22/08/2013 11:17 BST | Updated 21/10/2013 06:12 BST

Rising to the Challenges of Philanthropy

Peter Buffett, the musician son of billionaire investor and famed philanthropist Warren Buffett, caused much debate in philanthropy circles in the US and beyond last month, with an op-ed he authored in the New York Times criticising the "charitable-industrial complex". Given my position as Chief Executive of the Charities Aid Foundation, an organisation dedicated to promoting philanthropy and effective charitable giving, I read this with great interest and think it raises a number of interesting points for debate.

In particular, it brought to my mind the following challenges that have for a long time faced philanthropists and those who seek to help them give effectively: Is inequality a necessary precondition for philanthropy, and does this undermine the ability of philanthropy to strive for social justice? How can you use money to address certain problems when the production of that money has actually exacerbated those problems? Should philanthropic approaches be tailored to local practices and customs? Is philanthropy just about making the donor feel better about their place in the world?

Taking these in reverse order: I think it is a slightly misplaced criticism of philanthropy as a whole to say that it is simply about "conscience laundering". Yes, there are undoubtedly those who do approach it in this way, and that is not desirable. However, there are also plenty of philanthropists who have decided to give away their money because they are extremely passionate about a cause, and have put a lot of time and energy into thinking about the best way of using their money to achieve change. Many of the "business-minded philanthropists" that Peter Buffett criticises have shifted their focus explicitly from the way the act of giving make them feel to the actual effect their money has on addressing a problem. Surely this is a move to be applauded?

The idea of "philanthropic colonialism"- where donors try to impose approaches and structures from one place in other areas where they are not suitable- is also a valid issue to raise. As an international organisation with offices around the world, CAF is well aware that the most effective forms of philanthropy are often those tailored to local situations. However, the flipside to this is that we do need to beware of slipping into cultural relativism and believing that we cannot challenge the way things are done in other countries. Obviously there needs to be a balance here, but this is something that philanthropists involved in development issues are already well aware of.

The idea that philanthropy is a failed paradigm because you are always faced with people "searching for answers with their right hand to problems that others in the room have created with their left" is also a well-worn one, and fails to acknowledge many of the new approaches out there such as social investment and venture philanthropy, as well as the new ways in which some businesses are operating. The criticism here rests on a fairly caricatured notion that all philanthropists spend their days making billions by investing in companies that sell weapons to children and then go home and wonder about how best to give their money to address the issue of child soldiers in the developing world. Once again there is a kernel of truth here, in that there is a real danger in separating the values one applies when making money from those one applies when giving it away. However, wealthy donors and businesspeople are increasingly looking for ways in which they can apply their philanthropic values to all aspects of their financial affairs. Of course there is more that can be done, but the direction of travel is already changing.

Perhaps the most difficult challenge for philanthropy is its uneasy relationship with inequality. It is an uncomfortable truth that inequality is pretty much a necessary precondition for philanthropy. (Or at least for that type of philanthropy which consists of people with large amounts of money giving some of it away in the hope of addressing problems suffered by people with far less money; for that, you have to have rich people and poor people). This is clearly a problem for anyone who is concerned with inequality as an issue: can you use philanthropy as a tool to address inequality if it relies on there being inequality in the first place? Well, the pragmatic answer is clearly "yes": there is inequality in the world, so the choice for anyone concerned about it is to work towards eradicating it (possibly by giving money to organisations that share this aim) or simply to throw their hands up and say how awful the situation is and that they wish it was otherwise. In this instance, philanthropy certainly seems like the more productive option.

Peter Buffett's real complaint seems to be that he finds it difficult to do philanthropy that achieves the goal he is interested in- i.e. closing the gap between rich and poor. This may well be the case, but he is not alone in this: giving money away effectively is the major challenge facing all impact-focused philanthropists. However it is a challenge that many individuals are rising to, and approaching with humility and a willingness to embrace new thinking. That is why I firmly believe that philanthropy will continue to be an incredibly powerful tool for delivering social change for many years to come.