Philanthropy in a Time of Austerity

We’ve been writing throughout 2022 about the possible headwinds facing both donors and social impact organizations as they navigate continued disruptions in the philanthropy “marketplace,” from historic levels of inflation to logistics and supply chain constraints to the threats of potential economic recessions.

None of that feels like it’s letting up, with an increasingly complex horizon facing philanthropists and their partners. Among them:

  • The war in Ukraine will continue to displace a large amount of official development assistance as well as private giving. Both common sense and emerging data from donors suggests the shift in philanthropic capital to cope with the Ukrainian crisis is material and will persist for some time. This is both unsurprising and the “right” thing to do and will also have real impacts on donors’ discretionary budgets for new initiatives or programs, especially European donors and aid agencies. Like the pandemic in 2020, which forced many donors to push huge amounts of funding into public health, the war will trigger many donors to prioritize funding for relief and resiliency efforts in Eastern Europe and the Baltics at the expense, often, of priorities in other regions or sectors. None of this is wrong headed or irresponsible but it does generate zero sum consequences for organizations that do not focus on the region.
  • Inflation and rising interest rates are setting the stage for a possible economic recession. Should recessions hit industrialized markets, expect a significant pull back from donors whose wealth and giving are tied to performance in the markets. Stock options are worth less in a struggling market, which means executives and founders may feel compelled to dial back giving as their on-paper wealth shrinks. Many corporations will pull back on Corporate Social Responsibility and related corporate philanthropy spending as soon as earnings take a hit; Giving USA’s recent look back at giving trends in 2020 and 2021 made that clear. None of this will be good for organizations and grantees that have already been struggling in the wake of the global pandemic.
  • Donor fatigue is real. While it’s difficult to quantify this, leading donors are anecdotally expressing the same exhaustion many of us are struggling with after two and a half years of a once-in-a-generation global pandemic, economic dislocation, and juggling an impossible set of responsibilities on the home and professional fronts. Many scrambled to react to the pandemic, and in the United States were simultaneously scrambling to support racial justice work in the spring and summer of 2020. At some point, most donors lose the energy to be in constant crisis grant making mode, and we certainly sense that at Geneva Global with both institutionalized philanthropies as well as family offices and individuals. Do most donors have the resilience to cope with a looming economic crisis should recession set in globally alongside a European war and continued strains on the public health system? We’re not entirely sure.

Despite the dark clouds looming, donors and organizations aren’t powerless to prepare for and navigate these challenging times. Our recommendations include the following.

For donors:

  • Assume your grantees and partners will face the same if not increasingly severe macro challenges and prepare to respond accordingly. Flexibility, agility, and a willingness to trust grantees to put donor dollars to best use in navigating so many challenging headwinds will be crucial to maintaining and strengthening relationships.
  • Long-term donor strategies may be less crucial than short-term risk taking and support. While strategy-driven giving is almost always a sound approach, many grantees and partners need their donors to be flexible and willing to respond to unanticipated macro-level complexities. Being held hostage to a strategy developed and adopted in, say, 2019 will not benefit most donors this year.

For grantees:

  • Get used to crises as the default, not the exception. It’s depressing to write but it’s probably accurate to say the challenges facing social impact organizations will only evolve the rest of this year, not dissipate. Waiting for better days may be a fool’s errand; embracing an attitude of “the only way around is through” might serve leaders and organizations well with respect to internal expectations setting and morale.
  • Look for trust-based, flexible donor relationships rather than short-term transactional cash infusions. It takes money to keep organizations going, obviously, but there’s equal value in prioritizing partnerships with donors that allow organizations to pivot and adapt to rapidly changing circumstances. That flexibility can be the key to thriving in turbulent times and might be equally as valuable as additional cash.

There’s certainly no rest for weary donors and the social impact organizations they support for the rest of 2022. But with some luck, perseverance, and long-term agility, both can come out the other side stronger.