Good News for Giving Trends

00:00 - 00:22

On today's bonus episode, we'll review 2020 giving trends. This complements our previous episode where we distilled the 100-plus page NACUBO study of endowments and what that means for small and mid-sized organizations out there. While our take on the giving trends doesn't rely on a single study, an array of recent reports point to some surprisingly good news amid the pandemic.

00:27 - 00:57

Hi, everyone, welcome to Inspired Investing. I'm your host, Clare Gola, Head of Foundation and Institutional Advisory Services at Bernstein. This podcast is where we connect and share insights with listeners like you who are engaged in the philanthropic sector or who just want to learn more. Today, I'm excited to be joined by Margaret Borrasso, who is a former nonprofit development director herself. And we are very fortunate at Bernstein because she uses that experience in leading our firm's partnership and consultative services for our clients.

00:57 - 01:02

So, Margaret, thank you so much for joining me today. Thanks for having me, Clare. Excited to be here. Yes.

01:02 - 01:17

This is a long awaited, I think everyone has been eagerly awaiting the release of data measuring the impact of the pandemic on giving last year. We've had a lot of anecdotal information flying our way. So conventional wisdom would say giving had to take a hit last year.

01:17 - 01:19

Right? I mean, it's just how could it, how could it not?

01:20 - 01:43

But surprisingly, philanthropy's response to COVID-19 in 2020 was groundbreaking. 20.2 billion dollars, which eclipsed any other national disaster in recent memory. So these preliminary estimates are coming from legitimate sources, reports released by Candid and the Center for Disaster Philanthropy. So it sounds like the story really is one of incredible generosity.

01:43 - 02:02

Is that fair to say? Yeah. Charitable giving rose in 2020 despite the financial turmoil of COVID-19. That's the headline. Donations in the second half of the year nearly matched the initial months of disaster gifts. That's just, it's shocking to hear, given all of the conversations we were having with panicked organizations. Right.

02:02 - 02:24

In April, May, June of last year. And so it is good news, but I have to ask. Does that just encompasses the pandemic relief? What about all of the other issues out there? Is this sort of a case of robbing Peter to pay Paul or is it a zero sum game? Tell me a little bit about that. Well, Clare, we don't have a single definitive source and there are many ways to get the data. But for the most part, it was still a good news story.

02:24 - 03:36

So, for instance, the estimated increase in the number of charitable donations in 2020 was 10.6 percent. And it was the gifts that were under 250 dollars that experienced the biggest increase. This is according to the Fundraising Effectiveness Project. So gifts under $250, there were a lot more of them and the number of donors in all different giving levels grew by about 7 percent over 2019. Wow. So overall, charitable giving rose 2 percent year over year. And that's why the Blackboard Institute. So they do a study every year. It's one of the largest sample sizes of giving. It's representative of the nonprofit sector as a whole. And they found that not only did giving increase, but so did the average size of people's donations. So it went from $617 in  2019 to $737 for the average size of someone's gift. That's about 9,000 nonprofit clients of Blackboard who make up about 40.7 billion dollars in donations. And while it's only one slice of the giving pie, it's very representative of the 1.5 million nonprofits in the United States.

03:36 - 03:53

Yeah, that's so interesting because the trend prior, as I recall, was that those sort of bread and butter gifts, those smaller annual gifts, were becoming more and more difficult to come by by a lot of nonprofits. But we were seeing this growth in sort of mega gifts or transformational gifts.

03:53 - 04:03

People really stepped up, generally speaking, by and large, in 2020. I just mentioned the conversations that we were having, which were just laden with concerns.

04:03 - 04:30

Right, by organizations in April, May, June of 2020. And were those concerns justified though? I mean that we had a lot of these conversations. Overall giving grew during the first two months of 2020. And then as the coronavirus pandemic swept across the US, businesses were shut down, schools were shut down, nonprofits of all sizes saw a significant drop in donations. That was during like April, May, June. So, yeah, it was totally justified.

04:30 - 04:59

Smaller nonprofits especially experienced a 17 percent decline in that period of time compared to the year before. But giving picked up again. Blackboard noted that some people donated their stimulus checks and economic turmoil didn't harm all Americans. Many open their wallets to donate to foodbank frontline aid. A then protests over racial justice last summer spurred even more of an outpouring of donations.

04:59 - 05:22

So a lot of organizations that I was talking to, I know that you were talking to too, Clare, you know, we're having excess cash because they had stronger outcomes in 2020 than they had anticipated on the outset. Yeah, that's such a good point. We had so many conversations with organizations about contingency planning and cash position in those really scary months of April, May, and June.

