This question goes to the heart of family business philanthropy. And it's central to our latest study, which surveyed over 500 family businesses globally and found what makes them engage in giving.

We discovered that philanthropy plays a big part in bringing different generations closer together and that the founder's values are crucial. And there's a growing emphasis on social impact investing, which is the newest form of giving.

Investing in impact

We found that family businesses apply a portfolio approach. They invest in several forms of philanthropy at the same time. Providing services to the community is the most popular, followed by monetary contributions to charities. Next, though, comes social impact investing – targeting specific social objectives while earning a financial return.

It was interesting to see that more than a third of all family business owners, and a half of all large businesses, said that they're "highly engaged" in social impact investing. More than two-thirds say they're already involved in some way. I see these levels of engagement going higher in the years to come, in family businesses throughout the world.

Looking to the legacy

The study also revealed that family firms have a holistic perspective, centered on the founder's vision. Many family business owners pay particular attention to the past and cherish the business's heritage. Nearly 90% of sixth-generation family members agree that their philanthropy should be in line with the founder's values. I think that this sense of identity is very powerful and informs the social and environmental causes the family supports.

What's more, there's a positive relationship between the owners' wish to pass on the business to the next generation and their philanthropic giving. Owners who are concerned with the future well-being of the family are more motivated to address the long-term social and environmental issues in the world outside.

Government incentives

Family businesses adjust their portfolio and their chosen investment vehicles according to the local cultural and legal context. Government support is a decisive factor here. In countries where our respondents believe there are tax benefits for charitable giving, family businesses are more likely to engage in philanthropy.

In particular, there should be more tax breaks to encourage impact investing. The UK has extended its social investment tax relief – I'd like to see other countries follow suit. We need enlightened policymaking.

The next chapter in philanthropy

But where is family business philanthropy heading? In my view, families are united in their search for effective solutions. That's reflected in the high levels of personal involvement, which are greatest in small family firms and in the larger businesses. They want to be as close as possible to their favored causes.

And it's why families evaluate their philanthropy very carefully. There's room for improvement, though – nearly 60% of owners would like to have a sharper focus on their projects' effectiveness. They want to know about the connections they're making, the problems they're helping to solve and the positive impact they have on the world.

Family business philanthropy is all about forging relationships.

It's a long-term social investment with a clear family identity and a strong value base.

https://familybusinessblog.ey.com/2016/06/07/how-can-a-familys-values-be-transformed-into-social-impact/#more-926