10x Multiplier On Philanthropy In Some Economies
10x Multiplier On Philanthropy In Some Economies

Worldwide philanthropy – both giving and volunteering — equates to just less than 3% of global gross domestic product (GDP) with cash giving estimated at $550 billion. However, according to data in the recently released “Citi GPS Philanthropy and the Global Economy” report, in some advanced economies the fully adjusted value is 10% or more. 

The scale of this contribution needs to be more broadly recognized, especially within the policymaking world. Many of the world’s greatest challenges can be better overcome by a broader partnership between the public, private, and charity sectors, according to the report’s authors.

“Philanthropy has many more assets at its disposal than we realize — cash giving is around $550 billion globally each year, but we estimate that investable assets total more than four times this amount globally,” according to Andrew Pitt, head of research for the Institutional Clients Group at Citi. “Better aligning these investment assets with their mission stands to unlock many more funds that could deliver the positive social impacts that the sector seeks,” he added.

There will also be material changes in the global supply of philanthropic capital driven by growing wealth in emerging economies. There are some notable other transitions, the most significant of which are the changing aspirations of younger donors; the growing role of female philanthropists; and, critically, the impact that technology will have on the management and targeting of philanthropy, the authors wrote.

Citi researchers calculate the current value of $2.3 trillion in money and time donated creates materially more in terms of total economic value. Due to a multiplier effect, services and activities enabled by donations and provided by charities create downstream economic benefits. The size of the multiplier varies greatly across regions, donation type, and charities but the total value of philanthropic activity could make up 10% of GDP in many economies.

While the number of donors continues to decline in the United States, the number of people donating money or volunteering around the world has been relatively stable during the past 20 years, the Citi data shows. There has been an uptick in helping strangers, especially during the pandemic, indicating charitable sentiment might be increasing.

Among the reasons for some optimism, Citi researchers estimate that 2.4 billion people will enter the middle class globally by 2030 and spending is expected to double to nearly $64 trillion. Shifting 0.5% of spending to charitable donations, increases annual donations by $319 billion per year.

Not only is there an intergenerational transfer of wealth but also from male to female. Women will inherit 70% of intergenerational wealth transfer by 2035, according to Citi’s researchers. Women are more likely than men to support equality, share giving across more charities

and sectors and make donations without restrictions, according to the report’s authors.

Researchers draw a sketch of the average donor by combining multiple studies outlining characteristics of donors. First, 67% of monetary donations come from individuals. Individual donors in the United States contribute almost 60% of the total cash donated globally by individual. Among other data points: Women are more likely to give to charity than men; a range of studies finds marriage increases donations; the likelihood an individual will donate increases with age; and, the amount of money donated is higher among those with greater wealth, though there is less of a correlation with annual income.

Of the challenges to philanthropy, the authors wrote that the cost-of-living crisis has been seen by many as potentially bigger than the COVID-19 pandemic. It will place additional strain on charitable services that are already stretched from supporting the pandemic recovery. Elevated demand is affecting not only health charities, but charities across the board. Likewise, a broad cross-section of civil society will likely see demand increase, not only those providing essential goods, according to the researchers.

Beyond unlocking investment assets for social purpose, the report’s authors also highlight the need to target a new group of donors, the digital asset givers. Donations in cryptocurrencies skyrocketed in 2021, with some data reporting between a six-fold and 12-fold increase in digital asset donations. 

The demographic profile of digital asset owners differs from the traditional donor. Digital asset owners are typically younger and male while traditional donors are typically middle-aged and female. This presents an opportunity to grow the stock of philanthropy, and potentially to democratize it globally, if digital asset owners turn some of their funds to giving. However, philanthropy practiced by digital asset owners looks different from traditional donors in terms of causes that are currently being supported, with a very heavy bias to environmental causes.