2016 was a great year for philanthropy. It included record levels of giving and impact investing and more strategic approaches to charitable efforts. 2017 will likely launch its own unique trends. I’ll be watching for these highlights:
1. Reduced tax incentives for giving
Many knowledgeable observers predict that Congress will reduce income tax rates for the wealthy – thereby decreasing the tax savings from charitable deductions. Many also expect the estate tax will be eliminated – reducing the tax incentive to make final charitable contributions.
Some predict the new administration will seek to limit or even eliminate charitable deductions. Others expect that changes will be made to donor-advised funds – implementing payout requirements similar to those required of private foundations.
These changes could significantly affect the U.S. nonprofit sector and should be closely watched. They could also exacerbate income inequality – leading to increased demands on safety net nonprofit organizations at the same time that tax incentives for giving are reduced.
2. Increased impact investing
The value of assets currently under management using environmental, social and governance factors has grown to $8.72 trillion in the U.S., according to the US SIF Foundation, which advocates sustainable, responsible and impact investing.
The nearly $1 trillion sitting in foundations and donor-advised funds represents an enormous new resource of capital to be invested for the double bottom line of both financial return and social impact. Expect that more foundations will follow the lead of The Heron Foundation (and others) to ensure that all of their capital is invested to help achieve their missions.
3. More contributions from fewer, wealthier donors
Charities are increasingly relying on larger and larger donations from smaller numbers of high-income, high-wealth donors, while receiving shrinking amounts of revenue from the vast population of donors at lower and middle income levels, according to a new report, “Gilded Giving – Top-Heavy Giving in an Age of Extreme Inequality.”
The report also says a growing inequity in charitable giving may hold risks not only for nonprofits themselves, but for the nation as a whole.
According to the report: “Risks to charitable sector organizations include increased volatility and unpredictability in funding; … an increased need to shift toward major-donor cultivation; and an increased bias toward funding larger or heavily major-donor-directed boutique organizations and projects. The increasing power of a small number of donors also increases the potential for mission distortion.”
Risks to the public include the rise of tax-avoidance philanthropy, the warehousing of wealth in the face of urgent needs, self-dealing philanthropy, and the increasing use of philanthropy as an extension of power-and privilege-protection, the report states.
4. Support of constitutional principles
Many organizations that protect constitutional rights have seen a recent surge of donations. That pattern should continue as Americans of all political stripes invest to fortify bedrock democratic principles – including free speech, a free press, the separation of church and state, equality, privacy rights, the right to assemble and protest, and more.
5. Increasing impact of women
Today, women control more than half of U.S. private wealth and continue to demonstrate innovation and leadership in the field of philanthropy – with major impact. Facebook executive Sheryl Sandberg, for example, recently committed $100 million to fund LeanIn.org, focused on women’s empowerment, and other organizations.
Over the next 40 years, women are expected to inherit 70 percent of $41 trillion in inter-generational wealth transfer. By 2025, they will comprise 60 percent of U.S. billionaires.
6. More donors of color
By 2050, the U.S. population is predicted to reach a non-white majority. Philanthropy will shift in a similar pattern. The new Smithsonian National Museum of African-American History and Culture, for example, received nearly three-quarters of its individual gifts from African-Americans. The Denver Foundation and others are working hard to recognize and grow philanthropy in communities of color.
7. Mainstreaming of philanthropic strategy
Leaders in families, foundations and businesses increasingly understand that philanthropy consists of more than the transactional act of writing checks. Today, philanthropy is seen as a strategic investment that transforms both society and the donor.
Truly transformational philanthropy requires careful strategic planning, which has fueled the growth of philanthropic consulting in financial and professional services firms. It has also fueled the rise of philanthropic strategists as key advisers to philanthropists.
With these trends in mind, best wishes for a happy, healthy – and philanthropic – new year!
This post originally appeared in the Denver Post on 1/8/17. It is reposted here by the author with permission.