Impact-driven giving has become the centre of a philanthropic movement known as 'effective altruism.'Andrea Green/iStockPhoto / Getty Images
Canadians are a charitable bunch. We individually contribute nearly $10-billion annually to the country’s roughly 86,000 charities, according to Statistics Canada, with money going to causes that we consider important or that have affected us personally.
Despite the best of intentions, the effectiveness of our giving is often underexamined, says Kate Bahen, managing director of Charity Intelligence Canada, which provides detailed reports on Canadian charities. The Toronto-based research organization has become a leading source of information on the real-world impact of Canadian giving.
“We take a strict definition of impact,” says Ms. Bahen, a former Bay Street equity analyst. “We believe it can be determined by a cost-benefit analysis, looking at the demonstrated positive effect of every dollar you donate.”
Ms. Bahen says it’s the “new frontier in charity evaluation” and, in recent years, the impact-driven approach has become the centre of a philanthropic movement known as “effective altruism.” The term was coined by William MacAskill, a philosophy professor at Oxford University who co-founded the Centre for Effective Altruism in the United Kingdom in 2011. His philosophy is simple: If philanthropists take a utilitarian rather than a sentimental approach to giving, the vast sums of money given to charities every year could do much heavier lifting.
Possibly the best-known proponent of effective altruism is San Francisco-based GiveWell, a non-profit founded by two former hedge-fund analysts who do in-depth research on the measurable impact of charities, even conducting site visits where appropriate. GiveWell’s top-rated charities tend to be smaller and less well-known, often working in fields where small donations produce big impacts.
Ms. Bahen believes choosing an under-funded area can be one way to generate an outsized impact. An example is Toronto retiree Bob Clark, 71, who supports animal-welfare organizations. According to the online donation platform CanadaHelps, only six per cent of Canadian giving goes to animal causes, substantially less than to most others.
Mr. Clark doesn’t align himself with the effective-altruism movement specifically, but believes focusing on an under-represented sector is more gratifying than choosing one already well-funded. (He prefers not to disclose exact figures, except to say he gives in the “low six figures” annually.)
He and his wife initially thought they would wait until they passed away to donate, disbursing funds from their estate. However, that strategy changed after a lawyer specializing in philanthropy convinced the couple they should be “giving while we’re living,” Mr. Clark says. “Largely because we can have some influence on how the money is spent.” The Clarks created a donor-advised fund administered by Canada Gives, a non-profit which helps philanthropists simplify the complex legal and tax issues around funds and family foundations.
“From an impact perspective, the benefit of a fund or foundation is you have a pot of money that can provide a multi-year gift,” says Denise Castonguay, chief executive of Canada Gives. “That means you can be more engaged with the charity, ask for more information, and it becomes a two-way relationship.”
The Clarks devised a short grant-application form for potential donees and, at the end of the funding period, they complete an impact report outlining what was done with the money.
“It’s helpful to us, and charities have said it’s helpful to them, to clarify their goals,” Mr. Clark says. “We wanted to have some hands-on role, and that has turned out to be the most rewarding aspect.”
While the effective-altruism movement has been criticized for being too technocratic and hard-nosed, ignoring the emotional motivations behind most giving, philanthropy expert Devin Penner believes its proponents are well-intentioned. Still, Mr. Penner, an assistant professor of political studies at Trent University in Peterborough, Ont., says the movement has its limitations. Besides turning off philanthropists who may not be as keen to take a data-driven approach, data-driven impact analyses can never be the whole story.
“It’s inevitable that you’ll get a lot of methodological biases about what impact even means,” Mr. Penner says. “Effective altruism tends to privilege actions producing easily measurable results … so maybe a food bank seems very clear-cut, but funding something that addresses root causes of hunger may appear, on paper, less impactful simply because it’s harder to measure.”
There are other ways to improve philanthropic impact without going to the lengths of the most ardent effective altruists. Ruth MacKenzie, president and CEO of the Canadian Association of Gift Planners, says philanthropists should seek out professional advisors if they’re considering a significant gift.
“Very few major gifts come from donors without seeking advice,” Ms. MacKenzie says. “An adviser is absolutely going to help you direct your giving for more impact.”
Donors can also do some of their own homework on a charity by searching for available data on its website as well as sourcing information through the Canada Revenue Agency’s website.
Overall, well-heeled philanthropists should ensure they’re giving to a cause they care about, and try not to get overwhelmed with donation requests.
“As a high-net-worth donor, you will be bombarded with asks, “ Ms. Bahen says. “People will often say ‘I really care about [a certain cause],' but when you look at their giving, it’s going to [something else] because they were asked to contribute. It’s okay to give yourself time to dig into more research. And it’s okay to give where you want.”
Editor’s note: An earlier version of this story had the incorrect data for giving to animal causes provided by CanadaHelps. This version has been updated.