Issue 67, December 2015

Philanthropy News

Starting out youngHow one school gives

Keeping it close to homeBuilding community connections

Responsible investmentMore than carbon footprints

Latest findings on giving in New Zealand

Measuring Kiwi generosity

The magazine of Philanthropy New Zealand

2

From the Chief ExecutiveTēnā koutou

Welcome to the latest issue of Philanthropy News

– the last one for 2015.It’s been a busy and

inspiring year for us, and it’s finishing on a high note with the release of the latest update of Giving New Zealand, our regular report on philanthropic funding.

As you can see from the article on page 6, New Zealanders continue to be a generous lot – in fact, according to the latest figures from the Charities Aid Foundation, we’re the third most generous country in the world.

You can read a summary of the findings of Giving New Zealand 2014 in this issue of Philanthropy News or download a copy of the full report from our website: www.giving.org.nz.

One way of ensuring that we stay a generous country is by encouraging giving among our young people. Dilworth School in Auckland is doing this through its School Aid programme, which gives students the chance to make real-life investments then use the returns for philanthropic purposes. You can read about this unique programme on page 11.

However, we still have more to do to address the social issues that make life difficult for too many New Zealanders and to achieve Philanthropy New Zealand’s vision of a thoughtfully generous Aotearoa/New Zealand. To that end, we are finalising an ambitious new strategy that will guide our activities through to 2018. We will announce this new strategy very soon.

I’d like to take this opportunity to thank all of our members, our sponsors and our partners: you’ve helped make 2015 a landmark year for Philanthropy New Zealand and we couldn’t have done it without you.

I wish you all a happy and restful festive season and I look forward to working with you again in 2016.

Contents

The articles in Philanthropy News do not necessarily reflect the views of Philanthropy New Zealand.Magazine design and layout by Fortyfive Design Studio Ltd. This magazine is printed on sustainably sourced paper.

3 News & EventsThe latest news and events from Philanthropy New Zealand.

6 Measuring giving in New ZealandThe latest update of Giving New Zealand, our regular report on philanthropic funding, has found that New Zealanders continue to be a generous lot.

8 Keeping it close to homeResearch shows that connected communities are closer and safer, but how do you build those connections? We look at the different approaches being taken by two of our members.

10 A life dedicated to givingNew Zealand lost one of its pioneering philanthropists when Sir John Todd died in Wellington in July at the age of 88.

11 Starting out youngDilworth School runs a unique programme that allows students to make real-life investments – then use the returns for philanthropic purposes.

12 Lessons from the last 10 years Philanthropy New Zealand board chair, Kate Frykberg, reflects on what she learned during 10 years heading the Todd Foundation.

14 Busting the myths of responsible investment AMP Capital looks at how Environmental, Social and Governance (ESG) analysis can lead to better investment outcomes, and breaks down a few myths surrounding ESG.

Liz Gibbs

3Philanthropy News | Issue 67

News & Events

Return visit for Audette ExelWe’re delighted to announce that Audette Exel, the inspirational closing keynote speaker at the Philanthropy Summit 2015, is returning to New Zealand next year. She will take part in events for grantmakers in Queenstown on 13 June and in Auckland on 15 June 2016.

Audette is co-founder of the Adara Group, a philanthropic business in which profits from the group’s corporate finance arm fund a non-profit foundation that provides health, education and other essential services to thousands of women and children living in poverty in Nepal and Uganda.

The foundation works in everything from mobile healthcare to anti-trafficking projects. Adara has used more than $26 million in donations to help more than 100,000 Nepali and Ugandans. Of that, more than $7.6 million came from Adara’s business arm.

Audette, who was named a World Class New Zealander by Kea New Zealand in July, has worked in the world of corporate finance for many years and she believes that corporate philanthropy is the way of the future.

“The 80 richest people on the planet own the combined wealth of the bottom 3½ billion,” she says. “That’s what keeps me going. There is so much to do in the world. If not us, who?”

John Prendergast’s top 10 leadership observationsMany of you were lucky enough to attend one of the seven seminars on innovative philanthropy featuring 2015 Winston Churchill Fellows John Prendergast and Lani Evans in October and November. The information they shared included the following observations from John, CEO of the Community Trust of Southland, about leading a philanthropic trust or foundation:

1. It’s a privilege: Leading a philanthropic organisation gives you some incredible opportunities – make the most of them.

2. Always think as though you are in spend-down mode: Even if your organisation has been set up in perpetuity, that’s no excuse for sinking into inertia.

3. Lead by listening: It’s particularly important to listen to the “small voices” – the groups you fund that are doing the hard work out there in the community.

4. Be curious, courageous, bold and brave: Being a grantmaker gives you a fantastic licence to be all four of these things.

5. Be careful that you don’t become the foundation: It’s up to the trustees to decide whether they want their CEO to cut a dash – or not.

6. Recognise that you have few external drivers and actively listen for what’s happening: Trusts and foundations have no shareholders, no real customers, and very few who might complain about a funder. They are also run with a relatively light regulatory hand, so it’s important to stay tuned and listen for feedback.

