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Podcast – Shaping Finance

Tonika Hirdman: Finance & Philanthropy



Tous les 15 jours, Nicolas Mackel, CEO de Luxembourg for Finance, invite des leaders de haut niveau du secteur européen et mondial des services financiers à partager leur point de vue dans le podcast «Shaping Finance». La 19e invitée est Tonika Hirdman, directrice générale de la Fondation de Luxembourg.

Welcome to the podcast that shares the views of high-level leaders in the European and global financial services industry.

Nicolas Mackel . – “Welcome to Shaping Finance, a podcast which offers a platform to high level decision makers and shapers in international finance. My name is Nicolas Mackel. I’m the CEO of Luxembourg for Finance and the host of this podcast.

Tonika Hirdman . – “Thank you very much, Nicolas.

Tonika is the Director General of the Fondation de Luxembourg, an organisation that promotes private philanthropy commitment and about which she will tell us more in a minute. Tonika began her career as a diplomat at the Swedish Ministry of Foreign Affairs before moving into financial services where she served, among others, as the CEO of ABN AMRO Bank, Luxembourg. Tonika is also a board member of the Swedish Public Pension Fund, AP7. Welcome to Shaping Finance, Tonika. So tell us, what is the Fondation de Luxembourg?

“Well, first of all, thank you very much for inviting me to this podcast. I’m very honoured to be here. The Foundation de Luxembourg is a public utility foundation, which was created by the Luxembourg state upon inspiration of organisations like Fondation de France, or King Baudouin Foundation with a mission to facilitate long-term philanthropic engagement. So our role is to accompany people who come from all over Europe to help them to realise their philanthropic aspirations. We do that by identifying projects that suits their interests. We also follow up on these projects to make sure that the money goes to the right hands and we manage their foundations operationally under our agencies.

But Tonika, what actually would bring somebody who’s living in France or in Germany or in the Netherlands or in Sweden, your country of origin, to use the Fondation de Luxembourg to set up a charitable organisation?

“Well, actually our donors are based all over Europe and the reason why they choose to set up their foundation in Luxembourg is, first of all, because of the Luxembourg’s political and economic stability, which is important for them because the foundation is a very long-term structure and that gives them reassurance about the continuity of their foundation. So that’s one reason. Another reason is that it’s seen as a very efficient way of engaging in philanthropy. We take care of all the administrative burdens, whereas the founder can focus on the projects that they are supporting. The fact that we have been created by the Luxembourg government gives them credibility and continuity. We are also part and members of the Transnational Giving Europe Network, which means that the donations of these people are recognised by the authorities in their own home countries.

Okay. What is your connection then to the finance industry as a foundation?

“Well, actually we have a lot of connection to the financial industry. The discussion to initiate a foundation usually starts between the donor and his or her financial advisor, usually a private bank or a wealth management company. For the private bank, this is interesting because it adds a dimension to the relationship, allowing them to deepen the relationship to their client. Philanthropy is a very personal matter. It’s something that touches the life history and the personal values of the donor and thereby it serves to strengthen the relationship. But there’s also another aspect to it, and that is that a foundation has, of course, an endowment capital, which is then managed by a bank or an asset manager.

But you are not a wealth management tools such as foundations in other countries. This is a purely charity undertaking.

“Certainly. We are a public utility foundation, and our role is purely public interest.

So you mentioned the motivations of the founder of a particular foundation. What are the motives that bring people to actually engage in philanthropy?

“Well, let me first start by saying that the interest in philanthropy has increased enormously in the last 20 years. One thing is of course, that private wealth has increased a lot. So simply there are more people who have the ability to engage in philanthropy. But at the same time, people are getting more and more concerned with the way that society is moving with increased social inequalities, with the huge environmental challenges with climate change, reduced biodiversity. So if you have the money and the means, it’s natural that you want to use this resources to make a difference. Now, why do people engage in philanthropy? Well, there are different reasons. A lot of this wealth creation that we have seen in the past years is with entrepreneurs, people who have made their wealth themselves, and for them, it’s very often a question to give others the same opportunities that they had. So giving back basically. For another group of philanthropists, they have come to a certain age. Perhaps they’re thinking about their inheritance and for them, it’s about creating a legacy, about leaving something behind and the footprint that will lost forever. Then we have the third group, which is families, and there it can be about uniting the family around a common cause and educating the next generation, educating their kids to become socially aware. So I would say these are the main motivations, but of course it can be many other reasons also.

Good. What trends have you seen in philanthropy in the recent past?

