Philanthropy’s Role in the Nonprofit Sector
Philanthropic giving has significantly changed the nonprofit landscape, especially over the last few decades. The ability to connect with and mobilize small dollar donors, corporations, and high net worth (HNW) individuals can transform how nonprofits operate (for better or worse). The Philanthropy Outlook 2019 &2020 has found that total giving is expected to rise above the 10, 25, and 40 year annualized average rates of growth. 2019 and 2020 are projected to see increases in all types of giving with foundations and bequests seeing the greatest growth.
Factors Impacting Giving
Economic measures such as Gross Domestic Product (GDP), core personal consumption expenditures (measures inflation and real income), the performance of the stock market, and unemployment often correlate with philanthropic giving. Tax policy changes can also alter the giving landscape (we’ll revisit this topic in a later post). Additionally, with the rise and influence of more billionaires operating in the philanthropic sphere, HNW individuals and large foundations may have outsized influence on particular causes that are important to them.
Framework for Aligning Philanthropy
Philanthropy has never had greater potential to influence and impact nonprofits. However, philanthropists and nonprofits alike need to consider whether their values and missions are aligned. Arabella Advisors’ 3 P framework is one to consider when evaluating foundation and donor giving:
- People: Consider who is giving, who is impacted, and the relationships and experiences of those involved.
- Partners: Identify intermediaries, those who are connected to the mission, and how you can enhance collaboration across current and prospective donors.
- Platform: Integrate and consider the internal capacity of the organization, the external environment, and how this could impact the organization’s mission, values, and objectives.
The Donor Landscape for Nonprofits
The Philanthropy Outlook 2019 & 2020 provides a foundational understanding of how philanthropy may shift in the coming years. This resource provides you with stakeholders to consider in your nonprofit case interviews and a few nuggets of information that will be helpful in showcasing your understanding:
- Total Giving: Despite changes in the tax policy expecting to adversely impact the giving of the lower and middle classes, total giving is expected to increase by 3.4% in 2019 and 4.1% in 2020. This projection is due to above average growth in the stock market, increased personal income, and growth in the proceeding years’ GDP.
- Giving by Individuals and Households: This group is expecting to see giving increase by 2.1% in 2019 and 3.4% in 2020. Charities are growing, which means they are better able to invest in fundraising and many households are seeing increases in wealth and income which will drive giving increases.
- Giving by Foundations: This group will see the largest increases with a projected 7% increase in giving in 2019 and 6.1% increase in 2020. Foundations typically budget based on asset growth and increases in the stock market and GDP will factor into their giving increases.
- Estate Giving: This form of giving is projected to increase by 5.4% in 2019 and 5.6% in 2020. This form of giving can be volatile and shift substantially depending on who makes a bequest and when their bequest is realized (in simpler terms, they pass away).
- Corporate Giving: This form of giving is expected to increase by 3.2% in 2019 and 2.6% in 2020. This can be attributed to GDP growth and above average growth in corporate savings. Corporations use giving as a marketing and recruiting tool and tries to align their giving with their values or to create shared value (a concept that will be revisited in greater detail).
How to Use This Information
Whether applying for a role in philanthropy, Corporate Social Responsibility (CSR), nonprofit, or social sector consulting, this information will be helpful for your interviews and case interviews. Showing an understanding of the landscape will help you to better align partners, platforms, and people and target donors. Nonprofit is part of an ecosystem that includes the private sector, public sector, foundations, and individual donors and considering each of these stakeholders and shifts in the operating environment will help you determine a strategy (or at least impress your interviewer).
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