7. Help your board and staff to work well as a team: The lines between governance and management in the philanthropic sector are often blurred, which means teamwork is essential.

8. Trust the groups you work with: It’s easy to start feeling cynical about your grantseekers. Resist that temptation and, instead, work closely with them to forge deep relationships.

9. Even out the unequal conversations: Being a grantmaker is a bit like playing a game of Battleships, with both of you behind your separate screens. It’s time to put the screens down and meet as equals.

10. Use all the gathered weight of your trust or foundation: Grantmaking is about more than writing cheques. You need to make the most of all your strengths – your brand, your reputation, the skills of your trustees, your administrative and organisational expertise, and your ability to convene.

Audette Exel with some of the trafficked children the Adara Foundation has helped rescue.

Kathleen Enright of GEO to head downunderKathleen Enright, the dynamic CEO of the US-based Grantmakers for Effective Organizations, is coming to New Zealand next year as a keynote speaker for the Combined Community Trusts Conference being held in Christchurch in April.

Kathleen has very kindly agreed to join us for an event in Auckland on 19 April where she will talk about the recent GEO publication The Source Codes of Foundation Culture. It looks at the factors that affect the cultures of grantmaking organisations and how that culture drives – or impedes – the work they do.

4

JR McKenzie becomes a Living Wage employerThe JR McKenzie Trust has been funding the Living Wage Movement since 2013, and it has now taken that commitment a step further by become an accredited Living Wage Employer itself.

Executive director Iain Hines says the Trust supports the Living Wage Movement as part of its wider commitment to reducing child poverty in New Zealand.

“The living wage is yet another way to improve the life chances of low-income children and families, because poverty is not just an issue of being on the benefit – there are lots of children who fall under the definition of being poor but whose parents work.”

He says the board decided they wanted to demonstrate their commitment to the importance of paying a living wage – currently $19.25 an hour – by going through the accreditation process. The JR McKenzie Trust is now one of 40 accredited living wage employers and organisations.

“We don’t have a large workforce, and we don’t employ the kinds of roles that are paid at or close to the minimum wage. But we wanted to show that we were prepared to walk the walk.”

He says other Philanthropy New Zealand members may want to consider doing the same.

“If it aligns with their vision, then it’s one way you can show your support for building a better New Zealand for low income families.”

Another community trust rebrandsThe Canterbury Community Trust has joined its Auckland counterpart, Foundation North, by changing its name.

The Christchurch-based trust which funds organisations in Canterbury, Nelson, Marlborough and the Chatham Islands, is now known as the Rātā Foundation. The new name is inspired by the southern rata tree and is intended to better reflect the foundation’s wide geographic reach.

The Rātā Foundation and Foundation North (previously the ASB Community Trust) are the largest of the 12 community trusts that were created in 1988 when the government restructured the trustee savings banks. According to our new report, Giving New Zealand 2014, between them the two organisations account for 68% of all donations by community trusts.

Living donors support the Waikato environmentLifelong environmentalists John and Bunny Mortimer have become Momentum Waikato’s first “living donors” after creating a permanent fund of $100,000 to support the Taitua Arboretum on the outskirts of Hamilton.

Interest generated by the fund will be used to help develop the arboretum which the couple first started planting on a 50-acre family paddock in 1973, then gave to the people of Hamilton in 1997. They have also asked Momentum Waikato to distribute another $20,000 to five conservation charities in the region.

Momentum Waikato’s chief executive Cheryl Reynolds says “living gifts” rather than bequests mean donors are able to see the results of their generosity while they are still alive.

“The Mortimers were thrilled to discover that 100% of their giving through Momentum will make a difference during their lifetimes and beyond.”

Momentum Waikato, one of New Zealand’s 13 community foundations, has also appointed two new trustees, Niwa Nuri and Pam Roa. Niwa is Chair of Trust Waikato, while Pam is a former trustee or Trust Waikato. And it recently launched its new website: www.momentumwaikato.nz.

From left: Waikato environmentalists and living donors John and Bunny Mortimer with Cheryl Reynolds of Momentum Waikato at Taitua Aboretum.

5Philanthropy News | Issue 67

News & Events

Philanthropants help the bottom lineWairarapa sisters Josie and Sophie Bidwill have been selling their 100% organic cotton “Thunderpants” since 1995 and they now produce 30,000 of their famously comfortable undies every year.

This year they launched a new line – Philanthropants – with the aim of taking their already generous support of local businesses and Kiwi charities to the next level. In March and April they teamed up with All Good Organics, which imports and sells Fairtrade bananas, to support Wellington-based food rescue organisation Kaibosh.

Josie and Sophie produced a one-off run of banana-themed Philanthropants and donated $5 to Kaibosh from every pair sold – a total of $2899. At the same time, All Good Organics gave Kaibosh matched funding in the form of a bunch of bananas for every pair of Philanthropants sold – a total of 590 bunches.

Next up for the philanthropic sisters is a special run of Philanthropants to support Kokomai, a creative festival held in the Wairarapa every two years. The most recent festival was held at the end of October.

The latest line of Philanthropants features the Kokomai logo and is available both online and through the stores that sell Thunderpants.

