From a standing start at the fall of the Soviet Union, contemporary Russian philanthropy has made great strides and continues to grow in both scale and maturity. Today’s generation of Russians is the first with significant wealth for almost a century. Corporate philanthropy has become commonplace and many high-net-worth individuals and families see philanthropy as a key purpose for their wealth. Some families also regard it as an important factor in wealth succession and in creating a lasting legacy.
While the data we have gathered does not convey the full scale of Russian philanthropy, it does underline the fact that giving has become integral to how wealthy Russians apply their wealth and how corporations express social responsibility.
With CAF Russia, Coutts has been tracking donations of $1m or more from Russian corporations, individuals and foundations since 2011. While 2013 saw a significant increase in the number of million dollar donations, 2014 witnessed a decline, as illustrated in our analysis.
This decline may be explained by a number of factors, including a weakening economy, less financial stability and the devaluation of the rouble. While some recipients of regular sizable donations continued to receive these gifts, changes in exchange rates meant their value was no longer equivalent to $1m and could no longer be included in our survey data. The 2014 comparison also suffered from the high base level of 2013, which was boosted by increased giving in the wake of some large-scale natural disasters, such as floods in the far east of Russia.
In addition, CAF Russia depends largely on responses to a survey, given the lack of publicly available data on Russian philanthropy. As not all those invited to complete the survey did so, this report continues to track what is believed to be the ‘tip of the iceberg’ in the scale of Russian philanthropy.
Despite the challenges posed by the political and economic climate and the apparent associated decline in donations, we take heart from the marked increase in the number of foundations, as wealthy individuals or families look to establish their philanthropy for the longer term. Some are also creating endowments or hiring professional staff.
Today’s environment – the foundations sector is changing
While philanthropy by individuals is significant, institutionalised giving through foundations has become a key feature of Russian philanthropy.
In 1999, Vladimir Potanin created the first Russian private philanthropic foundation, with the aim of establishing long-term educational and cultural projects with a social purpose. Significant not only as the first in its field, it was also one of the first Russian foundations to have an endowment. Since the establishment of the Vladimir Potanin Foundation, the number of Russian foundations of all types – corporate and private – has grown steadily.
As is the case the world-over, governments can play a key role in enabling or inhibiting philanthropy. Recognising the important role of private giving, the government has begun to help pave the way for a more enabling environment for philanthropy to grow and flourish. For example, in 2007, the Endowment Law was passed, making the income earned from endowments tax free. And in January 2012, tax incentives were introduced for individual donors, a provision that came into play in 2013 when the tax declaration for 2012 began. In some cases, the government is known to influence the focus of an individual or corporation’s philanthropy.
More recently, it is becoming apparent that the political and economic situation is affecting Russian philanthropy and most notably the work of foundations. An increased wariness by the Russian government towards the West, anti-offshore legislation, sanctions and legislation aimed at controlling international contributions to Russian non-governmental organisations (NGOs)have all contributed to the new environment. This has particularly affected philanthropists that have established foundations registered outside of Russia. In some cases, founders have responded by moving their resources to Russia. For others, such as the Dynasty Foundation, the changing context has resulted in the founder deciding to close the foundation.
As illustrated by our findings, there is little doubt that corporate giving in Russia represents a major proportion of the philanthropic landscape. What is distinctive about corporate philanthropy in Russia is that large companies established in what were originally relatively uninhabited or remote areas have played a pivotal role in developing the local area.
As with philanthropy from individuals or private foundations, much corporate philanthropy in Russia has emerged in a piecemeal and ad hoc manner. But at the turn of the century, Russian companies began to embrace the notion of corporate social responsibility (in part influenced by their Western counterparts) and developed more focused and sophisticated philanthropic programmes.
The findings in this year’s report suggest:
· 32% of donations were in fact given to foundations established by donors themselves for further distribution. This likely means that the funds will be granted in smaller amounts to a number of final beneficiary institutions in the future and shows a continued trend towards greater institutionalisation of giving.
· The largest donation of the year ($62.5m) was made to a regional government by a corporate donor. Overall, 27% of the value of large donations was given to governments of various levels, and almost exclusively such donations were made by companies – half of the value of corporate donations went this way.
· The most popular cause for major donors was human services.
· 82% of the total value of large donations was made by donors located in Central Russia; 67% of distributions happened there too.
Finally, celebrities and other opinion leaders have started playing an important role in the Russian philanthropic sector, contributing not just money but their ability to influence public opinion and mobilise support to causes they care about. As with other philanthropists, some establish foundations and also proactively fundraise. Natalya Vodyanova, who founded the Naked Heart Foundation, is one such example.
