Savour International

Many affluent people have the urge to contribute money to a worthy cause. Members of the new generation of philanthropists tend to fund projects that aim to solve social problems via efficiently managed, socially beneficial business ventures.

Stephen Brenninkmeijer is actually more of a money magnet than a good guy. For many years, this offspring of the renowned C&A department store dynasty achieved outstanding yields managing a risk capital portfolio known as Andromeda (which also contained some of his family's assets) that invested in developing countries. Two years ago, the family successfully liquidated the portfolio.

Today, the Dutch-born Brenninkmeijer manages an NGO known as the Network for Teaching Entrepreneurship (NFTE), which aims to teach socially disadvantaged youth to build businesses.

Brenninkmeijer provides the project with financial and human resources, and regards it as more of an investment than a charity. "I'm still operating as a strategic financial investor, but in a social context," he says. Giving away money, runs counter to Brenninkmeijer's principles. The only difference between his current job and normal wealth management work is that the NFTE yields no financial return, but is beneficial to society. Some 3,500 students across Germany have participated in the programme thus far, and have learned skills such as writing business plans. Brenninkmeijer is a member of the Social Investors movement, which started many years ago in the U.S. and has been increasingly imitated in Europe. Social Investors are not philanthropists in the classic sense, but instead make investments based on the financial bona fides of a candidate project, as well as its potential for bringing about social change.

Numerous prosperous individuals from around the world have begun putting the principle of Social Investing into practice. These individuals include, besides Brenninkmeijer, the major BMW shareholder Susanne Klatten, the former Gea owner Otto Happel, SAP co-founder Dietmar Hopp, and Alexander Otto, a scion of the eponymous mail order company and head of the ECE. The watchword for Social Investors is "invest rather than donate". "We're interested not in giving money away, but rather in providing bootstrap assistance," notes social investor Dietmar Hopp.

01 | Before making a social investment, check to ensure that the project has a future-oriented approach that also addresses current problems.

02 | Another consideration is this: can the social business demonstrate that it will, or can, have a tangibly positive social effect such as creating new jobs?

Members of the new generation of philanthropists are social entrepreneurs who fund projects that aim to solve social problems via private enterprise. Germany lags far behind the U.S. in terms of relative numbers of social entrepreneurs. The reason: the German social-project sector has thus far been notable for its lack of transparency, with the result that most potential donors are totally unaware that such a thing called social investing even exists. And so what happens instead is that funds are funnelled into projects that serve no useful purpose – a phenomenon at least partially attributable to the fact that capital in the charitable sector has traditionally lacked transparency and has been disbursed inefficiently.

But all this may be about to change, as professional social investors are striving to bring the most promising projects to the attention of less well-heeled investors, thus affording them the opportunity to invest in accordance with guidelines defined by specialists. This is a major step forward for private investors, for they can now rest assured that their money will be channelled to the right persons or organisations, and will have an optimally beneficial social impact.

Nonetheless, the fact remains that the vast majority of donors fails to take key financial factors into consideration, and even the most hard-boiled businesspersons may be swayed by emotion in making charitable-giving decisions. "Most people make donations based on their personal feelings instead of taking efficiency into account," notes Mirjam Schöning, director of the foundation that was established by World Economic Forum founder Klaus Schwab.

Uncoordinated financial flows provoke chaos in the charitable-giving sector. Europe alone has more than one million charitable organisations and foundations that try to attract donors. This situation is particularly detrimental to the development and implementation of new approaches. According to a study conducted by the corporate law firm Linklaters, socially oriented businesspersons have tremendous difficulty raising funds to operate and develop their organisations. According to current estimates, a social entrepreneur needs to spend 70 percent of his time raising money, and loans and subsidies are hard to come by.

On the other hand, the unstructured and confusing state of the charitable-giving sector has thus far made it virtually impossible for potential donors to determine which projects are actually worthwhile – although in Germany, a series of organisations is currently attempting to provide support in this regard.