Generosity is integral to the sister’s business. At the end of last year they sent 400 pairs of men’s and women’s Thunderpants to the Samoa Victim Support Group, and in February they gave 30 pairs to the OUTline team to sell at the Big Gay Out to support their 100% OK campaign.

“We support a lot out there in the community – not a day goes by when we don’t get asked for something,” says Josie.

Nikau Foundation expands on all frontsThe Wellington-based Nikau Foundation has doubled the amount of endowment funds it manages in the last 18 months, and is looking to grow further.

This growth in funds has had a domino effect on the organisation, leading to the expansion of its Board,

plans for extra staff and a highly successful grants round. Nikau distributed $300,000 in its most recent grants ground, supporting a wide range of organisations in Wellington, the Hutt, the Kapiti Coast and the Wairarapa.

The Foundation has also appointed several new trustees, including

former MFAT head John Allen, leading employment lawyer Susan Hornsby-Geluk, former head of the Wellington Multi-Cultural Council Pancha Narayanan and wills, trusts and estates lawyer Greg Kelly.

Board chair Chris Milne says donating to a community foundation like Nikau makes giving easy.

“The benefits of giving in this way is overwhelming. We relieve donors from the need to manage investments, produce accounts, undertake an audit, file tax returns, register as a charity and maintain trustees.”

Pancha Narayanan

Banana-themed Philanthropants raised almost $3000 for Wellington-based food rescue organisation Kaibosh.

SAVE THE DATEOur events planning for 2016 is now well underway and we will be announcing the programme early in the new year. We do have some events already confirmed, so mark them in your diaries now:

Leadership for Social Innovation24 to 27 May (Venue to be confirmed) This 4-day residential course for mid-career and senior managers will give you the skills to help your organisation become more innovative, more collaborative and ultimately more effective.

Governance & Investment2 to 4 August, Wellington Our popular workshops for trustees will once again feature a one-day event specifically for board chairs.

www.thunderpants.org.nz

6

New Zealanders have maintained the outpouring of generosity sparked by the Christchurch earthquakes of 2010 and 2011, according to Giving New Zealand: Philanthropic Funding 2014.

The report, based on research commissioned by Philanthropy New Zealand and carried out by BERL, has found that total giving in 2014 was almost identical to the revised estimate for 2011 – $2.788 billion in 2014 compared with $2.789 billion in 2011.

Giving New Zealand is updated every four or five years and provides a “shapshot” of philanthropic giving during a single financial year. It measures giving in three main areas: personal giving, giving by trusts and foundations, and business giving.The last report, Giving New Zealand 2011, found that, thanks to a massive spike in giving prompted by the Christchurch earthquakes, total giving in New Zealand in 2011 was double that of 2006. Giving New Zealand 2011 found that New Zealand businesses alone gave at least $20 million immediately following the earthquakes – almost 20% of total estimated business giving for the year ended June 2011.

Philanthropy New Zealand chief executive Liz Gibbs says it would have been easy for New Zealanders to scale back their giving following the earthquakes. However, the findings of Giving New Zealand 2014 show that did not happen. Instead, we continued to give at the same level.

“Our response to the quakes set the generosity bar very high – we opened up our hearts, our homes and our wallets for those whose lives were devastated by the earthquakes. So it’s particularly pleasing to find that total giving during 2014 was almost identical to total giving during 2011 – despite the lack of a natural disaster to prompt our generosity.”

Main findingsTotal giving in 2014 was $2.788 billion. Of this the largest component is personal giving, which accounted for more than half of all giving in 2014. Giving by trusts and foundations is the second largest component, with business giving accounting for the remainder. The table below provides a more detailed breakdown of giving in 2014, and compares it with giving in 2011.

Measuring Kiwi generosityThe latest update of Giving New Zealand, our regular report on philanthropic funding, is now available, and the findings show New Zealanders continue to be a generous lot.

Breakdown of giving in 2014Source: BERL

Trusts and Foundations 42%, ($1,180.8 million)

Personal 55%, ($1,530.1 million)

Business 3%, ($77.2 million)

Total giving in New Zealand, 2014 and 2011 snapshotsSource: BERL

2014 estimate $million

2011 estimate $million

Personal givingDonations

Bequests

1,373.0

157.1

1,424.2

122.0

Sub-total 1,530.1 1,546.2

Trust- and foundation-based givingVoluntary

Family and individual trusts

Universities and other TEIs

Statutory

Community trusts

Energy trusts

Licensing trusts

Gaming machine societies

Lottery Grants Board

263.8 11.8

105.4

265.3

3.0

300.7

230.9

275.1 11.5

103.4

242.5

3.7

312.3

196.1

Sub-total 1,180.8 1,144.6

Business and corporate givingBusiness and corporate giving 77.2 98.6

Sub-total 77.2 98.6

Total: All classes 2,788.1 2,789.4

Total Giving $2.788 billion

2014

7Philanthropy News | Issue 67

Breakdown of trust- and foundation-based giving in 2014 and 2011Source: BERL

Personal giving Personal giving decreased by 1% between 2011 and 2014 – from $1,546.2 million to $1,530.1 million. Within this category, personal donations fell by 4% while the amount given through bequests increased by 29% – from $122 million in 2011 to $157.1 million in 2014.

