There are not many opportunities afforded by the turmoil in the financial world, and it can be difficult to look beyond retrenchment across the board. For many families of wealth, the past few months have been spent on refocusing investment portfolios. However, it is also a prescient time to look again at what your philanthropy is doing.
The philanthropic sector has been hit hard by the downturn. Ad hoc donations are falling as the general public tightens its belt. Wealthy families, whose philanthropic endeavours are often endowed or rely on donors who have a lot of their wealth tied up in investments, are equally feeling the pinch.
Even those who have experienced downturns previously and went to great lengths to ensure endowments were protected, especially through diversification, have found their philanthropic financing has not been protected from the current crisis.
However, participants to a roundtable hosted by Campden FB at Campden's Family Philanthropy Forum earlier this week said many families are rising to the occasion and making sacrifices to ensure commitments to grants are being met. For example, unnecessary "luxuries" that foundations have built up are quietly being dropped. Equally, money has been pulled from areas that were not deemed essential to a project's fundamental goal.
Roundtable participants also said it was proving to be a good time to revisit their philanthropic mission statements and ensure that what foundations are doing really fitted with their original objectives. Just as an increased focus on risk management is a hallmark of the post-Madoff investment era, an increased focus on due diligence, transparency and accountability is being witnessed in the philanthropic field.
Although current commitments to grants are being met and will be met during 2009, the same certainties are not there for the future. No one can say for certain when the downturn will end and grants may well begin to be affected from 2010 onwards.
This re-evaluation will mean that only those projects that "make the grade" or are trusted will be beneficiaries, according to one roundtable participant. However, another responded that philanthropy was about risk-taking and it was important that families remained bold when selecting what to support.
Downturn or not, what is clear is that the emotional attachment of families to philanthropy remains strong. This could lead to the strengthening of another consequence of the current market turmoil – increased partnerships.
When funding is squeezed, the importance of impact from philanthropy becomes ever more acute. Rather than sacrificing mission, finding a partner enables achievement of mission with efficiency.
"Strategic partnerships (or coalitions) aren't just a means of reducing overheads during hard times, they are also a highly effective way of delivering a policy message," James Libson, a partner at Mishcon de Reya Solicitors, told Campden FB. "If a foundation or charity is involved in campaigning, it will find that its ability to get its message across is greatly enhanced if it allies itself like-minded organisations."
Such partnerships can have further benefits too: advancing knowledge between philanthropists and foundations, and increasing collaboration in the nonprofit sector with the possible elimination of replication of effort and resources. There is much work to be done, but the economic crisis may provide an opportunity for better philanthropy.
* A full transcript of the roundtable will be published in the summer issue of Campden FB. Click here to ensure you receive your copy.