Marcos Flávio Azzi is creating a philanthropic culture in Brazil by introducing new management and educational mechanisms that encourage sound social investments. Marcos Flávio is bringing wealthy individuals to define their social causes, invest in them strategically and sustainably, and strengthen the citizen sector as a result.
The New Idea
Deeply concerned about income disparities in Brazil, Marcos Flávio is pioneering the field of strategic philanthropy while building bridges between wealthy people and citizen organizations (COs). Skillfully using his banking expertise, Marcos Flávio is combining financial market and management tools, with social impact measurements to build a strategic social investment model with the direct involvement of investors.
The Azzi Institute is creating a culture of accountability, preventing potential investors from supporting corrupt organizations and mitigating risk and uncertainty by helping investors identify and monitor successful projects that tackle social causes of interest to them. Although there are similar models in the world—i.e. the Institute for Philanthropy in England or WISE in Switzerland—the Azzi Institute differentiates itself by moving beyond philanthropy education and investor network building. Marcos Flávio’s approach is transforming traditional family legacy investments into strategic, impactful philanthropy. The Azzi Institute’s greatest contribution has been to bring principles of social investment to family-owned business managements (family councils), thus helping them build long-term investment commitments. Investors are now using a percentage of their patrimony to determine the size of their initial investments and gradually increase that percentage over time to build a legacy for their families. As a result COs are gaining access to previously untapped resources and are constantly challenged by the Azzi Institute to strengthen their organizational capacity and become increasingly financially sound and transparent.
As a result, these new types of investors are contributing to the development of Brazil’s citizen sector while fostering new social values for future generations. Barely two years after its launch, the institute has already built a portfolio of more than 600 social investors and 100 registered organizations. In 2009, 25 organizations received more than R$1M (US$556,000). Within the next five years Marcos Flávio plans to have grown this investment pool to R$10M (US$5.56M) and by 2012 he plans to spread the institute to Rio de Janeiro and other major Brazilian capitals.
Despite significant economic growth in recent years, Brazil remains one of the world’s most socioeconomically disparate countries. Approximately ten percent of the population owns 45.8 percent of the gross domestic product. Brazil is the 10th largest economy in the world, yet it ranks 69th on the human development index. Such disparities are all the more apparent in capital cities. The city of Sao Paulo, for example, is home to some of the world’s wealthiest people. It is the only city on the planet to have three Tiffany stores, and the number of Ferrari sport car sales are higher there than anywhere else.
Unlike the U.S., Brazil does not have an established culture of philanthropy, be it organized, strategic or charitable. Less than 14 percent of citizen sector funding comes from individuals, and the average Brazilian donates approximately R$158 (US$88). Although this may seem like a large sum to many Brazilians, it pales in comparison to individual donations in the U.S., where 70 percent of the adult population donates approximately US$1,017 yearly (Brito, Márcia & Melo, Maria Emília. Hábitos de doar e captar recursos no Brasil, São Paulo, Peirópolis, 2007). It is true that nearly half of Brazil’s adult population with a family income greater than 20 minimum salaries donates to CO, however 65 percent of those donations are fragmented and average less than R$100 (US$56). In addition, families whose wages are equal to or lower than a minimum wage income donate about 3.6 percent of their salaries to social causes, while those that make the equivalent of 20 minimum salaries barely donate 0.8 percent of their income.
The small portion of Brazil’s population that decides to engage in philanthropy is usually confronted with the challenge of not knowing how to choose one social cause over another or how to link it to their family legacies.
Brazil has one of the fastest growing populations of millionaires. By increasing their interest in responsible private social investments they could have a deep impact on the redistribution of wealth as well as on the creation of a value-based culture of philanthropy for generations to come. Nevertheless, family philanthropy in Brazil is still not valued. Family Councils are common in big cities, yet they tend to focus on discussing procedural norms as opposed to ways in which they can give back a portion of their profits to society.
In 2007 Marcos Flávio realized that it was possible to help address problems of income distribution and support social change by significantly increasing and strategically directing the amount of money going into philanthropy. Marcos Flávio is applying the management tools and techniques he used when he helped create Brazil’s first private wealth management firm. He founded the Azzi Institute to stimulate and channel investments from wealthy individuals to strong COs, thus simultaneously ensuring transparency, enabling the emergence of a strategic philanthropic culture in Brazil, and strengthening the citizen sector.
The Institute works with two target populations: The first consists of wealthy investors, and the second is made up of COs with a proven social impact. In order to reach out to the wealthy individuals, the institute’s staff set annual and biannual goals to increase the number of contacts, meetings, proposals and new investments or renewals. Marcos Flávio’s organization also disseminates the concept of strategic philanthropy and best practices through conferences and written publications.
