Not all charitable organizations are alike. In 2013, some nonprofits can look forward to robust donations, while many others will continue to worry about where the next dollar will come from, according to Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors.
In the coming year, impact investing will gain increasing traction among philanthropists, and a global culture of giving will continue to emerge, Berman said in a recent telephone interview with AdvisorOne.
Rockefeller Philanthropy Advisors is an independent nonprofit consulting firm that spun out of the Rockefeller Family Office about 10 years ago. The firm advises ultra-wealthy individual, family, corporate and institutional donors on philanthropy; it includes some 50 members of the Rockefeller family among its clients, Berman said.
The Year Ahead
As the fiscal cliff negotiations drag on (as of Dec. 25, hope for a resolution was dim if not extinguished), the entire outlook for the philanthropic and nonprofit sectors is clouded by uncertainty about what will happen with the individual charitable deduction, Berman said. However, many ultra-high-net-worth donors have decided to lock in a charitable deduction at the current level.
"They are putting more funds than they usually do into either a private foundation or a donor-advised fund," she said. "I don't think that trend is going to be large enough to have a significant influence on charitable giving across the whole U.S."
Into 2013, the economic environment will be the key factor for most charitable giving. As studies have noted, U.S. donors generally give away around $300 billion per year. Most of those are small donations from individuals, and modest donations to local institutions, "which is part of what keeps the wheels turning here in the U.S.," Berman said.
For most of those donors, their attitudes about whether they feel secure in their jobs and whether they feel prices are rising quickly or not determine how generous they can be.
"Only the top 20% of the donors have the luxury of taking a longer view," Berman said. Those donors drive a very disproportionate amount of giving, and already they are beginning to feel that the worst parts of the recession are behind them."
As a result, "that part of the philanthropic giving is going to be strong in 2013," she said.
The major education, health care and cultural institutions, which receive significant donations from wealthy donors, are in a good position, and indeed an improving one. "We survey our donors every year, and by March 2012, close to half of our donors were already planning to increase their giving. This is probably a combination of putting more money into a philanthropic vehicle and donating more money directly into public charities."
Not so fortunate are small local organizations that rely on lower-income donors. "Some of them, especially in areas like the New York area that was so hard hit by Hurricane Sandy, are already feeling that some of their donors gave more in 2012 to help out with Sandy and essentially borrowed from their budget allocation in 2013."
For small nonprofits in the U.S., then, 2013 is still a very uncertain environment. "We're nowhere near back to the kind of comfort level individuals across the country had before the economic downturn began to be felt in 2008–9."
Impact Investing Evolves
The impact investing field of philanthropic activity has been developing rapidly, and promises to gain more adherents in 2013, according to Berman. For Rockefeller Philanthropy Advisors, impact investing is any investment that is made with an eye toward a social and environmental return as well as a market return.
