COVID-19 interviews: UBS on Strategic Philanthropy

COVID-19 interviews: UBS on Strategic Philanthropy

UBS has a unique structure as a wealth management firm that has an in-house Foundation dedicated to helping its clients drive greater social impact. In many cases UBS Optimus Foundation cooperates with its clients to support them in directing capital  to tackle issues set out by the UN Sustainable Development Goals (SDGs), – although this is under-developed in some CEE markets.


Marta Kozielska (MK), UK Consultant for Social Impact Alliance for Central & Eastern Europe: What are some of the social challenges UBS Optimus Foundation tackles?

Phyllis Costanza (PC), Head UBS in society, CEO UBS Optimus Foundation: In terms of the work we do, a lot of issues we tackle directly correspond with the UN Sustainable Development Goals (UN SDGs). For instance, education, healthcare, child protection are areas of focus in places like sub-Saharan Africa and East Asia.

More specifically, for example, we look at tackling the difficulties associated with integrating refugees, or rather the lack of integration altogether. Whether it is refugees from civil unrest, conflict or climate change we want to ensure they are educated in the country they come into and can effectively integrate into local schools. In times of escalating numbers of refugees across the world, this is of utmost importance.

Many issues we address are ones which cross socio-economic boundaries and affect many countries, such as child trafficking. Human trafficking and slavery annually fuels a USD50bn business. We need to start educating families and children about the risks and how to prevent it. It is not merely about rescuing children and addressing the Criminal Justice System. We need to stress the importance of prevention which has not been prioritised or enacted widely enough.

MK: How do you choose and prioritise which social challenges to tackle?  

PC: The way we work is trying to find the intersection between a grave social need and issues that our clients can effectively and strategically address and make a real difference. We try to address problems that organisations or clients would not be able to address on their own and do it in a way that’s scalable. For example, in San Diego County we are working with three organisations on the problem of child trafficking.

We have a programmatic strategy which explains the rationale behind choosing a specific issue which is based on solid evidence of what works. These are also critical issues that our clients deeply care about. Effectively, we help direct our clients to find the most impactful and scalable projects. So, we take positions about what is good and bad philanthropy. In fact, we only accept 5% of programmes under review.

MK: Besides Foundation grants, do you try to encourage wealth management clients toward philanthropic activity or cooperation with UBS Optimus Foundation?

PC: We do not convince, or need to convince, clients at all. There is a huge demand, and that is, in fact, why and how UBS Optimus Foundation was started. This structure is quite unique. UBS is the only wealth management firm that has an in-house Foundation dedicated to its clients.

Clients will fund through us. Donations are tax deductible because we have separate entities in key client locations. We do not charge the clients for our service – 100% of their money goes to the chosen programme. In fact UBS covers the costs of administration, planning, review and development. So, we will fund the programme directly, we will manage that project and report on the impact.

Effectively, we are a service for our clients. Clients fund through us and in some cases UBS co-funds alongside our clients for success of these programmes.

MK: What kinds of partners does UBS seek to successfully carry out  projects?  

PC: One of the key principles of how we operate is grounding our strategy and operations in collective action. We try to bring multiple clients together to solve problems, as well as bringing outside organisations for the best outcomes. We partner with Rockefeller Foundation, Jacobs Foundation, Lumos (the JK Rowling Foundation), Elma Philanthropy, Children’s Investment Fund Foundation. And, we partner with many other grant making organisations as well. Frankly, we rarely do things on our own. We work with a variety of organisations – big, small, grassroots, international NGOs.

As we bring clients together to implement collective action and come up with a strong solution from the best accessible pool of resources and knowledge – similarly, for an identified issue to tackle, we will give money to multiple organisations so the best solution or impactful outcome can be delivered. We work collectively on all fronts.

MK: How do you then choose which organisation to give grants to?

PC: We have a very robust due diligence process which ensures we give grants to the right causes and organisations. We have experts working in all of our focus areas, including healthcare, education, child protection, and environment.

We have a rigorous application process where we are looking for evidence of impact – and not self-reported evidence of impact, but third party validation, as well as cost of impact, management team, evaluation of ‘competitive environment’, which gives us an idea of who else is providing this impact and who is best suited to do so.

MK: How to measure success?

PC: Typically, the large organisations – so the DFIDs [Department for International Development] and the USAIDs of the world – allocate funds to an activity and measure it and its effectiveness against the specific output produced – for example, the number of textbooks given to a child, or a number of teachers trained. Whilst, we try to measure not only the output but also the tangible outcome—for instance, improvements in learning.

MK: How do you measure impact?

PC: For measuring impact, we sometimes use external evaluators. We also work with organisations that have sophisticated evaluation methods. In the Social Finance space, and the work we do with Development Impact Bonds (DIBs), we embed the outcome measures into the payment structure. We have to balance the cost of collecting and analysing the data versus the validity and importance of the outcome.

For example, in early childhood development you want to track the change in cognitive ability. As a child gets older you want to see that literacy and numeracy is improving. However, there is a big debate about the best measures to assess this.

MK: As we are speaking about scalable solutions and systemic change – what is it that you – as the CEO UBS Optimus Foundation – would want to achieve in the short-term and long-term?

PC: Short term we are looking for evidence of change; one of improvement in social outcomes. We are also looking at issues for which solutions can be implemented effectively and efficiently.