This increase is thought to reflect a growing awareness of this kind of charitable giving through marketing campaigns, and programmes such as Perpetual Guardian’s Giving@PerpetualGuardian which actively encourages people to leave a bequest or legacy in their will.

Many thanks for the generous funding for this report from: Perpetual Guardian, BayTrust, Community Trust of Southland, DV Bryant Trust, Eastern & Central Community Trust, Foundation North, J R McKenzie Trust, Rotorua Energy Charitable Trust, Wayne Francis Charitable Trust and Wellington Community Trust.

Get your copyCopies of Giving New Zealand: Philanthropic Funding 2014 can be downloaded from our website: www.giving.org.nz. We also have a limited number of printed copies available. Contact Philanthropy New Zealand on 04 499 4090 or email info@philanthropy.org.nz.

Donations 90%

Bequests 10%

Breakdown of personal giving in 2014Source: BERL and Nielsen

Business givingBusiness and corporate giving decreased by 22% between 2011 and 2014 – from an estimated $98.6 million in 2011 to an estimated $77.2 million in 2014. According to Giving New Zealand 2011 at least $20 million of the 2011 total is thought to be related to giving following the Christchurch earthquakes.

It’s also interesting to note that while the amount of philanthropic giving by businesses is small compared to other types of donors, for every $1 they give in cash, they give an estimated $1.43 in sponsorship and $3.27 in donated goods and services.

Giving by businesses 2011–2014Source: IRD, BERL

Year to 31 March

Donations made ($m)

2010 58.6

2011 98.6

2012 77.5

2013 70.3

2014 77.2

Giving by trusts and foundations increased by 3% between 2011 and 2014 – from $1,144.6 million to $1,180.8 million. Just over three quarters (77%) of this giving was from statutory sources: community trusts, energy trusts, licensing trusts, gaming machine trust and

the Lottery Grants Board. Giving from these organisations increased by 6% between 2011 and 2014.

The remainder was from charitable family and individual trusts. Giving by these organisations decreased by 4% between 2011 and 2014.

Trust- and foundation-based giving

8

Keeping it close to homeResearch shows that connected communities are closer and safer, but how do you build those connections? Two of our members are taking quite different approaches to find out what works.

Every Thursday morning a group of Kawerau residents meet at a local reserve and head off for a two- or three-hour walk.

When the walking group first began it was small and required a lot of input from Hannah Edwardson, community co-ordinator for a Kawerau-based project called Neighbourhoods of Healthy Homes (NoHH) set up in 2012 with funding from BayTrust. Now the group operates independently, attracting between 8 and 18 walkers of all ages every week.

“They decide where they’ll go on the day – someone might suggest a place they’ve been to at the weekend,” says Hannah. “They just potter along, and sometimes play games along the way.”

They also talk about food and how to cook cheap, nutritious meals, and

those conversations have inspired another community activity – a monthly cooking class where up to 18 people learn how to make a wide range of foods using ingredients paid for by NoHH. “A couple of months ago we made

pizzas from leftovers in the fridge and they looked really fancy,” says Hannah. “It helped people realise what you can do if you have a bag of flour in your cupboard.”

The walking group and the cooking classes are just two of several regular community activities now taking place in Kawerau – a town of almost 6500 people with high levels of social deprivation – as a result of the NoHH project. Others include regular DIY classes run by NoHH energy advisor and DIY-whizz, Phil Richards, as well

as a series of street barbecues and get-togethers.

There’s even been an alleyway beautification project initiated and carried out by a group of Kawerau neighbours. Using materials supplied by NoHH they turned a previously rundown alleyway into a safe, clean and attractive route for locals to get into town.

NoHH project manager Mary Hermanson says the group are now completely responsible for maintaining the alley. “Two neighbours in that street have the special cleaning fluid you need to wash off any graffiti, and they make sure it stays looking good.”

It’s an example of the power of neighbourhood in action, and one that Megan Courtney of Inspiring Communities wants to see more of.

Left (top and bottom): Before and after shots of an alleyway that was cleaned up by a group of Kawerau residents as part of the Neighbourhoods of Healthy Homes project. Right: The Kawerau walking group attracts up to 18 people of all ages every Thursday morning.

9Philanthropy News | Issue 67

The retrofitting programme has also benefitted from more intensive community engagement. So far 260 homeowners have had energy and maintenance checks, and 54 have opted to have the insulation installed.

That’s a much higher uptake than in other low-income areas, and the

project has been so successful that both the Bay of Plenty and Lakes District Health Boards have changed their retrofitting programmes to include more community engagement.

Taking it small At the other end of the country the Community Trust of Southland is also actively involved with community-led development, most recently experimenting on a small scale. In 2013 the Trust gave $10,000 to a local organisation called South Alive so it could provide grants of up to $1000 for community-led projects.

So far they have allocated grants to upgrade a walkway between a local school and a nearby road, to set up two 10-week fitness programmes at a local park, and to help a church establish a community vegetable garden.

