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COVID-19 fundraising: is the sky really going to fall?

“The world has seen and survived many grave challenges and disasters before, providing encouraging clues into the resilience of the sector and past do determination.”

Approximately 12 years ago, and just a few years into the establishment of my fundraising consultancy, the global financial crisis (GFC) struck causing an international economic meltdown described by economists at the time as being the most severe since the Great Depression.

This culminated on 15 September 2008 with the collapse of Lehman Brothers, the fourth largest US investment bank. This prompted a global financial tsunami which led to a cataclysmic drop of the Australian equity markets, described by financial commentators at the time as a “three standard deviation” event.

Lindsay Tanner, Minister for Finance and Deregulation at the time, recalls then Prime Minister Kevin Rudd announcing to his colleagues that they were in “uncharted waters”.

Sound familiar?

Well it does to me, especially when I look at some of the client and sector briefings I gave at the time. I made statements like, “This is more a question of when rather than if we will be in an official recession.”

This is real: how will this impact giving?

The first question on everyone’s lips is how will COVID-19 impact charitable giving? Krystian Siebert, an Industry Fellow at the Centre for Social Impact at Swinburne University of T echnology has looked closely at ATO statistics during and after the GFC and found that donations fell by 10% and 6% in 2008/09 and 2009/10 respectively – and we didn’t even have a recession then. He concludes, “If we experience a major recession now, charities will likely be hit hard by a big drop in donations.” But just how hard, no one really knows.

Table 1: Tax deductible donations in Australia: 2000-01 to 2010-11

I said similar things during the GFC, and yet we all dodged a bullet then. It’s not to say we are likely to dodge one now, especially when considering the unprecedented once-in-a-100-year dual health and economic crisis we are all facing, and the dramatic and compounding impact that isolation and social distancing will have on jobs, business and giving.

How do COVID-19 and the GFC compare?

The next key question to ponder is how does the COVID-19 crash compare with the GFC?

In recent weeks, due to COVID-19, the ASX/S&P200 dropped 1907.2 points from a peak of 7197.2 on February 20 to a low of 5290 on March 12, an overall drop of $608.5 billion in value or 26.5%. During the GFC, when Lehman Brothers collapsed, the ASX/S&P200 dropped 3168.2 points from a

peak of 6385.7 on January 2 to a low of 3217.5 on November 21, an overall drop of $678.3 billion in value or 49.6%. (Source: Blayney Chronicle).

While the COVID-19-induced drop was much more rapid, it has not as yet been as severe on a relative percentage basis as during the GFC, despite the absolute amounts being similar.

With the ominous International Monetary Fund (IMF) warning that the Australian economy is likely to shrink by 6.7% this year and the Morrison Government’s statement in mid-April outlining the expectation that unemployment will reach 10% in the June quarter, COVID-19 can still take many

twists and turns.

At worst, we face the possibility of a far deeper global financial crash and at best, perhaps a graduated return to business as usual as the pandemic curve flattens and the economy potentially rebounding in 2021 with expected growth of approximately 6.1%. In truth, no one really knows and hence we

need to prepare for both possible scenarios.

Is there anything we can compare this to?

We’ve been hearing ad nauseam for weeks on end now that COVID-19 is a once-in-a-hundred-year dual health and economic crisis event, with unprecedented actions and impacts. We are all living proof of how incomparable this is to anything we have seen or experienced before.

Despite this, the world has seen and survived many grave challenges and disasters before, providing encouraging clues into the resilience of the sector and past donor loyalty and determination. As mentioned, this is not the first time I have found myself pondering this question and this does feel like GFC deja vu as I searched for parallels.

Bradford Wm. Voight, CFRE, current VP of Development at The Philadelphia Orchestra, penned a terrific article at the time of GFC entitled Resilient Philanthropy (Advancing Philanthropy, Sept/Oct 2008), which he began by referring to the fable of Chicken Little: “The confused fowl that creates

hysteria among her friends in the mistaken belief that catastrophe is near at hand. Similarly, ongoing news about the declining stock market and teetering economy has created an uneasy feeling of foreboding and dread. Fear not. The stock market may indeed be falling, but luckily the sky is not,

as a study of historical data proves.” That data was from the Giving USA study, an initiative of The Giving Institute, with research undertaken by The Centre on Philanthropy at Indiana University.

This Giving USA research looked at the impact of various economic shocks on philanthropic giving in the United States over a 27-year period and clearly shows, contrary to conventional wisdom, how philanthropic giving holds up in the face of economic crisis and in response to dramatic stock

market declines.

This was based on 13 major events of terrorism, war (or war-like acts) and political or economic crises, including the fall of France in WW2, the bombing of Pearl Harbor, the Korean War, the Cuban Missile Crisis, the US bombing of Cambodia, the Gulf War, the bombings of the World Trade Center (1993) and Oklahoma City, the assassination of President Kennedy, the resignation of President Nixon, the Arab oil embargo, the Hunt silver crisis and the 1987 financial panic known as “Black Monday”.

In this study, the percentage change in three core indices – the Dow Jones Average, S&P500 Index and total year-on-year US giving data, sourced from Giving USA – were tracked and measured from 1980-2007. As shown in the table below, while the Dow Jones Industrial Average and S&P500 correlate closely with each other, Giving USA data (not adjusted for inflation) does not.

Table 2: Percentage Change in Dow Jones Average, S&P500 Index and Total Giving: 1980-2007

As Voight noted, the surprising findings of this study were that:

  • Changes in philanthropic giving do not seem to be directly correlated to change in the stock market.

  • Philanthropy seems to be very resilient and weathers storms very well with much “less dramatic fluctuation”.

