Foundations Continue to Give Generously Amid Economic Uncertainty

dollar-bar-graph.jpg DavidLeshem/iStock/Getty Images Plus Wealth Planning>Philanthropy Foundations Continue to Give Generously Amid Economic Uncertainty But can it be sustained, given the negative asset growth in 2022?

Private and family foundation giving increased amid economic uncertainties of the past year, a new study by Foundation Source reveals. The 2023 Report on Private Philanthropy: Giving and Investment Trends within Private Foundations (the study) found that foundations gave $111 million more in charitable aid in 2022 than the previous year ($865 million compared to $754 million), despite a 31.5% drop in their asset value and 14.5% decline in growth.

Of note, of the more than 100,000 private non-operating foundations in the United States, 90.9% have assets under $10 million while just 2.4% have assets exceeding $50 million, underscoring the fact that the philanthropic organizations effecting change in the world aren’t just the largest and highest profile philanthropists. In fact, the survey found that the smallest foundations have generally been the most generous relative to their asset size, and they were the leaders again in 2022, distributing 7.7% of their total assets.

Change in Focus

Interestingly, the largest percentage of 2022 grant dollars went to unknown or unclassified organizations, highlighting a growing blind spot in the philanthropic sector. A change of focus is also underway, with a 2% increase to public/societal benefit (such as civil rights), while grants to education, human services and health causes dropped behind. This is in contrast with individual giving trends for the year, with the largest percentage of total giving going to religious organizations and causes and higher education.

Although where and when grants were made remained mostly consistent with previous years, there was an uptick in grant volume during March and April of 2022, in part due to relief efforts following Russia’s invasion of Ukraine.

Mission Driven

Foundations continued to favor specific-purpose grants, particularly larger foundations, which favored specific-purpose grants at a rate of 2:1 in 2022 (to be precise, 80% of grants were for specific purposes). According to the study, the logic is to ensure their charitable missions are being pursued in a way that aligns with their vision and incorporating documents and furthers their own charitable objectives (nonprofits, on the other hand, tend to really appreciate general grants because it gives them more autonomy as to how to allocate the funds).

Outlook Amid Uncertainty

The unwavering generosity of private foundations comes at a time of sustained market downturn, geopolitical and economic uncertainty and record-high inflation, among other factors, demonstrating the philanthropic commitment of the nearly 1,000 foundations surveyed. One potential explanation for the increased giving considering unfavorable economic conditions is given the strong market performance in 2021, many foundations experienced an uptick in assets, which translates to an increased payout requirement in 2022. However, foundations granted an average of 6.6% of their assets for charitable purposes, continuing the pattern of granting more than the 5% required distribution from previous years.

Meanwhile, according to Giving USA, individual giving, the largest source of charitable gifts, declined by more than 6% in 2022. It’s therefore likely that foundations might still be riding the high of the 2021 strong market, and we may haven’t yet seen the full effects of the economic uncertainties that 2022 brought.

"We're cautious that negative asset growth in 2022 could signal a softer environment for giving in 2023,” said Hannah Shaw Grove, chief marketing officer of Foundation Source. “But planning and strong grantee partnerships will help to mitigate headwinds as they continue to focus on long-term priorities and deep-rooted philanthropic legacies."

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Originally posted on: https://www.wealthmanagement.com/philanthropy/foundations-continue-give-generously-amid-economic-uncertainty