South Alive coordinator Janette Malcolm says they have found it surprisingly difficult to get people to apply for the money, despite a range of marketing initiatives including leaflet drops, posters, articles and some direct targeting in South Invercargill.

The Trust’s grants manager Diane Williams agrees that it has been harder than they expected to get the message out. “We really want to reach people who don’t normally apply for grants – that’s the challenge of it.”

And while she’s more than happy with the projects that have emerged so far, she’d definitely like to see more of them.“We took this opportunity when

it came along because we wanted to get some insights into how we might engage more closely with the community. We’ll keep reviewing it

– it’s very much a work in progress.”

She says there’s a growing awareness that healthy neighbourhoods help build healthy communities.“Neighbourhoods are the building

blocks of towns and cities and regions – people feel a much closer identification with their parks, their school or their shops than they do with their city.”

Her organisation, which promotes community-led development to build strong, self-sustaining communities, welcomes the growing willingness by funders to provide both small “seed” grants as well as high-trust, flexible funding so local people can develop projects that will work best for them.

The funding for NoHH falls into the latter category. The project was established with a $400,000, three-year grant from BayTrust, and support from both the Kawerau District Council and Eastern Bay Energy Trust.

A different approachIt’s different from many community- led development projects because it combines two quite different aims. The first is to encourage a greater sense of community in Kawerau. The second is to help people make their homes warmer, drier and healthier by taking part in the Warm Up NZ retrofitted home-insulation programme, as well as offering advice on home maintenance and wiring issues.

BayTrust’s Senior Policy & Community Investment Advisor Terri Eggleton says it was the first part of the project that particularly appealed to the trustees, who were keen to

support a community-led project and had put aside funds to pay for such a project. “The retrofitting on its own wouldn’t

have been enough – it was the community-led development aspect that really triggered the trustees’ interest. They wanted to help create

better neighbourhoods and they were prepared to experiment and learn from it.”

She says they hoped the retrofitting side of the project would provide a way of building community engagement which would ultimately lead to not just healthier homes but happier, healthier neighbourhoods.

That has turned out to be the case. Since the programme first began NoHH team members have made contact with the occupants of over 300 homes in five Kawerau neighbourhoods, offering to carry out energy and maintenance checks, with a view to eventually installing insulation.

Those initial meetings provided an opportunity for people from the neighbourhoods to socialise and start doing things together, such as the walking group and cooking classes. “We’ve learned that this approach

is more costly but it can lead to long-term sustainable change in the ways neighbours relate to each other,” says Terri.

“We’ve learned that this approach is more costly but it can lead to long-term sustainable change.”

Kawerau residents learn how to make cheap, healthy food at their monthly cooking class.

10

A life dedicated to givingNew Zealand lost one of its pioneering philanthropists when Sir John Todd died in Wellington in July at the age of 88.

grants, and changed from a broad-brushed approach to grantmaking to focusing more narrowly on children, young people and their families.

His dedication to the Foundation was so strong that he was still chairing it just a few weeks before he died in Wellington on July 29 at the age of 88.

He was proud of the fact that as well as changing its focus, the

Foundation also changed the way it worked, including introducing a two-step application process and giving fewer, larger, longer grants, rather than taking a “scatter gun approach”.

Generosity and giving were central to Sir John Todd’s life. In a speech to the 2009 Philanthropy New Zealand conference about why he gave and what he hoped to achieve through giving, he said one of the Todd family’s values was to act with “Generosity of spirit and caring for and contributing to our community.”

It was a value he took very much to heart both in his personal life (he sat on and, in many cases, chaired the boards of a wide range of charitable and voluntary organisations) as well as in his more public work with the Todd Foundation.

Sir John helped set up the Foundation with his uncles, Sir Bryan and Andrew Todd, in 1972. Since then it has given more than $60 million in

Sir John was also among a group of Wellington-based philanthropists who were instrumental in setting up Philanthropy New Zealand in 1990.

Sir John was born in Wellington in 1927 and went to school at Wellesley College and St Patrick’s College in Silverstream. He left school at 18 and started working in the family business, the Todd Motors car assembly plant in

Petone, where he was put to work as a spot welder on the Hillman assembly line.

As his son Mike observed at his funeral in Wellington on 4 August, he didn’t last long: “An informed insider told me years ago that you could almost hear a cheer go around the workshop when the company’s worst welder was promoted to sales.”

Over the years Sir John worked his way up through the business, becoming managing director in 1968, a role he stayed in until the company was sold to Mitsubishi in 1986. He went on to become chair of the Todd Corporation, a position he held until he retired in 2011.

Kate Frykberg, Philanthropy New Zealand board chair and former executive director of the Todd Foundation, worked with Sir John for almost 10 years. She says he was an extraordinary man with an incredible intellect.

“He was also a really caring person who could relate to anyone – he felt just as comfortable being in a room full of ex youth-offenders as he did in a boardroom.”

She also valued his willingness to take risks, making it possible for the Foundation to change in quite fundamental ways.