“A lot. Actually, there’s a lot that has happened in philanthropy during the last decades. What we have seen is the emergence of a new generation of donors who are younger than before, they have made their wealth themselves, and they want to be personally engaged in what they are supporting and the projects they’re supporting. Often together with others. So it’s very often a collaborative approach, but their main focus is on having an impact, on seeing the results. So this is one trend. Another trend is that philanthropy has become much more professional and organised and global. Of course, technology had a role also because it enables people to have a direct global exchange with the organisations who are running the projects on the ground. Then perhaps, finally, a third trend is what is called venture philanthropy. So venture philanthropy is a concept that comes from the venture capital finance sector, which is about selecting the best charities, the charities with the most potential, and to help them to become more efficient, sometimes even taking your place on the board of those charities. But the focus is on the charities themselves and not on the projects. Perhaps I could add also that there’s more desire to combine financial support with nonfinancial support today than before.

Okay. You mentioned impact as one of the aims for such a philanthropic foundation. Do you see today a convergence between philanthropy and the very large movement towards sustainable finance?

“Yes, definitely. Sustainable finance, if you see it on a spectrum and on the very left side, you have traditional investing, and then you have ESG with a whole range of negative screening, positive screening, et cetera. Then on the other side, you have impact investing or what I call mission-related investment. On the far-right side, I would put philanthropic giving. So philanthropy is closely related to impact investing, whereby impact investing of course you expect to receive your money back at least, or maybe even return on your investment. With philanthropic giving, obviously you don’t expect to receive a financial return, but the main purpose to have a real impact is the same. So that’s one way to see it. The other way is in regard to a foundation, which has two pillars. One pillar is the support that you are giving to fulfil the objective or the purpose of the foundation, and the second pillar is the endowment capital managing the endowment capital of the foundation. There it makes sense to manage these assets in a sustainable way, so according to ESG principles, because we see it as a way of aligning the values of the founders and the purpose of the foundation with the investments they are making. So for instance, if you have a foundation that is acting or to support reforestation in Indonesia, it doesn’t make sense at the same time to invest in companies whose activities are serving towards deforestation. Very obvious example is if you have a foundation which is supporting research against cancer, it doesn’t make sense to invest in tobacco companies.

Okay.

“Perhaps I could add another aspect to this also, and that is ESG, or impact investing, can also be a way to reinforce the purpose of a foundation and to have a double impact. So for instance, if you are supporting a project, let’s say, in one part of the world, in Amazonas. At the same time, you can invest in an impact investing fund or in a microfinance fund that is actively investing in that same region. That’s a way of having this double impact

Talking about impact. The current crisis has, for instance, in ESG, as we were talking about this a minute ago, highlighted the S, the more social aspects. How has the current crisis played out in the area of philanthropy? What consequences has it had in this area?

“Well, it’s actually really interesting because at the very start of the sanitary crisis, we saw a huge mobilisation of donors who had this desire to contribute to the local community, helping to create or support the manufacturing of protective gear for health personnel, or contributing to supporting the homeless people or people who were isolated. Then came the confinement and the pace of life went down. People had more time to reflect, to reflect on the vulnerabilities of our societies, on things like how fragile our lives are. They started to think about what they can leave behind. So what we saw was in the beginning of this year, a very significant increase in the interest of creating foundations. I think that came out of these reflections during the confinement.

Maybe also being confronted with your own mortality induces people to think, ‘What trace will I leave? What impact will I have made in this world?’ And that will then encourage some to engage in philanthropy. Hopefully it will inspire some others.

“Certainly. So what we saw was an evolution from this ad hoc giving in the urgency of the crisis to a desire to engage more long-term in philanthropy.

Good. Before we finish, let me ask you our traditionally last and final question, which is about a book that you may have read and that you would like to recommend to our readers. I’m sure there are plenty of books in the area of philanthropy that you would like to recommend to possible future founders of a charity.

“There certainly are, but what I have in mind now is actually a novel that I just finished, and I was really taken by this book so I’m very happy to share it. It’s a book that was written in the 1960s by Marlen Haushofer, an Austrian, quite famous author. It’s about this lady who is trying to survive in the hunting lodge in the Austrian Alps. There has been this transparent wall that has been placed between her and the rest of the world. On the other side of the wall, everyone is dead. This book, as I said, it was written in the 1960s and it can be interpreted in different ways. At that time, there was this issue with a nuclear war, and it was interpreted in the context of the aftermath of a nuclear war. But the interesting thing is that it has very much come back into vogue. It’s called The Wall and the way I interpret it now, it’s more around the loneliness and the isolation of human beings. Why I like it so much is because it forces you to reflect on existential questions, such as what is the meaning of life? What is the relationship between human beings and nature, and especially the relationship between human beings and animals. Because animals are the only company that she has. So this is a book that once you leave it aside, it really stays with you because it forces you to reflect on these questions.”

How, interesting. Thank you very much, Tonika. Also for sharing your insights with us. Thanks also to our listeners who have tuned in again to our podcast. In our next episode, I will be delighted to speak to Tanguy van de Werve, the director general of the European Fund and Asset Managers Association, EFAMA. To stay up to date with our podcast, please feel free to subscribe on iTunes, Spotify, or Google, and you can also find more information on our website, luxembourgforfinance.com