Philanthropy in 2024: More questions than answers

Do arts organisation apply to trusted trust and foundations, despite more competition for funds and with many pursuing wind up strategies? Or do they continue the pursuit of local- or regionally-based funds, regardless of what looks like a very vulnerable local authority financial landscape? Or do they put more time into individual giving and corporate fundraising?

At present, the data doesn’t point to readily identifiable trends, especially in terms of philanthropy. It is a mixed picture as Neil Heslop, CEO of Charity Aid Foundation says in his foreword to the 2023 UK Giving Report: “2022 was the most generous year ever for giving with an estimated £12.7bn in donations, up £2bn on the previous year.” Yet, the report goes on to explain, the extra giving was not the result of more people giving, but of more giving by the same number of people.

The war in Ukraine contributed to higher inflation in the UK and the cost-of-living crisis saw many donors cut back, while rising prices significantly eroded the value of donations to charities, due to escalating costs.

Shifting sands

A February 2024 report by UKOnward backs up these claims in assessing the current philanthropic environment. It states that the most affluent individuals are donating proportionately less, with the top 10% of earners in the UK donating at half the rate of the poorest 10%, resulting in £3.4bn of lost funding for charities.

The report also points to donors focusing on giving to a rather narrow set of places in the UK, for example, with over a third of all grants from the largest philanthropic foundations made in London.

So, amid these shifting sands, what do we know for certain about philanthropy in 2024?

1. Keep faith
The principles of long-term relationship building with individual donors still apply in times of austerity or uncertainty. People will give if they can understand the urgency of the need and if they have a connection to the cause.

In investing in relationship building for the long-term, legacy giving demonstrates the most assured positive trends. Data from Legacy Futures show that over the past 30 years, legacy income to charity has quadrupled in value, from £0.9bn in 1993 to £4.0bn in 2022/23.

While we might feel awkward talking about legacies, legacy fundraising has the highest return-on-investment fundraising ratio in the sector at 33:1, with £33 raised for every £1 spent.

2. Economic stability is a way off yet
Economic turbulence is set to continue with lower-income households and smaller charities the hardest hit since Covid. Data from the National Institute of Economic and Social Research outlines that poorer households will not recover pre-pandemic spending levels until 2027. This will have an ongoing impact on both giving levels to arts organisations and discretionary spend to attend events and performances.

3. Generation Z engage with charities but can’t give cash
According to Bankrate’s jobseeker survey, more than a quarter of people aged between 18-26 are unemployed. With little to no room for savings or investments, and with many vulnerable to unexpected costs, it is a very challenging time for young people.

However, this community still has a deep link to charitable causes, with many engaging in activism via social media. A report by Classy in 2022 suggests that Generation Z are three-times more likely than older donors to engage in advocacy for a cause and are four times as likely as traditional donors to learn about a cause via influencers and celebrities. Additionally, it seems very high numbers of Generation Z are willing to volunteer.

4. Elections will affect giving
This year will see elections in both the United States and the United Kingdom. Shifting priorities in policy and general uncertainty often mean donors pause their giving. For charities, elections also add competition for financial contributions. Charities at the cutting edge of social issues affecting policy are more likely to attract donations than those that are not. In general, giving cycles will face more unpredictability.

5. AI will both help and create ethical concerns
The difficulties charities face in adopting AI lays in access to big data and a joined-up approach across the charitable sector. The potential, as outlined by Meredith Gray, for AI to reduce the cost of fundraising, increasing engagement of donors and volunteers and enhancing research and evaluation, is extraordinary.

However, ethical concerns abound. Donors want personalised approaches and to feel connected to an organisation that cares about them. Organisations also need to navigate the issues inherent in adopting AI in relation to donor privacy, data collection and accuracy. Again, the challenge will be to achieve sector wide consensus about the standards to adopt.

Long-term approach

Amid so much uncertainty, it is difficult to know where to invest time and attention. In philanthropy, relationship building is a must, meeting engagement needs across different generations, as is developing communications that are both urgent and relevant.

However precarious income might seem, taking a long-term approach to develop income for the future through areas such as legacies, are all essential elements of underpinning fundraising strategies.

More predictable times will come, but at this time of heightened economic uncertainty and increasing social justice concerns, donors come with strong opinions and agendas. Keeping faith with our organisational purpose, cause and looking to the long-term future, is therefore a crucial part of ensuring donor confidence.

Michelle Wright is CEO of Cause4 and Programme Director of the Arts Fundraising & Philanthropy Programme.
artsfundraising.org.uk
@artsfundraising | @MWCause4