05:22 - 05:40

And then, like you said, things didn't seem to be playing out in such a dramatically negative fashion that a lot of organizations had been preparing for. So it's really interesting, but if we dig beneath the headlines, we know that not all nonprofits benefited from this resiliency.

05:40 - 06:05

So what can you tell us about the impact based on size or type of organization? Yeah, so only the largest nonprofits benefited from the boom, according to Blackboard study, at least. And although small groups fared very well in digital, we'll talk a little bit about that later, that's consistent with other data that's showing a bifurcation. We can't say for sure that's driven by the size of the organization, but it's pretty much comparable.

06:06 - 07:15

For example, CCS fundraising, they are a strong group nationally who does some research, they released a report in January and indicated that the pandemic had mixed effects on fundraising in 2020. Thirty-nine percent of the survey respondents reported an increase in fundraising in 2020 due to the COVID pandemic. But the flipside of that is 44 percent reported a decline. So some of that might even depend on sector, not just size of the nonprofit organization. So medical research organizations, environmental, arts and culture groups experienced the biggest drops in donations. But on the flip side, human service organizations, so groups like the Salvation Army, the YMCA, and faith-based groups saw the biggest increase in donations in 2020. So one study from the Lake Institute of Faith & Giving said that the share of religious congregations that have seen declines in giving since the pandemic is 41 percent. But folks who already had online giving set up fared best, and 30 percent of the congregations said they even were able to raise funds to support other congregations and nonprofits that they support in need.

07:15 - 07:20

So that completely aligns with what we've seen with our client base across the country.

07:20 - 07:47

Margaret, you work with a number of the churches and synagogues that I do. And those that have really strong online giving programs were faring very well there. The challenge for any organization that acts as the center, the lifeblood of any community, will be in many cases providing rental income to other programs, housing, other programs. And so for some churches, it was find those that housed food banks. For instance, you just mentioned food banks have been flush with cash.

07:47 - 08:02

People have been incredibly generous by donating time, talent, treasure, right, to those who need it most. We were working with a number of churches this year that have daycare centers, other community programs that had to stop during the pandemic and actually couldn't pay their rent.

08:02 - 08:30

So it's interesting to look at the mix of revenues and how different types of organizations fared. The other piece that you mentioned is these other types of medical groups. So we've seen an influx of cash to a number of medical centers or medical clinics, particularly in areas with significant need. But medical research, anything to do with medical research that is not COVID, these associations and institutions have,

08:30 - 08:39

they've had to downsize staff. It's been devastating for these kinds of organizations. It'll be interesting to see how organizations rebuild after all of this is said and done.

08:39 - 08:47

So tell me a little bit about the education sector. So this looks like one area where smaller institutions seem to have actually bucked the trend.

08:47 - 09:34

Yes, I actually found that to be a really interesting finding from the NACUBO study. The total value of new gifts received in fiscal year 2020 compared to fiscal year 2019 declined by anywhere from five to 18 percent across size cohorts. Except the smallest institutions where new gifts actually increased marginally. So the largest endowments, think like 25  million dollars to one billion dollars and beyond, they saw the greatest percentage decrease in the value of new gifts coming in. Well, institutions under that 25 million dollar mark actually increased new gifts this past year, and they had more outlier gifts, which I would call extraordinary gifts or unexpected gifts.

09:34 - 10:06

That's so interesting. It just makes you wonder whether donors to a certain extent thought about, OK, maybe this year in this time, this is the rainy day. This is when we're going to give to those organizations that need it most, maybe not the mega institution with the well oiled machine fundraising. It's an interesting thing to think about, but that completely bucks the trend that we saw with smaller colleges heading into the pandemic as well. Prior, we've seen some significant financial challenges there. So that'll be something to keep our eye on

10:06 - 10:20

looking ahead. What were some of the factors as I'm speculating here, tell me some of the factors that the data actually bears out influencing donor behavior? Sure. So there were kind of some mixed undercurrents, which is not a surprise.

10:20 - 10:42

It's kind of the theme of what we've been talking about today. Here are some of the pros. I was talking to a managing director at CCS the other week, and we agreed that for the first time in a really long time, with folks unable to spend, unable to travel, certain groups of people had savings on the sidelines and money to spend that they typically didn't have.

10:42 - 11:06

And the well-off are even better than before. This is nothing like '08-'09. This downturn was deeper, sharper, but the uptick has also been sharper and faster. So I'm going to let my inner fundraiser show a little bit when I say this. But the need has been more apparent in the past year than ever before, at least in recent history. It's more real now than it was in recent history.

