The financial industry today has a huge image problem. There is continuing public distrust of the City, resentment over bonuses and a media focus on the more caricature features of capitalism. These concerns are not based on myths – the world and his dog knows there have been serious abuses. But we need to take a balanced audit and recognise the virtues of the free market as well as its vices, which it should be our aim to eliminate.
Capitalism has been an enormous force for good. Globally, over the past 30 years, it has lifted 1billion people out of poverty. That happened through the operation of market forces, developing resources and releasing latent talent and potential at the macroeconomic level. But I believe there is also a challenge to the financial industry and other businesses to engage with communities at the microeconomic level too.
Fund managers are as much part of the community in which they work as teachers or doctors, so our engagement with local projects should reflect that fact. We have a duty to support charities, not only through donations but by lending our expertise to the work of charities where possible. With so many charities seeking support, we should apply similar criteria to those we employ when scrutinising companies as potential targets for investment.
Is the charity well run? Is it cost effective, so that funds donated to it will have a measurable impact? Does it have a governance structure that will enable the donors to monitor the effects of any investment? These are among the criteria applied by the Aberdeen Asset Management Charitable Foundation, which is responsible for our philanthropic work. At Aberdeen we prefer to help either small charities where our contribution will be significant relative to its size or to engage with identifiable projects run by larger charities that can make a measurable, tangible difference.
It is important to select projects where company employees can participate by volunteering. It’s not a question of just writing a cheque and ticking a box, it’s about active involvement, at a personal level, with local people. Our key investment principle is long-termism and the logical extension of that is full engagement with communities where we intend to be a permanent presence.
The Foundation’s charitable work is as global as Aberdeen’s business activities. Since charity begins at home, we established The David Nicholson Fellowship in Gastric and Oesophageal Cancer in memory of an inspirational colleague, in partnership with the ARCHIE foundation at Royal Aberdeen Hospital. We fund other projects in Aberdeen, Edinburgh and London, as well as in five European countries.
Our first major emerging market project was in Brazil – Action for Brazil’s Children, promoting development through projects focused on education, shelter, care and advice. Our second emerging markets project is in Cambodia and the Foundation is also active in Singapore, Japan, Canada, the US and Australia. There is no limit to the causes businesses can choose to support.
Fund managers are not running philanthropic organisations. Their responsibility, first and last, is to manage their clients’ money successfully. In any case, considering the number of charities whose funds we manage, any benefits they incur through our professional efforts would surely dwarf in scale the donations we make directly to charity.
But direct involvement is still important. Employees volunteering, engaging in hands-on participation in community projects, keeps them well-grounded and helps integrate their company with local society. It can also be great fun as I know from experience of my company’s sponsorship of the Aberdeen Asset Management Scottish Open, where more than £73,000 was raised this year for the ARCHIE foundation.
Philanthropy is not only a longstanding Scottish tradition – think of Andrew Carnegie – it is also a natural activity for capitalists. You have to make money before you can give it away. Last year in the UK the financial sector accounted for one-third of all corporate donations to charity: £245million in cash, rising to £319million if in-kind donations are included. I would like to see that achievement surpassed every year.
There could be no better template for the combination of fund management and philanthropy than the late Sir John Templeton. He was a legend in the markets. Between its establishment in 1954 and his retirement in 1992 the Templeton Fund grew at a rate of 15% a year.
But his genius at making money was equalled by his passion for giving it away. Of the five “economic virtues” he devised, the third was charity. “Profit and exchange alone are not enough to sustain the good in society,” he insisted. “We need to care for those in society who cannot care for themselves.” If the financial industry can live up to that humane ideal it will greatly improve its reputation – and if we get to watch some first-class golf along the way, that is an added incentive.