mental states are usually a reflection of our choice of thoughts. Why choose depressing thoughts when there are so many things to be happy about. Live mindfully. Appreciate that cup of coffee, bowl of noodles, the smile of a child, the wave of a neighbour – we are surrounded by happiness. The sprouting of a new blade of grass gives hope as it is life after being trodden on. A butterfly bursting through its cocoon, tadpoles hatching from eggs almost invisible to the eyes, – there is life all around us.
                I wish I can tell those who commit suicide before they do: Don’t give up your life just like that.