Long term we look for scalable and lasting change, which may be manifested in three ways:

  1. Governmental changes in policy;
  2. Changes in funding, which begins with devoting a relatively small pot of money into a programme and much deeper pockets come in at a later stage to enable scaling;
  3. Practice change – let’s take textbooks and deworming pills, as an example. Whilst I am not saying that one should be prioritised instead of the other, if schools are expecting learning outcomes through improved quality of textbooks – that is never going to be achieved. Alongside that, children need to be healthy. So, both the outcome and impact couples books with things like deworming pills, and if such an approach is widely adopted we will be able to see large-scale change.

MK: UBS Optimus Foundation works as a strategic philanthropic Foundation. What is ‘strategic philanthropy’ and how does it differ from its traditional type?

PC: Strategic Philanthropy is really about driving towards large scale change. Strategic philanthropy is trying to drive impact – from inputs (textbooks) to outcomes (improved learning) to – finally – impact (large-scale and lasting change]. Whereas philanthropy stops at the point of output or, for more sophisticated philanthropists, outcomes, strategic philanthropy strives to achieve large scale and lasting change through the three levers I mentioned earlier: progress on the policy front, funding, and practice change to drive more systemic change.

MK: How do you ensure financial returns on your projects in order to meet the clients needs, or is this not a requirement?

PC: We actually do not ensure financial returns – I wouldn’t use that phrase. What we are trying to do is to create structures that would link financial returns to outcomes.

For example, the Development Impact Bonds (DIBs), which have been very successful, supported Educate Girls in India, and delivered a 15% Internal Rate of Return (IRR) which was paid by the Children Investment Fund Foundation as well as the initial funding amount. We reinvested that into philanthropic pool to now help more girls – trying to do more in this space.

Whether there is financial return or not is irrelevant. Focusing on the outcomes and what those specific outcomes are, is most relevant.

We really want to move away from valuing activities and towards giving the organisations unrestricted funds so they can drive impact in the best possible way. They know best, so if we give them money and they find training teachers is more impactful than focusing on new textbooks, that’s great.

MK: Looking into the future – which segment do you think will be developing quicker and more successfully – Philanthropy, Social Finance, Impact Investing? Should they be cooperating?

PC: We need all three of them to tackle these huge social issues. We are living in perilous times where we cannot expect one of them alone to solve these problems. I think it is critical that all of these area play a role.

Philanthropy is typically used to address market failures, and whilst we are not seeing ways in which we can achieve financial returns on some of those, that has created a whole new market. And so, I hope we continue to innovate within all of these areas. We do expect all of them to  grow.

MK: These still seem to be just buzzwords to most. In your own words, can you please define ‘Philanthropy’, ‘Social Finance’, ‘Impact Investing’?

PC: I think everyone uses a different taxonomy which is a problem. The way we define it at UBS is that Strategic Philanthropy aims to drive large scale change and large-scale impact. Social Finance is that space between Strategic Philanthropy and Impact Investing delivering lower than market rate returns but focussing on high social impact. Impact Investing is driving social impact alongside market rate returns.

MK: Recently you said that „strategic philanthropy has a vital role to play in responding to the escalating social needs around the world that we’ll unfortunately see as a result of COVID-19.” Why do we need strategy in our philanthropic actions, especially now?

The reason we need strategy is so we can think about what we are going to need to rebuild communities and make them more resilient following this. There are immediate emergency needs which must be addressed but then we have to ask ourselves how this happened and how we can rebuild. In places like Africa, we will have to think about building the health system to make it stronger to withstand this.

MK: Our (CEE) region still seems to require encouragement to move private capital toward philanthropic activities. How can we go about this challenge?

PC: I think one of the answers to that is combining different sources of capital. Blended finance is something we have been talking about for years. I think that it is an elegant solution to use philanthropic methods to de risk and leverage assets from private sector capital. I really hope we start to see more of that in large financial institutions to move private capital towards funding solutions for the most marginalized in society, because we will never achieve the Sustainable Development Goals  unless we tap into that private capital.


As Head UBS in society, Phyllis Kurlander Costanza is committed to making UBS a force for driving positive change in society and the environment for future generations. The UBS in society team ensures the firm is creating long term positive impact for clients, employees, investors and society.

She’s also dedicated to finding innovative ways to tackle some of the world’s most pressing social and environmental issues. In her role as CEO UBS Optimus Foundation she applies an investment-based approach, making it simpler for clients and their families to manage their philanthropy and maximize their impact.

Since starting at UBS in 2011 she’s been instrumental in reshaping the UBS Optimus Foundation’s strategy, helping clients fund impactful philanthropic programs that improve children’s lives and fight climate change globally. Together with her team, she has introduced innovative financing vehicles, like the first Development Impact Bond in education.

Prior to UBS, she was a senior executive and board member of the Children’s Investment Fund Foundation (CIFF), a UK-based philanthropic organization, linked to the hedge fund TCI. She also has more than a decade of experience as a management consultant, and has worked in the public sector as the New York City Representative for New York State Governor Mario Cuomo, advising on policy and politics in Manhattan.

Phyllis is a board member of Nutrition International, the International Center for Research on Women (ICRW), UBS Optimus Foundation UK, an advisory board member to the Education Outcomes Fund for Africa and the Middle East, and a member of the Council of Foreign Relations. She was also a co-founding board member of the Power of Nutrition from inception to 2019.

She holds a Master of Public Policy from Harvard University’s John F. Kennedy School of Government.