Citi Warns Charities Face Crisis Despite $2.4 Trillion Warchest – Wealth Management
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Ben Steverman | Oct 04, 2022
(Bloomberg) — Plunging markets, rising inflation and increasing need for services add up to a “triple squeeze for charities” that will create a “crisis” for the sector in 2022 and beyond, according to a new Citigroup Inc. report.
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“In the face of increased demand, charities face higher costs and higher risks that their funding will decline,” researchers at the bank wrote in a report on global philanthropy trends published Tuesday.
Nonprofits are facing trouble despite receiving about $550 billion in donations annually, according to Citi. The bank “conservatively estimates” the philanthropic sector sit on $2.4 trillion in assets globally, greater than the amount controlled by all but the very largest money managers.
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While the pandemic prompted a wave of generosity in 2020, charitable donations have stagnated more recently. Giving in Canada and the UK dropped significantly last year, and in the US it failed to keep up with inflation. This year’s trends are even more troubling, Citi warned.
“Inflation and worries about the economy have already started to impact individual giving and this trend may persist in 2022 if these issues are not resolved,” according to the report, whose contributors included Senior Research Associate Amy Thompson and Andrew Pitt, head of research for Citi’s institutional clients group. Meanwhile, Russia’s invasion of Ukraine and the cost-of-living crisis have put additional strain on a sector “already stretched from supporting the pandemic recovery.”
The bright spots in philanthropy include corporate giving, which rose sharply last year in the US, and cryptocurrency, according to the Citi report. Donations of digital assets surged in 2021, though they remain a minuscule share of total giving. This year, Russia’s invasion has inspired generosity: A real-time tally by the nonprofit Candid records more than 1,500 grants worth almost $1.5 billion “to support the people of Ukraine.”
The US accounts for the majority of assets earmarked for the needy, and in recent years wealthy Americans have been urged to give more from foundations and other funds that have already reaped charitable tax breaks. However, a Bloomberg News analysis found a small but growing number of foundations are exploiting a strategy that allows charitable money to sit indefinitely.
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In recent years, millionaires and billionaires from all over the US have sent more than $4 billion from foundations to large sponsors of donor-advised funds, or DAFs, rather than directly to the needy, Bloomberg estimates. The Biden administration and bipartisan groups of lawmakers have proposed plugging the loophole. But groups including financial firms that manage DAF assets have opposed new regulations, arguing they could backfire by restricting giving.
–With assistance from Noah Buhayar.
To contact the author of this story:
Ben Steverman in New York at [email protected]
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