Will philanthropy catch a cold?

Will philanthropy catch a cold?

News (International)
When Wall Street sneezes, the impact often is felt far beyond the isle of Manhattan.

Many savers, investors and home-owners around the globe are feeling the effects of the current tumult in the financial markets.  At the same time, on both sides of the Atlantic, household budgets are being squeezed as food and energy prices are increasing while job vacancies are declining.  The troubles in the US are compounded by the presidential election and hurricane season, both of which are putting competing pressures on donors’ wallets.

Charities on this side of the pond also have cause to worry that last year’s decline in charitable giving, to £9.5 billion, may become a trend. But it is far too early to tell what the real impact will be on giving, and the limited, and largely anecdotal, evidence that is available is mixed.

For instance, a recent YouGov poll suggested that Britons will donate 7% less to charities this year compared with last year.  Still, this predicted decline is relatively modest, especially when considering the context of the question. When respondents were asked how much money they gave to charity in 2007, the mean total was £155.35.  When asked what their giving will likely be in 2008 “with the onset of the credit crunch and a possible recession in sight”, the mean total was £144.55.

The same poll also suggested that those respondents making gifts over £100 expected little change in the amount they will donate. And, when asked what types of expenditure they would cut as a result of the credit crunch, more people said they would cut back on a wide variety of other spending, including on clothes, restaurants, theatre and home improvements, than would reduce their charitable donations.

There also may be cause for cautious optimism for giving by the very wealthy, who tend to be more insulated from market shocks.  Philanthropy advisors attending the Society of Trust and Estate Practitioners (STEP) philanthropy symposium this week reported that the financial environment has not, at least as yet, had an impact on giving by their high-net-worth clients.

Corporate philanthropy will also be under pressure, especially for financial institutions. Catherine Sermon, director of community at Business in the Community (BITC) said in Third Sector magazine last week that “Companies inevitably will have to cut investment” during the economic downturn (19/9/08).

However, Alan Eagle, manager of Abbey Charitable Trust, an Association of Charitable Foundations (ACF) member, finds that sentiment amongst corporate and other grant-making foundations in the UK is not as negative as it may be in the US. He told Philanthropy UK, “It is too early to tell what the effects of the economic climate will be, but there is a general feeling that there will be a period of consolidation and that giving won’t go down.”

David Emerson, ACF chief executive, added, “Foundations tend to give over longer cycles, with 2-3 year budgeting not uncommon.” However, Emerson also noted that as the economic climate further strains charities, applications for funding may increase, which would make it harder for charities to get funds from trusts and foundations simply because of the greater demand.

The real impact on charitable giving of course won’t be known for some time, and charities are understandably restless in the face of so much uncertainty. Whilst the sector appears to be facing a challenging fundraising environment, the £9.5 billion question is “How bad is it?”

Still, private philanthropy will likely become increasingly important to charities and other civil society organisations in the UK and around the globe. Indeed, at the European Venture Philanthropy Association annual conference this week, venture philanthropists across Europe recognised that, in the immediate term, they may need to help charities merely to survive rather than to grow or replicate.

In an interview with national philanthropy reporters on the eve of the annual Clinton Global Initiative, former US President Bill Clinton said, "Around the world, the thing that I worry most about with other stock markets going down and the American market here is that it will reduce the availability of capital” (Washington Post, 23/9/08).

Clinton called on foundations, companies and individuals to increase their giving, because philanthropy "is even more important over the next two or three years than it would otherwise have been."

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