11:06 - 11:37

And for example, social justice is front and center. Donors are rising to the occasion and more people are becoming donors who didn't consider themselves, I'm going to use air quotes, the audience can't see them here but "philanthropists". People are becoming philanthropists that never would have categorized themselves like that before. Philanthropy is kind of democratizing. So those are some positive undercurrents. But there are some negative ones, too. Reflected in the NACUBO study, there was market volatility, recession.

11:37 - 12:08

And of course, we saw that here at Bernstein, too. But they pointed to another potential contributing factor. And that was the fact that required minimum distributions from individual retirement accounts in this calendar year were pretty much canceled. No one had to make them. And so NACUBO was saying that could have negatively affected giving. We at Bernstein didn't see that with our charitable clients. A lot of them still made that charitable contribution from their IRA. So I'm not so sure if that was a huge impact, but it is something that was pointed to in 2020.

12:08 - 12:18

Yeah. And I have to say, I mean, CCS, that report in January was the only thing that I could find out there early, early on. And so I got to give a shout out there, that was really helpful.

12:18 - 12:42

So it's interesting that you mentioned this democratization of philanthropy. And I want to come back to something that you said earlier about nonprofits who already had online giving set up. It makes sense that we see coinciding an increase potentially in online giving as well as smaller gifts. And so tell us a little bit more about nonprofits who successfully pivoted in particular, potentially with online giving or use of technology.

12:42 - 12:59

And what were some of the key success factors? Sure. So while donations to charities increased two percent like we've been talking about, gifts made online grew 21 percent over 2019. Wow. That's a big jump. Huge. Portion of these assets. Yeah.

12:59 - 13:22

So like we said last year at our virtual branding webinar, virtual went from a nice to have to an absolute necessity, and CCS has dug even deeper into this trend. And I think it's one that has a lot of staying power. So in their survey, they found that respondents were finding success with virtual major gift solicitations. These are some wild numbers.

13:22 - 13:49

So. Fifty-six percent conducted a major gift virtually, phone, video, both, some virtual format. Of those who did it, 72 percent reported that they were as successful or more successful than their in-person gift solicitations. And you can see why I think donor virtual engagement methods have staying power beyond the pandemic. That's a pretty significant number.

13:49 - 14:05

And 43 percent reported that they want to include hybrid virtual events even after social distancing requirements are lifted. And 34 percent said they'll include options of hybrid, virtual, in-person major gift solicitation.

14:05 - 14:34

So not just events, but asks post pandemic. Clare, while we're on the topic of virtual, I think it's worth noting, remote work for fundraisers may also be here to stay. About 90 percent reported that at least some of their fundraising employees were working remote, at least part of the time this January. And 83 percent were contemplating that for the future for fundraising staff post pandemic, which is huge. That is not where we were a year ago.

14:34 - 14:54

No. And it's reflective of almost every sector out there. Right. We're all looking at what will fundamentally change and what will kind of go back to business as usual in some aspects of, I think, virtual business. They're just here to stay as folks have experienced the increased efficiencies. Right. You always have to weigh the pros and cons. And that, interestingly, brings me to you,

14:54 - 15:17

Margaret, and I have both experienced this transition to online events from the beginning of the pandemic because it really hit right at the beginning of the spring fundraisers and a lot of institutions had their events already planned. And so they tried to just basically take what was planned as an in-person event and replace it with online.

15:18 - 15:41

We knew that didn't work right. No one's sitting in the Zoom thing for for three hours or whatever. It just doesn't, it doesn't work like that. We've seen this morphing and this sort of adjustment and evolution of how organizations can do these online fundraisers or just incorporate virtual strategies into their overall fundraising plan.

15:41 - 16:02

And so that's something that I see continuing to change. There's an industry growing up around it. We're having conversations with vendors to organizations to help them facilitate these online auctions and whatnot. There's always opportunity with change in our economy. Right. OK, next question. Grantees were absolutely not the only ones who had to pivot.

16:02 - 16:35

So at the same time, while we were having many, many conversations with organizations out there trying to keep the lights on, stay in business, deliver the programs that need to be delivered at Bernstein, we were also having many conversations with funders, with private foundations, particularly family foundations that we work with. And there's no question that there was a major shift among funders as well. At Bernstein, we published a piece actually about the need for donors to be more flexible with grantees, the need for speed last spring.

16:35 - 16:53

Could you share a little bit more about that? Yeah. So we saw funders moving quicker and with fewer restrictions. We saw major moves towards what I call trust-based philanthropy. And the Lilly School found that 56 percent of foundations that plan to stick with permanently loosened restrictions on grantees.