And this is what happened during the GFC, or the Great Recession as it is called in the USA. As shown below, data sourced from the Fundraising Effectiveness Project’s Growth in Giving database – described as the world’s largest publicly available database of actual nonprofit gift transactions –

shows that despite the rapid collapse of the S&P500 of nearly 39%, giving to nonprofits rose slightly and then declined by only 8% at the end of the recession years.

Table 3: Great Recession (GFC): Donations and the Stock Market USA

The situation in the UK was not dissimilar. A briefing paper produced by the National Council for Voluntary Organisations and Charities Aid Foundation (CAF), published in November 2009, revealed similar trends to the USA experience. Key findings are:

  • In 2007/08, over half the adult population (54%) continued to donate to charity in an average month.

  • While there was a slight decline in the proportion of adults giving, levels were roughly equivalent to what they were in 2006/07.

  • The total amount of charitable giving declined during the recession by 11% from 2007/08, due to a combination of fewer people giving and smaller average donations.

COVID-19 donor research

It is still early days in the COVID-19 fundraising cycle and, with little Australian research available, the best we can do is draw insights from two separate UK donor research studies.

Blue Frog Fundraising were out of the blocks very quickly and commenced a series of in-depth telephone interviews with donors on 9 March 2020 with a mix of men and women of various ages. The findings were discussed in an excellent podcast, in conversation with founder Mark Phillips and researcher Amber Nathan, Why Donors Give?, released on 3 April. They found that prior to 13 March 2020, donors perceived this as “something happening in China”, yet by the end of March there was a stark realisation that this “could be serious”, they “need to take control” and stay home to be safe, and they could clearly see that others were suffering.

When asked about how this relates to their giving, the donors initially found no connection, but towards the end of March the situation had moved so rapidly that the donors had evolved their responses to say: charities would be “part of the solution”; they were exploring how to volunteer; they not yet been asked; they were “stuck at home” but wanted to do their part “by giving”.

So as any experienced fundraiser knows, the biggest reason why funds aren’t raised is because they are not asked for. This appears to be the early and clear case in coronavirus fundraising to date.

Clearly donors are saying that this is big, that they want to help, but have not yet been asked. So as any experienced fundraiser knows, the biggest reason why funds aren’t raised is because they are not asked for. This appears to be the early and clear case in coronavirus fundraising to date.

About Loyalty undertook a COVID-19 Sentiment Tracker and provided a summary of findings after four weeks to 16 April 2020, and two weeks further into the crisis than the Blue Frog study. About Loyalty found that COVID-19 has: affected everybody – both professionally and socially; prompted

tremendous goodwill; people worried, especially about economics, the health system, their elderly parents, social unrest and education; people reevaluating what really matters in life; people looking for leadership.

Directors Roger Lawson and Richard Spencer believe the impact of this on charities will be big and that COVID-19 is changing giving as follows:

  • There is an “outpouring of humanity”.

  • Most donors say they don’t plan to make any changes to their giving.

  • Some have indicated they would consider donating to a new charity, helping people affected by coronavirus.

  • Other would reduce support or even switch away from supporting existing charities they perceive as not directly coronavirus related.

  • Some charities will gain, ie in areas of elderly, health, disability, children, homelessness, armed forces, local community and animals, at the cost of others, ie environmental, overseas aid, religious, sport and arts.

  • The Sentiment Tracker revealed three weeks (between 30 March and 13 April) of consecutive declining response by donors to a question about supporting “a specific named charity”, leading to the fear that some key UK charities might be about to take a “big hit”.

Is the sky really going to fall?

In a follow-up to the economic shocks on philanthropic giving paper, the 2019 Changes to the Giving Landscape report, researched and written by the Lilly Family School of Philanthropy at Indiana University, found that following the Great Recession there has been a downward trend in charitable giving participation rates with fewer Americans making donations than in the past.

Their data showed a “broad and consistent decline of over 13 percentage points in the share of households who gave in 2016 compared to 2000”, and that “this percentage equates to approximately 20 million Americans who are no longer giving to charitable institutions as of 2016, at least not in ways that are captured in this data set.”

Despite this, the researchers found that, encouragingly, the overall average percentage of donations remained stable from before to after the Great Recession. In other words, “Households who continued to give from before to after the Great Recession continued giving a similar percentage of their incomes, even if their income dropped during this timeframe.”

The most critical points for fundraisers to note from this research are:

  1. Households who continued to give, gave consistently, even under difficult economic conditions.

  2. Even though the Great Recession was the biggest economic downturn since the Great Depression, many people didn’t stop giving.

  3. The dollar amount they gave may have changed if income decreased, but most people gave a consistent percent of their income, even during hard times.

  4. For nonprofit practitioners, it’s important to note that you can keep fundraising, even during a recession. You don’t have to be worried that all of your donors will completely stop giving.

  5. Giving can become a habit. Even if the economy is hit hard, some people will not change their giving behaviours dramatically.

Cautious but optimistic

We need to be cautious as the current COVID-19 situation is not a true apples-to-apples comparison to the GFC. The impact of social distancing is a major difference and, by all accounts, it does appear that the impact of the coronavirus on Australian charities will be far more severe than during the GFC. Nevertheless, the data does suggest that donors are incredibly supportive of nonprofits through uncertain economic times. Before we call doom and gloom on charitable giving, let’s remember the natural generosity of people and the abiding triumph of the human spirit, highlighted in the research,

during these most challenging of times.

Lawrence Jackson is a long-time fundraising and philanthropy practitioner, consultant and commentator. He established fundraising and philanthropy consultancy, Catalyst Management, in 2006. Since then Lawrence has undertaken more than 80 bespoke projects and assignments for a wide

spectrum of organisations ranging in size, age and area of focus.

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