Finance has been pilloried in recent years for putting profits ahead of people. At its best, it still performs a noble role: connecting investors to investments and fuelling industrial innovation. But finance could also do far more to help tackle social problems instead of leaving the challenge to governments drowning in debt and philanthropists with limited resources.
Look at the numbers. US foundations alone have around $700bn in assets. They give away about 5 per cent of assets annually, about $35bn. This is a lot of money, but not when compared with the investment management industry, which oversees more than $100tn.
Our experience suggests investors want to devote more money to making the world better. They ask their advisers how to do that, but usually do not get a helpful answer. They are also put off by the complexity of establishing their own foundation or remain unconvinced they can give away their money as effectively as they earned it. Yet if investment advisers helped clients to direct just 0.1 per cent of their assets to philanthropy, total funds would increase by around $100bn a year. $1tn could be unlocked this decade.