Why Philanthropic Giving Declined in 2022 – Non Profit News

Total US philanthropic giving decreased significantly in 2022, one of only four times the metric has dipped in the last 40 years. The latest annual report by Giving USA shows that total giving for 2022 declined by 3.4 percent in current dollars (or 10.5 percent after adjusting for inflation) to a total of $499 billion—down from $517 billion in 2021.

The report’s findings, researched and compiled by Indiana University’s Lilly Family School of Philanthropy, are not entirely surprising. Philanthropy had been especially strong in 2020 and 2021, largely due to giving related to the COVID-19 pandemic, as well as to racial and social justice movements in the United States. In 2021, total giving exceeded a half trillion dollars for the first time ever.

At the same time, 2022 saw both sharply rising inflation and a downturn in the US stock markets—the S&P 500 index fell nearly 20 percent—both of which events negatively affected wealthy donors’ bottom lines.

Philanthropy had been especially strong in 2020 and 2021.

“One of the reasons we saw a decline in giving by individuals was because of that stock market loss,” notes Dr. Anna Pruitt, managing editor of the Giving USA report for the Lilly School. “We know historically that can really affect high-net-worth donors. On the flip side, you know, we also saw disposable personal income go down as well, especially when we adjust for inflation. That just means that households have less to give.”

The decline in individual giving is especially significant because of the outsized role it plays in overall American philanthropy, according to Dr. Una Osili, associate dean for research and international programs for the Lilly School, who oversaw the research. “Individual giving is the largest share of American philanthropy. And we’ve seen that individuals now have a relatively small share of overall giving. It’s down to 64 percent,” Osili says, which reflects a trend over the last several years; individual giving as a share of total giving has continued to decrease after it dropped to 70 percent in 2018, which was considered low at the time.

“Individual giving is the largest share of American philanthropy.”

The report found that while individual giving declined significantly (13.4 percent when adjusted for inflation), corporate charitable giving actually increased slightly, in unadjusted dollars, from 2021 to 2022, rising by just over 3 percent (although representing a decline of about 4 percent after adjusting for inflation). Giving by foundations also proved more robust, growing by about 2.5 percent from 2021 (a decline of 5 percent, adjusted for inflation). In other words, though all sources of charitable giving showed declines in adjusted numbers, these declines were much smaller for corporations and foundations than for individuals.

The differences in giving between individual, corporate, and foundation donors can be attributed to a few factors. “We actually saw GDP increase and we saw corporate profits go up in current dollars,” notes Pruitt. “On the foundation side, we see that these more institutional forms of giving are a bit more insulated” from the shocks of inflation and stock market volatility.

“It’s also worth noting that foundations tend to give on a rolling average, and their giving has been way, way up due to the COVID-19 pandemic and the movements for racial justice,” adds Pruitt.

Giving to Foundations and International Charities Bucked the Trend

Despite the overall decline in giving, a few sectors stood out for bucking that trend, including giving to foundations and international charities. Both sectors grew by about 10 percent before inflation.

One reason for those increases, according to Osili, was the war in Ukraine.

“It’s important that nonprofits continue to build relationships and engage with donors.”

“Americans have been very generous in support of [Ukraine],” notes Osili. “And with the international organization sector, we’ve also seen many of them build in new models of giving and engagement, including monthly subscription donors, for example, and taking advantage of a lot of the technology that’s available, so that it’s not just a one-time gift, but an ongoing commitment to the crisis.”

Overall, the report highlights the fact that many nonprofits are facing or are likely to face financial headwinds this year.

“There are some real challenges ahead,” Osili says. “I think it’s important for nonprofits to understand that giving has gotten a lot more sophisticated and complex. Nonprofit leaders need to adapt to this changing landscape and in some ways adapt to the new tools and vehicles that donors are using.”

Even with the decline in giving, and especially in individual giving, American philanthropy remains robust.

“This has been a very complex and unusual environment,” Osili notes. “At the same time, we’ve also learned a lot from periods of challenge in the American economy. And one of those lessons is that American generosity is pervasive, is persistent, is resilient. And generosity has been a core theme from Giving USA’s beginnings in the 1950s to the present time.”

These periods of turbulence in giving present challenges to nonprofits, but also opportunities to reinvest in fundraising. “We’ve seen that in periods of downturn, it’s important that nonprofits continue to build relationships and engage with donors,” says Osili. “It’s often the case that in those shocks there is recovery that follows the downturn and organizations that build and maintain those relationships, especially the authentic communication and engagement, that leads to donor retention and long-term sustainability for organizations.”