IN FOCUS6-8 min read

Giving like MacKenzie Scott

Having reportedly donated $2.2 billion to charity last year, MacKenzie Scott is making a name for herself as one of the world’s biggest philanthropists. It’s not just the amount she gives, but the way she gives, that is really making an impact.

17/04/2024
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Not many women can say their divorce has had a transformative impact on the planet and people across the world. But, since her split from Jeff Bezos, founder of Amazon, MacKenzie Scott has embarked on a journey of transformative giving. She has reportedly donated $16.5 billion since the divorce, helping almost 2,000 organisations and disrupting the status quo in philanthropy. It’s estimated that MacKenzie gave away about $6 billion in 2020, which experts say might be the most ever given directly to charities in a single year by a living donor.

It’s not only the amount she gives but also MacKenzie’s approach to philanthropy that makes her a trailblazer. On her blog, MacKenzie argues that giving should be “with full trust and no strings attached”. Indeed, it’s characterised by strategic giving coupled with unrestricted funding. Her style offers plenty of lessons to wealthy individuals and families looking to make an impact, even if you’re giving much smaller sums.

“The reason MacKenzie could give that money is because she was thoughtful about what she did,” says Lyn Tomlinson, Head of Philanthropy and Impact at Cazenove Capital. “She took good advice and used trust-based philanthropy.”

The power of unrestricted funding

Many donors like to fund areas and projects that they can see, such as a hospital ward, an animal sanctuary or a specific intervention. However, this can leave charities without the funding for their core needs such as salaries and office space.

MacKenzie’s philanthropic philosophy is rooted in trust. “By providing unrestricted funding to charitable organisations, she gives them the autonomy to allocate resources to the areas that will have the most impact,” says Lyn. Unrestricted giving recognises that charities are the experts in knowing the best way to further their causes. It allows organisations to adapt to changing circumstances, invest in capacity building and pursue long-term strategies that can yield transformative results.

“Philanthropists can put lots of restrictions on how their donations are used, but that can suffocate the team. It can limit the thing they want to see happen,” says Lyn. “Sometimes, you can have more impact by backing the people working at a charitable organisation, the same way that an investor does, because you believe in them,” she explains.

This movement is known as “trust-based philanthropy”. While donors have trusted charities for centuries, this relatively modern phenomenon goes further. It seeks to prevent charities from being starved of funding because they are constantly operating on short-term, project-based grants. Funders may choose to manage the accountability of a grant through streamlined, simpler, and sometimes conversational reporting to avoid grantees’ time being taken up by onerous oversight requirements. This does require increased engagement and collaboration between grantors and grantees, with the metrics of success often being jointly developed.

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MacKenzie Scott donated $20 million to Habitat for Humanity, a charity that rehabilitates slums and renovates empty spaces into safe homes and more.

Should you work with a philanthropy adviser?

Some of MacKenzie’s philanthropic success can be attributed to her collaboration with her charitable adviser, the Bridgespan Group. Rather than waiting for funding requests from charities, Bridgespan does its own research before reaching out to organisations itself.

A significant portion of MacKenzie’s 2023 donations appear to focus on housing organisations, including community land trusts, advocates for affordable housing and legal aid societies, which often represent tenants among other clients. When it comes to education, she has historically given large amounts to colleges and universities that many people have never heard of, that tended to serve regional, minority, and lower-income students, rather than giving to better-known and well-funded organisations.

High-net-worth individuals and families often have diverse philanthropic goals as well as complex financial situations. Engaging with experts in the field can help navigate the complexities and make sure resources are allocated for maximum impact.

Regardless of the causes you are interested in and the approach that appeals to you the most, others have probably trodden this path before. “There is a huge body of experience to draw from to understand how different organisations have approached these challenges,” Lyn says.

Even experienced donors can benefit from working with philanthropy advisers. For example, if you are thinking about funding a new area you may need some support to understand the issues in more detail and identify charities that are providing effective interventions.

We have a strong network of adviser contacts and are very happy to make introductions. Speak to your usual Cazenove Capital contact for more information.

Using trusts

MacKenzie makes all of her donations through her charitable foundation - the Yield Giving Foundation. There are plenty of benefits to putting your money into a charitable trust or foundation. The funds are placed outside of your estate and attract charitable tax relief. They face no inheritance tax or capital gains tax. Other benefits include legacy planning, privacy when donating, professional management, control and flexibility over how the funds are spent. However, trusts and foundations can require a lot of administration and trustees can take on plenty of personal liability. “Clients looking to establish a charitable vehicle should seek specialist legal advice to make sure they establish the right vehicle for their giving needs,” says Lyn.

For those looking for an alternative, many of the same benefits are available when using a donor-advised fund (DAF) without the administrative burden. DAFs are charitable giving vehicles that enable individuals to outsource the administration and operational complexity of running their own charity or trust, allowing them to focus on strategic giving to specific charities over time. DAFs can facilitate timely giving, with the same tax benefits available as giving directly to charity. They reduce the level of administration and give a higher degree of privacy when compared to setting up a charity. As a result, many more philanthropists have been turning to DAFs in recent years as the preferred vehicle for their strategic giving. For information on the Cazenove Capital DAF, please speak to your usual contact.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

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