“You could go to him with an idea and he would be totally open to it and understand it instantly – including the things that needed to be expanded. Then he’d say ‘go for it’.”

“He felt just as comfortable being in a room full of ex youth-offenders as he did in a boardroom.”

Sir John Todd, who died in July this year.

11Philanthropy News | Issue 67

Starting out youngDilworth School runs a unique programme that allows students to make real-life investments – then use the returns for philanthropic purposes.

Not many 17 year olds get the chance to buy thousands of dollars worth of shares in some of New Zealand’s top companies then use the dividends to help make life better for young people in Africa.

But that’s what Muwali Zimba and his Year 13 classmate Liam Jacobson did this year as part of Dilworth School’s School Aid programme. The boys are among 12 senior students who served as student trustees for School Aid, which was set up by Dilworth old boy and former prime minister Mike Moore in 2009 to help students at the Auckland school learn about investment, with investment returns used for charitable purposes.

“It’s an indescribable privilege,” says Muwali, who headed the finance committee which is responsible for overseeing an investment fund of $350,000.

Of that, $160,000 is now invested in shares in companies such as Infratil, Fisher & Paykel Health Care and TradeMe, and another $15,000 is invested in bonds. The remainder is in term deposits – a much smaller sum than in the past, according to economics teacher William Poor who mentors the boys involved in the School Aid programme.

“In the last financial year we have moved away from term deposits and

have been a bit more aggressive, making higher-risk, higher-return investments,” he says. “Its gone quite well.”

Muwali and his fellow finance committee members were responsible for identifying and checking out investment opportunities. They then took their proposals to the board of trustees, which includes five adult members.

Among them is Rob Campbell, who as general manager of the Dilworth Trust Board, an endowment fund which finances the school, is familiar with the challenges of running an investment fund.

However, he says the adult trustees try to be as hands-off as possible.

“We try not to make decisions for them, but we do ask lots of questions. The objective is to help them learn.”

At present the boys are getting an 8% to 9% return on their investments and over the last four years School Aid has allocated more than $50,000 to a range of projects in Africa. Recent grants include $6000 to build and maintain a well for a village of 300 people in Ethiopia; another $6500 went to ChildFund New Zealand to buy fuel-efficient, wood-burning jiko stoves for 18 childcare

centres in the Kenyan town of Emali. “It’s a very feel-good moment when

you’re making money and not keeping any of it, but giving it to people less fortunate than you,” says Muwali.

Liam, who headed the marketing committee, agrees. “It’s a massive opportunity to learn new things, but also to make other people’s lives better – we’re not just helping ourselves by learning new things, we’re helping people in Africa who don’t have as much as us.”

The boys take their grantmaking decisions seriously and use the

Philanthropy New Zealand resource, The Grantmakers’ Toolkit, to help guide them. They don’t require their grantees to provide comprehensive feedback, though they do appreciate getting photographs and emails.

Not surprisingly, competition to become a School Aid trustee is intense, and as Muwali points out, the long-term benefits are obvious. “Being able to say that you have managed $350,000 is such a big advantage when you’re applying for scholarships, or for a job.”

“It’s a massive opportunity to learn new things, but also to make other people’s lives better.”

From left: Liam Jacobson, William Poor and Muwali Zimba at Dilworth School.

12

Lessons from the last 10 years Earlier this year Philanthropy New Zealand board chair, Kate Frykberg, stepped down from her role as Executive Director at Todd Foundation to become an independent consultant. She reflects on what she learned from her 10 years heading the Foundation.

My first day at Todd Foundation began with a meeting over a cup of tea and home-made cheese scones with the Foundation’s chairman, the late Sir John Todd. He told me very clearly that my role was to “get out in the community and find out how the Foundation could help”.

This advice filled me with delight – how cool a job is this, I thought! But there was also a little anxiety. I was white, middle-class and fresh out of the world of Internet start-ups – what did I know about communities, especially those most marginalised and disadvantaged? How could I authentically ask what might be most helpful, particularly if this then translates into judging and recommending who should and should not receive funding? And did I

even know what good philanthropy is? This last question is deceptively

simple. Google is remarkably unhelpful on the topic – especially when

compared with the many relevant hits on what makes a good charity. I suspect that this lack of a shared view on what constitutes good philanthropy is mostly because funders don’t have good feedback mechanisms. We rarely receive either complaints or honest assessments of our performance, and even if we are doing a very bad job (by whatever

measure), we rarely go broke.So we forge our own definitions

of good philanthropy, and we tread our own paths towards this.

I believe that good philanthropy is simply about effectively supporting positive social and/or environmental change.

So what are some of the key lessons I learned at Todd Foundation on our journey to defining and implementing “good philanthropy”? Here are some:

I believe that good philanthropy is simply about effectively supporting positive social and/or environmental change.

Kate Frykberg at the opening of the Philanthropy Summit 2015 in April this year.

13Philanthropy News | Issue 67

Be clear on the change we are looking forIf we want to support positive change, then it helps to understand what is most needed and how this aligns with what the people who created the trust or foundation care about. The processes we used for this at Todd Foundation included researching our social landscape, visiting communities and grantees and undertaking visioning workshops with trustees, family members, staff, grantees and sector experts.