 Russian law on Foreign Agents concerns non-governmental organisations that receive funding from abroad and are engaged in broadly defined ‘political activities’. The Dmitry Zimin Dynasty Foundation was labeled a foreign agent in May 2015 and as a result the founder made a decision to close his foundation.
Trends for the future
There are a number of trends that will shape the future landscape for million dollar donations in Russia.
Developing more strategic philanthropy For many new donors, the early stages of a philanthropy journey often involve giving in a more emotive or piecemeal fashion. Indeed, some philanthropists will choose to continue to be reactive and relatively ad hoc in their approach, as it may be more desirable or appropriate given what they want to achieve. However, over time others may develop more purpose and focus in their mission and objectives, and look to make a more lasting difference with their philanthropy. In 2014 foundations continued reviewing and reshaping their strategies to ensure they remained relevant to the changing environment and the needs of their grantees and beneficiaries. This is a sign of the increasing maturity of foundations and the increasing importance founders are placing on maximising the results of their philanthropy.
Institutionalising philanthropy As the number of wealthy individuals or families that engage with philanthropy grows, it is inevitable that they will consider institutionalising their philanthropy through the establishment of philanthropic foundations in Russia. They may also hire professional staff and establish effective boards.
Establishing endowments Many major philanthropists are likely to endow the foundations they establish to sustain and develop their philanthropy. The developing situation in Russia may result in endowments being held within the country.
Raising the profile of philanthropy As philanthropists gain confidence in their work, some will also choose to proactively talk about it and the causes or organisations they support. This may be driven by a number of factors, including a desire for the general public to better understand philanthropy and what it can accomplish, greater transparency, a desire to encourage their peers to give, or a wish to enhance their own reputation.
Creating a lasting legacy The relative youth of Russian philanthropists means that in many respects they are at the beginning of their philanthropy journey. Nevertheless, creating a lasting legacy features prominently in their minds. As wealthy families begin to focus on succession planning and the inter-generational transfer of wealth, philanthropy will often feature in this process.
While philanthropy in Russia is not without its challenges given the domestic context, building on progress to date, Russian philanthropists have a significant opportunity to grow and strengthen their work in a way that could make a real and lasting difference to culture and society at home and abroad.
The tradition of giving in Russia
Before the Bolshevik Revolution of 1917, there was a well-established tradition of giving. This tradition has re-emerged in a new guise since the fall of communism.
Historically, many Russians gave to charity, mainly through the Church, which was the principal instrument of charitable activity until the 18th century. It built and supported hospitals, orphanages and shelters for the homeless.
The Crown also set an example of charitable giving. From the time of Catherine the Great, the royal family often paid for the establishment of educational and healthcare institutions. Examples include the First Moscow City Hospital set up by Prince Golitsin in 1802, and the State Hermitage based on the collection of Catherine the Great, which opened to the public in 1852. By 1900, the institutions of Empress Maria alone included more than 300 such organisations.
Between the Revolution and the fall of Communism – some 70 years – Russian philanthropy disappeared. The state was expected to meet all needs and philanthropy was neither recognised nor encouraged. But following the break-up of the Soviet Union, philanthropy re-emerged in Russia in the late 1980s and 1990s.
In the early 1990s, the first Western philanthropists and development agencies appeared in Russia. One of the most significant was George Soros’s Open Society Institute (OSI). Soros was responsible for greatly influencing public perception of what an individual philanthropist could achieve. The Ford Foundation, Mott Foundation, MacArthur Foundation and Eurasia Foundation followed, along with international development organisations such as the US Information Agency (USIA), the US Agency for International Development (USAID), the UK Department for International Development (DFID) and the World Bank. All these provided additional stimulus to philanthropy and the country’s NGO sector.
However, as was the case with pre-revolutionary philanthropy, giving by Russians in the 1990s was largely piecemeal and done on an ad hoc basis.
After the financial crisis of 1998, corporate philanthropy emerged with the first organised grants programme. Other companies began to follow with larger initiatives. In 1999, Vladimir Potanin created the first Russian private foundation.
Since then, the number of Russian foundations of all types – community, family and private – has grown steadily. In addition to the growing number of foundations, there are numerous ‘direct assistance funds’. Many of these are created by the media or by celebrities, often as an emotional response to an urgent need; for example, funding the costs of surgery for deprived children. By the end of 2014, the four largest Russian assistance funds had between them raised more than $75m. Not only have such funds raised significant resources, they have also played a key role in building a culture of charitable giving and philanthropy in Russia.