16:54 - 17:22

That is huge. And only 13 percent said that they are decidedly not permanent. So there's a handful of groups that are kind of still thinking about it, and there's hope that they'll be a little more flexible too. The AB blog at the outset of COVID called for COVID to be this catalyst for long overdue changes in the philanthropic and nonprofit world. So while there's still much work to be done yet, I'm so happy to see that some of these trends like this one show promise for sticking around.

17:22 - 17:45

And I should add that when it came to flexibility, only 39 percent of gifts were for general support rather than specific programs. And these stats, according to the report collected by Candid and the Center for Disease Philanthropy, because look at these gifts. If you take out MacKensie Scott and exclude her extraordinary gifts last year, the figure plunges to 9 percent.

17:45 - 18:12

So a ton of room for improvement. But again, progress in a very promising direction. MacKenzie Scott alone was a game changer this year. You and I both worked with organizations who were the direct recipients of MacKenzie Scott's gifts, which were game changers, which included then building out an investment policy, building out an investment program, really thinking strategically about the best use of funds and what's spent now, what's reserved for later.

18:13 - 18:21

Tell me a little bit more about other disruptors. Can we say anything else? Does the data show anything about other mega donors? Yeah.

18:21 - 18:54

So The Chronicle of Philanthropy is an annual ranking of America's biggest philanthropists called the Philanthropy 50. And they cited that this group gave more to historically Black colleges and universities, social justice groups, and organizations that serve the poor and homeless than they ever have before. This is large in part due to COVID's disproportionate impact on minority groups and increased social and civil justice discourse. But experts again think this change, too, could have staying power. I can't say it enough, it's another long overdue change with still a ton of work to be done.

18:54 - 19:28

But stats like 39 percent of education grantmakers now say racial justice is a top priority for funds, trends in the right direction. You know, we saw in a number... CCS put a number of other reports that so many respondents indicated their nonprofit changed some aspect of their operations in response to this national reckoning on racial equity and social justice. I know we've worked with organizations who have said, both foundations and nonprofits out there seeking funds that have said, we've made a commitment to become anti-racist in all aspects of our enterprise.

19:28 - 19:49

And so that includes our investments, that includes our staffing, that includes our programming, everything looking at every single aspect of the business of a foundation or a nonprofit. And so I know that in the CCS report, 51 percent of survey respondents I read reported that they took steps to make our workplace more diverse, equitable, or inclusive.

19:49 - 20:08

And I'm just going to put a plug in here for our March episode with Ashley Davis. It's titled Learning to Be Color Brave. And it talks about this journey that so many institutions are on right now and how we're partnering at Bernstein with our clients. Not that we have the answers, but we're on that journey with them.

20:08 - 20:25

So before we wrap up, what can we say looking ahead into 2021, should organizations brace for a pullback in giving or should we expect this type of generosity to continue? What do you think, Margaret? So yet again, it depends on who you talk to. I'm optimistic, though.

20:27 - 20:57

CCS said, looking ahead, they kind of surveyed sentiment and experience of fundraisers and saw that 43 percent said they expect a decline in fundraising, but 27 percent said they expect an increase. I'm going to note that that 43 percent, which sounds large, is broken down into 33 percent expecting a modest decline, and only nine percent expecting like a steep drop-off. And most of these declines are expected around events, which is not shocking as we talk about this move to virtual.

20:57 - 21:10

So in my opinion, again, another move in the right direction towards less reliance on major events and more reliance on individual relationships or relationships with families and different companies and communities.

21:10 - 21:41

The Lilly School, though, said in their recent report, broad philanthropic growth is on our horizon, and that's over the next two years as our post-COVID economy rebuilds. They anticipate a 4.1 percent increase in total giving this year and 5.7 percent the next year. Now they look at foundations specifically and I thought this was interesting. They predict a dip, just one percent this year, in their giving and then a big jump to 8.8 percent the next year, which makes sense.

21:41 - 22:08

Foundations might pull back a little bit this year and then revert back to business as usual due to some major outside giving in 2020. So I believe there's reason for optimism. People are going to be giving again this year and some people are even going to be giving more. Well, that is a great way to end it. Optimism. I love it as we reopen. Thank you so much, Margaret, for joining me today and for parsing out all of this research. Yeah, thanks for having me.

22:08 - 22:41

Fun to take our conversations to a new forum this week. Absolutely. Thank you all for listening. If you'd like to learn more on Bernstein's Foundation and Institutional Advisory Services, please see our link to the blogs in this episode's description. If you enjoyed this episode and haven't subscribed to our podcast yet, please go to the iTunes store, Google Play, or wherever you listen to podcasts to subscribe and rate us. Also, please e-mail us with your thoughts, questions, and feedback to insights@Bernstein.com and be sure to find us on Twitter at BernsteinPWM.

22:43 - 22:52

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