Listen, learn and have representation from the communities servedWe helped implement Sir John Todd’s advice about getting out in the community and finding out how we can help by taking every opportunity to listen and learn. This was reinforced through team KPIs for how much research we read and how many community events and seminars we attended. Over time, Māori staff and board members were appointed and we began experimenting with panels of young people to help select youth funding.

Select organisations which are constantly learning and which actively create environments where people help themselves and each otherA grantee who is well-equipped to make positive social change is one who can show they are constantly trying new things, figuring out what works well – and what doesn’t – then improving what they do accordingly. The phrase “nothing about us without us” is also important. How, for example, can an organisation with no young people on its staff or board know what is best for youth?

The processes we used for this included looking for organisations which reflect the communities they serve and which support those

communities to help themselves and each other. We also preferred evaluations that were an honest look at how to improve initiatives, rather than simply attempting to prove the initiative is working.

Create fit-for-purpose processes and funding structuresA “net grant” is the value of funding provided less the value of the time an applicant puts in applying for and reporting on funding. This means it’s important we “right-size” processes so trustees have enough information to make good decisions without unnecessarily diverting community organisations from their real work.

It’s also important that our funding provides enough resources, time and flexibility to do the tough work of social change well. The processes we used for this at Todd Foundation included tracking how long applications take to ensure the time involved is reasonable and using a two-step selection process where shortlisted applicants had a greater than 50% chance of success. We also introduced untagged five-year funding for a small number of trusted organisations, and used face-to-face, roundtable reporting processes.

Hold a mirror to ourselvesIf honest feedback is rare in the funding world, it is vital that we actively assess ourselves. The processes we used for this at Todd Foundation involved developing a framework for assessing our concept of good philanthropy, which included monitoring how well we:• understand the communities

we serve• meet the needs of all stakeholders• manage our people, investments

and systems• understand the impact of our funding• serve our communities beyond

providing funding.

Look for ways to help out beyond moneyAs well as money, funders generally have a reasonable amount of power – arguably more than we deserve. How can we use this wisely for the good of our communities? Examples include using our convening power to bring organisations together to explore new ways of working, collaborating with other funders, freely sharing what we learn and, when appropriate, adding our voice to our grantees’ causes.

Find the new horizonsOne of the joys – and challenges – of philanthropy is that we are working in complexity. Social issues like violence and poverty have been with us for millennia and have no quick solutions. However there are many new things to try, and some seem particularly promising, such as:• supporting “collective impact”

approaches tailored for Aotearoa New Zealand. None of us can change the world alone – but together much is possible

• exploring social finance – that is, investing some of our capital base to support positive social and environmental change

• considering ways of more effectively engaging our communities in the design and distribution of funding through participatory philanthropy.

I feel very privileged to work in philanthropy and to have contributed to Todd Foundation’s journey. It is exciting to watch that journey continue and strengthen under talented new leadership – and similarly I am excited by my new role as an independent consultant for philanthropic and community organisations.

And, if we follow Sir John Todd’s advice and simply get out in our communities to find out how we can help, we are all on a path to good philanthropy.

7

6

5

4

2

3

1

14

Busting the myths of responsible investment Environmental, Social and Governance (ESG) analysis can lead to better investment outcomes. This article by AMP Capital looks at how to achieve those outcomes and breaks down a few myths surrounding ESG.

What is ESG?Some say ‘ethical investments’, others say ‘socially responsible investments’, while others will say ‘sustainable investments’ or

‘Environment, Social & Governance (ESG) integration’. Although there are similarities, there is often confusion about this terminology as the industry has evolved over time. So what’s the difference?

While both an ethical investment strategy and a sustainable investment strategy might avoid investments in tobacco companies, they may have arrived at the conclusion for different reasons. An ethical investor might avoid tobacco stocks on moral grounds. However, with sustainable investment, or ESG integration, tobacco stocks might be avoided because, looking at them through an environmental, social and governance lens, they are perceived to have poor long-term earnings fundamentals.

Helping to make better-informed investment decisionsIn equity investments, the value of ESG analysis can be summarised into two key points:• First, as a complement to traditional

investment analysis, ESG can be a useful tool to discover investment risks before they ‘blow up’.

• Second, by integrating ESG analysis, investors can make better-informed investment decisions. In turn, this can lead to better returns.

Let’s look at why this is the case…The starting point is to look at what

actually drives a company’s value. Analysis shows that the majority of a company’s value is made up of so-called intangible drivers.

These are not necessarily found in financial statements. Examples include a company’s culture, its occupational health and safety performance, and its supply chain risk management.

Given that intangibles increasingly make up the majority of a typical company’s value, by understanding

how companies are managing their intangible drivers, investors can make better informed investment decisions. In addition, by understanding what is underpinning a company’s earnings, investors can assess the earnings sustainability of a company. If the business model relies on under-priced pollution, under-paid labour or weak regulation, the current earnings levels might not be sustainable.

It’s not just about a company’s CO2 footprintESG analysis refers to a wide range of non-financial drivers. In-depth analysis of these can identify mispriced securities and excess returns for investors.