At the beginning of a relationship with a potential investor, the institute first offers advice and evaluates investments previously made by the donor, should they exist. If the person is thinking of investing for the first time, Marcos Flávio’s team seeks to understand the potential donor’s interests and begins to jointly define the cause to be invested in as well as the amount. Throughout the process, the institute strives to involve more than one member of the same family. Once the cause has been defined and agreed to, the team of advisers introduces the potential investors to COs with proven track records. The institute monitors the investments and provides donors with regular reports about the projects while also providing support to the organizations in question.
Marcos Flávio has developed an online platform to allow donors to follow their investments at the click of a button (i.e. a model he replicated from his experience working in the private wealth management firm). Thus, the Azzi Institute centralizes wealthy individual’s social investments in a practical, efficient and transparent manner. In instances where investors would like to dedicate their time and expertise to the cause chosen, the institute identifies organizations within which their volunteering would have the highest potential impact.
The secret to Marcos Flávio’s success has been his ability to help investors define their causes and direct them to credible projects that could truly benefit from such investments. He strives to transform the way wealthy individuals think about donating and to create a lasting philanthropic culture in Brazil. The Azzi Institute therefore spends a considerable amount of time educating the potential donors about the causes they express an interest in, providing them with as much background information as possible about the issues chosen and the organizations that tackle them. Involving various family members in this process has the dual role of helping them create family legacies while also ensuring the entrenchment of this philanthropic culture.
Marcos Flávio is also working hard to dismantle the widely accepted stereotype that COs in Brazil are corrupt and/or poorly managed. In his work with COs, therefore, he focuses extensively on due diligence making sure that they have a solid organizational structure and are financially transparent. This also has the added benefit of reducing the risk of investing, thus building up the Azzi Institute’s credibility with its investors. The institute evaluates four core aspects of COs before including them in their portfolio: Stability, good management, potential impact and transparency. These are the parameters used to define an Organization Quality Index (OQI). The OQI is calculated by a software in order to ensure an impartial process. The Institute follows up these initial evaluations with periodic investment monitoring and site visits.
Currently, the Azzi Institute is a not for profit organization entirely supported by a percentage of Marcos Flávio’s personal patrimony and that of two other investors. To guarantee its full sustainability, in two years Marcos Flávio plans additionally to charge investors 10 percent overhead to be reinvested in the Institute’s scaling up efforts. In 2009, in order to secure 18 new investments, the institute had to establish contact with approximately 600 potential investors and organized more than 90 meetings. Barely two years after its inception, the Azzi Institute has already directed more than R$1M (US$556,000) in investments to 25 COs. The goal is to reach the R$10M (US$5.56M) mark within the next five years in the city of Sao Paulo. Marco Flávio plans to open four new offices in Brazil by 2020. His vision is to aggressively scale this model in order to create the equivalent of five huge foundations in Brazil that will operate under the highest standards of professionalism and will invest in organized, transparent and honest philanthropic projects. Marcos Flávio is thus building and spreading a strategic and impactful philanthropic culture in Brazil.
Marcos Flávio was born in a lower-middle-class family in a town of 20,000 inhabitants of the Interior of Minas Gerais. His mother has always been involved with social work in the region and has instilled a desire in her children to treat people with care and respect.
After completing high school in the public educational system, Marcos Flávio joined the army with the goal of one day serving as a United Nations peacekeeper. After two years of training, he grew frustrated of the strong corporate hierarchy embedded in the military and felt that he could make a greater contribution to society by continuing his studies. He studied administration at a private university in Sao Paulo and in 1994 he began working at Citibank. The following year, he left Citibank to find a smaller company within which he could grow and explore his potential. He began working with Hedging-Griffo, a company founded at the time as an Absolute Return Fund and became Brazil’s first private wealth management firm. Driven by the motivation to develop close relationships with clients, Marcos Flávio created the firm’s commercial area from scratch. He thus developed a valuable expertise and became responsible for an important portfolio of clients and relationships. His innovative approach—introducing care and personal interactions to the financial market, addressing customers not as mere investors, but also as people looking for support and guidance—was highly successful.
A short four years later, Marcos Flávio became a shareholder of Hedging-Griffo and, with his increased income, he was finally able to unleash his vocation for social transformation. In 2003, in addition to creating the company’s Social Responsibility Institute, he started saving part of his patrimony to invest in his own social investment in housing, a field which he has always seen as a priority. In the first year, 60 popular houses were built in the suburbs of Sao Paulo and 200 more followed a year later. He quickly realized however, that much like his bank clients, his social investment was too fragmented to make a significant impact. He needed to develop a more strategic approach to social investing, and began seeking his social cause.
This is how Marcos Flávio understood that he could foster a strategic culture of family social investment in Brazil by creating a mechanism that would bring potential investors together with COs. Weaving his expertise and resources from the successful sale of Hedging-Griffo to Credit Suisse in 2007, Marcos Flávio created the Azzi Institute. He is helping investors discover their social causes and build family legacies for future generations.