Protracted pandemic impacts
There is likely to be a backdrop of lingering uncertainty from the pandemic, even if we discount the impact of potential new variants and the need for global vaccination efforts to ramp up. In the context of the latter, Charities Aid Foundation is supporting the Go Give One campaign from the WHO Foundation to raise funds towards vaccines for those most in need.
A subdued fundraising environment is likely to continue with in-person fundraising and mass participation events still feasible, but not reaching pre-pandemic levels, dampening income generation. Many charities have learned how to adapt. But some level of uncertainty could be still disruptive or a drain on resources. National governments have introduced policy responses supporting giving and civil society across the world in the context of Covid-19. However, some countries have used emergency measures and powers to further crack down on civil society and restrict civic space. Some of this also affecting donors’ ability to give across borders.
Rapid inflation affecting charities
Inflation is on everybody’s mind and widely discussed in the media. The impact on charities can be multipronged. If input costs increase, then this affects products and service, and any pandemic-induced increases of operational costs could now be further knocked by rises in energy costs. This all means that income generated goes less far as result.
Gifts by donors (particularly set amounts) are another issue. Pro Bono Economics estimates that the expected value of £20 - the median amount donated or sponsored - given in 2020 will fall to £17.20 by 2026. If a charity is ‘awarded a grant of £100,000 per year in 2021 for the next three years, the 2023 grant would be worth £94,000 after accounting for inflation’, which is effectively a reduction of 6%.
Data from our Charity Landscape report shows that the majority (85%) of charity leaders agree that charities will be expected to fill the gaps in public sector provision over the next five years. Furthermore, if public service contracts are not adjusted for inflation those charities involved in delivering them could now face a widening gap between what they are being paid and the real costs.
Sustained changes to funder behaviour
In light of Covid-19, many funders made more resources available and signed statements pledging to make more use of flexible funding. They also started to collaborate more. Impactful examples include London Funders collaborative response to COVID-19 and the launch of the Association of Charitable Foundation’s Funders Collaborative Hub. There could now be a wider expectation of an increase in longer term and less restricted funding following the pandemic. At CAF, we have also looked into the benefits of providing more resilience funding which allows for a range of positive organisational impacts to enhance the long-term survival and development of grantees.
Old challenges are here to stay
Issues of climate change, racial justice and tackling levels of inequality have been front and centre in public consciousness the last couple of years. Like everyone else, civil society organisations and their funders have taken note and are working on solutions. Funders are starting to take these into account, viewing their work from a cross-cutting lens and larger funder collaborations are emerging, including on climate change. The arrival of players like the Bezos Earth Fund has helped to spark new momentum and we could see a rapid growth in philanthropic giving in this area.
For charities, there is also a need to stay on top on of changes to regulation, even when the initial impetus was to address past challenges faced by the sector. For example, the Charity Commission announced changes in its expectations of trustees in relation to safeguarding. This is also regarded as a governance priority for all charities, whether working online or in person.
Cybersecurity threats and fraud
During the past couple of years, we saw more reports about cybersecurity attacks on charities, both large and small. Hackers have put charities on their radar, seeing them as more defenceless and softer targets. Fraud is part of that picture. CAF polling found that one in five charities (19%) said that moving to online, digital, or remote working in the pandemic made their controls and processes more secure against fraud. But while two in five charities are concerned about fraud, only one in seven train their staff or volunteers to spot it. CAF Bank has provided fraud prevention resources which can be useful for charities.
Maintained trust in charities
Not everything is gloom and doom and there are positive stories. Trust in charities increased in 2020 and remains higher than pre-pandemic. This could be also due to the fact that they have been absolutely essential to the Covid-19 response across the country. Many have relied on their services, and others became involved with their work or joined one of the many mutual aid groups that formed during the peak of the crisis. Hopefully, this does not just represent a short-term crisis response, but we will see a continuous trend upwards, or a plateau at a high level. Within the context of declining trust in other sectors, civil society could be one of the few which will come out of this pandemic with a better reputation than they went in.
A continued decline in donors
A couple of years ago a debate emerged about a decline in giving. Recent UK Giving data has shown that many of the questions remain. In particular: are we increasingly reliant on a smaller pool of donors? The total amount of giving increased in 2020, rising to £11.3 billion from £10.6 billion in 2019. Growth was driven by an increase in the average size of donation, up from £45.69 in 2019 to £53.52 in 2020. But this was accompanied with a fall in the overall number of donors, and the trend towards fewer people giving more seems to have increased further. It is still to be seen whether we will see donor numbers stabilising or if they will fall further. There could be additional impacts on people’s ability to give with inflation as well as the changes to the wider economic environment following the pandemic.
Fundraising environment evolving
Isolation due to the pandemic accelerated existing trends towards digitalisation, but we have also seen new platforms move into the fundraising market. The demise of cash is a trend which is likely to continue. As online giving increased, giving with notes and coins became rarer. CAF polling in 2019 found than half (51%) of respondents said they donated in cash. But in 2020, this fell to 38%, slumping to only 9% in May and June. As restrictions were being lifted in August 2021, cash donations remain subdued (18%), but giving via a website or app did not make up the difference, dropping back to 14% in the same month.
Another question is how giving habits have changed, partly being driven by a generational shift. In the latest UK Giving report, respondents aged 16-24 listed ‘buying an ethical product’ as their third most common way (38%) to get involved with charitable activities in 2020. This behaviour did not make it into the top three for any other cohorts.