While the direct earnings impact of individual ESG issues might be small, another important aspect of ESG analysis is that the way a company deals with its ESG issues can also tell investors something about the quality of management.

ESG has often been closely associated with the ‘E’ (environment) in ESG and climate change. However, while environmental issues and companies’ environmental performance can certainly be key aspects in a wide range of sectors, such as the mining industry, in other sectors analysis of

the ‘S’ (social) or the ‘G’ (governance) in ESG can unlock relatively more important investment insights. For instance, while the transport sector has major environmental challenges in the long term, the way a company deals with social considerations such as occupational health and safety

and union relations, can have a direct earnings impact in the short term.

Good ESG analysis tries to answer two questions:• What is the earnings or share

price impact?• Is it already factored into the price?

What is the earnings impact of poor occupational health and safety performance?The agriculture, forestry and fishing industry has the highest work-related injury incidence rate in New Zealand and it has one of the highest fatality rates. In addition to direct costs, ie accident compensation costs, investors also need to consider a number of indirect costs, such as the impact of poor occupational health and safety performance on employee productivity, relationships with customers, regulators, unions and the wider community.

Our research indicates that the indirect costs of poor safety performance are increasing. Quantifying these costs can be difficult – but as a rule of thumb, the indirect costs are typically at least as high as the direct costs.

The way a company deals with ESG issues can tell investors something about the quality of management

15Philanthropy News | Issue 67

Is this factored into the price?If companies’ disclosure was perfect, perhaps it would be. However, investors need to have a comprehensive understanding and see beyond what companies are reporting.

Lost time injury frequency rates (LTIFR) have generally improved over time, but they do not say much about the severity of injuries. In most cases they do not include contractors, and they can even mask issues with a high number of fatalities. Executive remuneration may be linked to LTIFR performance, which means a risk of under-reporting, and it can cause friction with unions if the actual safety performance is poor. Investors using alternative information sources to company reporting can find valuable insights and detect earnings risks before it is too late.

Another example of potentially conflicting information is staff engagement. Our research shows a strong link between staff engagement on the one hand and customer satisfaction on the other. In turn, customer satisfaction can be a major driver for market share growth in markets characterised by commoditised products and services and intense competition. Is it in the price? Going the extra mile and researching how companies are managing their intangible drivers through alternative information sources can enable investors to find mispriced securities.

ESG and strong financial returns are not mutually exclusiveAnother myth is that investors need to forfeit good returns to invest responsibly. However, ESG and strong financial returns do not need to be mutually exclusive. In fact, ESG analysis can help make better informed investment decisions, which may lead to better investment outcomes.

The Responsible Investment Association Australia (RIAA) assesses the performance of responsible investment funds compared with their benchmark index and the average of equivalent mainstream funds, and has found that the myth of underperformance of responsible investments is unfounded. In addition, a mounting body of global evidence shows that a responsible investment approach is entirely consistent with good investment outcomes.

Engagement can lead to better investment outcomesBy engaging with companies they invest in, investors can improve their understanding of companies’ management of ESG issues. And by influencing companies, investors can safeguard their invested capital. However, investors can also broaden their investible universe by engaging with companies not in their portfolio and sometimes reduce systemic investment risk. In short, engaging

with companies’ management of intangible drivers can lead to better investment outcomes.

Final thoughtsThe responsible investment industry has evolved significantly over time from

‘ethical investments’ to integration of environmental, social and governance analysis. The latter is increasingly important as the proportion of a typical company’s market capitalisation that is derived from so-called intangible drivers has increased over time. While many sustainability issues may be known to the market, the implications for investments can be complex.

In-depth ESG analysis successfully integrated with financial analysis can provide investors with significant benefits, including:• better-informed investment decisions• identifying investment risks before

they ‘blow up’• identifying mispriced securities• higher investment returns – both

in the short and long term.

In addition, active engagement with companies on ESG issues can lead to better investment insights and improved investment outcomes through preservation of invested capital and/or expansion of the investible universe.

Good occupational health and safety performance in the fishing and forestry industries can make them better investment prospects. PHOTOS: Seafood NZ and Worksafe NZ.

Thank you to our key sponsors Philanthropy New Zealand Board members

Chairperson Kate Frykberg, Thinktank Charitable TrustDeputy Chair Kim McWilliams, Auckland Medical Research FoundationMembers Annette Culpan, Lani Evans (Vodafone NZ Foundation), Jonny Gritt, Murray Jones (Dove Charitable Trust), Sandra Kai Fong (Rotorua Energy Charitable Trust), Rongo Kirkwood (Trust Waikato), Jennifer Walsh (Te Rūnanga o Ngāi Tahu)

Philanthropy New Zealand is the hub of philanthropy in Aotearoa/New Zealand. We provide thought leadership and practical help for everyone with an interest in giving to make the world a better place. Our members include private philanthropists; family, community and corporate foundations; and iwi and community trusts.

We also have a Community membership category for not-for-profit organisations that deliver services into the community.

Join nowTo become a Grantmaker or Commmunity member or to find out more go to www.giving.org.nz