Grants by small to large private foundations increased by nearly 15% from 2021 to 2022, despite high inflation and other negative financial conditions, but those macroeconomic trends raise concerns about the extent of donations this year, according to a new survey by Foundation Source that was released Wednesday.
Foundation Source, a consulting firm for private foundations, surveyed 980 private foundations that had assets ranging from $1 million to $500 million for its “2023 Report on Private Philanthropy.” In 2022, the nearly 1,000 foundations issued 31,373 grants, worth $865 million in total. This represents an increase in both the number of grants (1,553 more than the previous year) and the total dollar value of those grants (up by $111 million, or 14.7%, from 2021). Even when adjusted for inflation, the total amount issued in grants saw an increase of roughly 6% from the year before.
These findings appear to buck overall trends in philanthropy from 2022, as identified in Giving USA’s “Annual Report on Philanthropy” from June, which determined that philanthropic giving in 2022 dropped by more than 10% after adjusting for inflation from the previous year.
Gillian Howell, the head of client advisory solutions at Foundation Source, said this was due to the nature of these private foundations.
“These are high net worth, or ultra-high-net-worth donors that have made the commitment to give to philanthropy, it’s irrevocable,” she told eJewishPhilanthropy. “I’ve found in my 33 years in my career that these are the people who step up when things are going in the other direction. If markets are down, giving is being cut back in other areas, they are the ones who step it up.”
Howell said this could be seen in the fact that the foundations gave beyond what is legally required of them. “If as a foundation you have a 5% minimum distribution requirement, we see in our report people were giving 6.6%, way above what their average is. In 2022 the markets were down and they were still giving 6.6%,” she said. “It shows that in the high-net-worth space most especially, giving is really driven by altruistic reasons and less around tax benefit. They are giving because they want to have an impact, they want to make a difference through a foundation and that’s their passion, as opposed to looking at any other financial benefit for themselves.”
While the survey found that grant-giving had risen in 2022, it also found significant negative economic trends that made the future uncertain. Foundation Source determined that the 980 surveyed organizations saw significant declines in their endowment portfolios, with a nearly 13% decrease in assets in 2022 on average, due largely to the performance of U.S. equity markets, which are the largest holding in most foundations’ endowments.
“Double-digit declines in endowment portfolios may signal a softer environment for giving between now and the end of the year,” Howell wrote in the report. “These dynamics warrant a closer look to fully understand last year’s trends, and what they may mean for us going forward.”
Speaking to eJP, Howell was slightly more optimistic, however. “I don’t see [philanthropic giving] decreasing,” she said. “For this year, I think it’s going to continue in trying to make up for drops in other areas [like] direct individual giving and… the markets going down. In my experience, I don’t see people all of a sudden saying, ‘I’m just going to give 5% now.’ I see people in the high-net-worth and ultra-high-net-worth space continuing to give and also step it up when it’s needed.”
The report identified a shift in focus for private foundations. In 2022, “Public/Societal Benefit charities” received the largest share of donations from these 980 foundations, replacing education-related charities, which had been the largest sector for years. “Public/Societal Benefit charities” received 19.5% of donations, an increase of 2%, educational charities got 18.1% of grant dollars, down from 19.9% the year before. Donations to religious charities also saw an increase in 2022, up to 3.4%, from 2.8% the year before.
“Education, since we started, has been the top sector in terms of where people have given. That is now dropped to second place in replacement with public and societal benefit organizations,” Howell said.
She attributed this to a number of national and global developments, which likely pushed those public benefit charities into the lead, chiefly the war in Ukraine, the U.S. withdrawal from Afghanistan and natural disasters. Philanthropic responses to most of these would fall into the “Public/Societal Benefit” category. “I see there were lots of crises in the world,” Howell said.
She also noted that younger philanthropists are more likely to be interested in donating toward international causes. “People are so much more aware than ever of what is going on beyond their own state and country, and they’re tuned in and wanting to incorporate that into their mission,” she said. “I think as new generations come into the philanthropy world, they’re taking control of the dollars from their parents, and you’re going to see more international and societal [donations] than you’ve seen before.”
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