Donations to smaller groups are on the up
Posted on 12 Sep 2024
Small to medium not-for-profits have enjoyed a 5% donations spike compared to this time last year,…
Posted on 12 Sep 2024
By Matthew Schulz, journalist, Institute of Community Directors Australia
A unique Australian investment vehicle is on track to give more than $100 million to Australian youth charities while making healthy profits for investors.
Nearly 10 years after its inception, Future Generation’s philanthropic model involves carving off a small slice (1%) of its $1 billion asset base each year for charities.
It is expected to comfortably reach a $100 million funding milestone by 2030.
While the primary purpose of the fund is to make money for shareholders – and by recent reports it appears to be doing so handsomely – a significant secondary purpose is to help charities, with the focus on supporting children and youth at risk, and promoting wellbeing and preventing mental ill-health, also for young people.
The funding is helping young people like Chenara, 16, to turn their lives around.
The teen is a beneficiary of the BackTrack program, which received $484,000 from Future Generation for its 2023 program. The charity was founded in Armidale, NSW, and its mission is to do “whatever it takes, for as long as it takes” to keep vulnerable kids alive, out of jail and with a chance of chasing their dreams. The program offers education, training, diversions, accommodation and jobs.
In a case study featured in an impact assessment of Future Generation funding, Chenara revealed she had struggled with a chaotic home life and, after her grandfather died, started getting into trouble at school.
“I went through a lot growing up. My parents fought constantly and their abuse of each other really affected me. In 2022, when my Pop passed away, I stopped being the bright little girl I was. I started to muck up in school, get into fights and even do crime. Nobody was looking out for me, so most nights I stayed on the street or couch-surfed. I was constantly thinking about suicide, and I even tried to end my life more than once. I knew I wasn’t okay and needed help.
“Someone recommended BackTrack, and since then, my whole life has changed. BackTrack makes me feel like I’m appreciated and a part of their family. My favourite part of the BackTrack program is giving back to the community – going to people’s houses and helping with things that they can’t do.”
Prevention is such a priority because for many reasons economically, prevention is a lot more cost effective than treatment services."
Unlike other impact investors, Future Generation does not invest in impact-related activities such as social enterprises seeking a dual financial return and social benefit. And unlike many corporate models driven by ESG (environmental, social and governance) commitments, the fund doesn’t simply donate a slice of the profits.
Instead, it invests in Australian and global stocks. The trick that enables millions to go to charity is that Future Generation’s fund managers – a roll call of some of the country’s most sought-after investment experts – do their work for nothing.
As a result of that pro bono support, the organisation doesn’t need to pay fees for management, performance, service providers, board members or investment committees. Those savings are redirected into doing good.
Importantly, the commitment to giving away assets means profit fluctuations don’t affect payments, meaning funds for not-for-profits are consistent and can involve multi-year commitments.
Over nearly a decade, Future Generation’s two main investment vehicles have given $87.2 million to charity, including $6.8 million in the 2023 financial year – a sizeable chunk of its 2030 target of $100 million.
Future Generation companies include Future Generation Australia (FGX) and Future Generation Global (FGG), which invest in Australian and global stocks respectively.
There are currently 24 organisations involved as social impact partners. For Future Generation Global these are:
For Future Generation Australia, the beneficiaries are:
Future Generation has been able to attract some heavy hitters to steer the ship, with Philip Lowe, the former governor of the Reserve Bank of Australia (RBA) chairing Future Generation Australia (his sole board position since leaving the RBA), while Jennifer Westcott, the former chief executive of the Business Council of Australia, joined Future Generation Global as chair late last year.
There’s no doubt the funds are having an impact, because there is evidence.
According to the recently published Future Generation Global Impact Report 2023, which tracked FGG funding over two years, the fund was able to support 14 not-for-profits and more than 5.3 million young people. FGG’s charity focus is on promoting wellbeing and preventing mental ill-health among young people.
The report followed a strategic review of FGG’s funding, which highlighted the fact that existing government funding had been unable to counter a surge in mental health conditions in young people, with as many as 38% of people aged 16–24 years experiencing a mental health problem between 2020 and 2022.
The review prompted FGG to divert funds from larger established charities and direct them to smaller high-impact charities.
FGG now stands as one of the biggest private funders of youth mental health in the country.
Future Generation founder and director Geoff Wilson said the company “has been at the forefront of helping young Australians since it was founded in 2014”.
He described the collection of charities it was helping as “a portfolio of not-for-profits” and said that by measuring their impact, “we continue to be at the cutting edge of philanthropy in Australia”.
Future Generation chief executive Caroline Gurney said that the first year of the report demonstrated the “remarkable” individual and collective impact of FGG’s partners, and the firm would use the data in future to push for more investment in preventing mental ill-health in young people.
The company’s social impact manager, Emily Fuller, said in a video update that there was a good reason for the organisation shifting its focus to mental ill-health prevention.
“Prevention is such a priority because for many reasons economically, prevention is a lot more cost effective than treatment services. Obviously, if you can stop something from happening, or developing, or becoming acute, you save a lot of money over the long term, and morally of course everyone would choose to spare a young person and their family the experience of mental ill health, so unless we are able to front-load some of our investment, the financial bill and the human cost of mental ill health is only going to continue to grow.”
Not surprisingly, not-for-profits are keen to access Future Generation funds, but the process is a rigorous one. Following a strategic review, Future Generation Global conducted an expression-of-interest round that attracted 175 applicants, narrowed down to the 14 selected partners with the help of a youth advisory committee.
It is expected that Future Generation Australia will conduct a similar strategic review of its programs in the near future.
Future Generation Global 2023 Impact Report
Meet Future Generation's CEO Caroline Gurney
This article first appeared in Community Directors Intelligence, the newsletter for not-for-profit leaders.
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