How to give money and educate people

This summer's ARK fundraiser, figureheaded by the suave Swiss millionaire Arki Busson, was thought by many to be the most glittering in the charity's nine-year history. In a vast marquee behind Kensington Palace, bankers, brokers and the

But this summer, on a similarly balmy night, London also witnessed a very different kind of event. The contrast between the sumptuous luxury of the ARK dinner and the lives of many of the young people who chose to loot and rampage over three nights in August could not be greater, and yet the two are linked. For much of the money that was raised that night by ARK (Absolute Return for Kids) will go towards attempting to improve the lives and lots of the city's underprivileged children by overhauling underperforming urban schools. This is why the Duke and Duchess were happy to be seen at an event so lavish that it is attended with trepidation even by some hedge funders, wary of being seen so publicly amid such decadence, in these financially straitened times. As the Duke told guests, he has no complaints about the quality of his own education, at Eton and St Andrews, and feels a sense of guilt towards others less privileged than himself.

The Duke is not alone, and it is this feeling of guilt, this urge to use one's wealth to better the plight of others, that has fuelled a rise in educational philanthropy. A generation ago, this was largely limited to rich men giving money to build science labs or music rooms at their former public schools or Oxbridge colleges. Today, it has transformed into a vast and expanding financial sector.

Like most philanthropic trends, the habit of very rich people giving very large amounts of money to improve state funded schools started in America. Bill Gates has given billions to improve bad government schools across the US, and Facebook founder Mark Zuckerberg has pledged £60 million of his own fortune to improve state schools in New Jersey.

In the UK, with our two-tier education system, educational philanthropists' motives are mixed. Some seem driven to give money to 'repay' society for their good fortune at having been well educated. Others resent how badly they were taught and want to ensure that today's children are given better opportunities.

Lord (Stanley) Fink, 53, chairman of ARK, co-treasurer of the Conservative party, and known to some as the god-father of the London hedge fund market, falls into the former category. He had a brilliant education after winning a scholarship to Manchester Grammar School, which functioned on the now defunct direct grant model, phased out in the 1970s when schools had to become either comprehensives or fully private. 'My life, my horizons, were totally changed by my education,' he explains. After a degree at Cambridge, he became spectacularly rich, transforming the Man Group into the world's largest quoted hedge fund business. In May 2008 when he stepped down from the board, the Man Group had just reported pre-tax profits of £1.05 billion, and his personal wealth was estimated at £116m.

He got into educational philanthropy when the headmaster of his old school asked if he would donate money for scholarships. But when the Blair government introduced its academy programme, and invited 'high net worth individuals' to donate money to rescue failing schools, he realised there were better options. 'Sponsoring a school, rather than individual scholarships, gives you operational leverage. Bluntly, you achieve more for your money.' There are now more than 1,000 schools with academy status in Britain. This New Labour initiative is one that the Tories have taken up with gusto.

Lord Fink declines to put a figure on how much he has donated to schools over the years, but says that since he became wealthy, he has made a point of donating roughly a third of his income to charity. He recalls that his parents, the children of immigrants from eastern Europe, always gave money to charity even though they had little disposable income. 'When someone came asking for money, they never said no, they just asked how much.'

Jim O'Neill, head of Goldman Sachs Asset Management and regarded as the global guru of the currency markets, pours a great deal of his surplus disposable income into the coffers of Shine, an educational charity he set up in 1999 with a group of fellow bankers, which runs school programmes designed specifically to improve numeracy and literacy, and to widen the horizons of children who have no books at home or have never been to a theatre. It has raised, and spent, more than £20m since its foundation.

O'Neill grew up on a depressed council estate near Manchester. The son of a postman, he was bright and stayed on for A levels at his comprehensive before taking degrees at Sheffield and then Surrey universities. To this day he is agitated that boys 'just as clever as me' left school at 16 with no proper qualifications: 'I'm an economist by training, so I know that the best way to increase economic growth is to improve educational standards.' He started giving money 13 years ago when a rich friend sat him down and asked: 'What are you going to do with your life?' Since then philanthropy has become an expensive but rewarding habit. 'Getting involved with donating money to improve schools is the best thing I have done with my life,' he says.

Shine pumps money into funding after-school activities and programmes to improve basic learning or musical achievement, as well as funding staff's salaries for longer hours, while ARK moved early into sponsoring and running academy schools. It currently operates eight academies - six in London, including the recently opened Evelyn Grace Academy in Brixton, designed by Zaha Hadid - and within two years, when six more schools have opened, it will have 15,000 children in its education network. ARK has raised and spent more than £150m in the past nine years.