Key Findings: Increased Giving and Larger Grants
The report shows that private foundations continued their generous giving in 2022, despite challenging macroeconomic conditions. A total of 980 foundations were analysed, and collectively, they made 31,373 grants, representing $865 million in charitable support. This represents a 7.1% increase in the number of grants made and a 14.7% increase in the amount of money granted over the previous year.
Not only did the number of grants increase, but so did their size. In 2022, foundations made more and larger grants than in 2021. The average number of annual grants per foundation increased from 31 to 33, while the average grant size increased from $25,000 to $28,000. This demonstrates foundations’ commitment to having a greater impact on the causes they support.
Going Above and Beyond: Giving More Than the Minimum
Private foundations are required to distribute at least 5% of their assets each year. However, the report shows that foundations consistently give more than the minimum distribution. In 2022, foundations gave away an average of 6.6% of their assets, exceeding the requirement and demonstrating their commitment to making a difference.
Focused on Mission: Shaping the Charitable Landscape
Private foundations strategically allocate their resources to achieve their philanthropic goals. The report highlights the various tools and techniques foundations use to effectively manage and deploy their charitable assets. In 2022, foundations increased their funding to nonprofits by 88.9%, nearly doubling from $18 million in 2021 to $34 million in 2022. This represents a growing recognition of the importance of supporting organisations that may not have tax-exempt status but are instrumental in driving positive change.
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Foundations also directed a significant portion of their grant dollars to public and social benefit charities, with a 2% increase over the previous year. These organisations, such as those working in the areas of civil rights and social justice, received 19.5% of total grant dollars in 2022. However, funding for education-related charities will decrease by 1.8%, indicating a shift in priorities within the philanthropic sector.
Tailored Approach: Specific-Purpose Grants and Asset Allocation
Foundations, especially larger ones, prefer specific-purpose grants to ensure that their charitable missions align with their vision and governing documents. The report shows that 80% of grants made by larger foundations in 2022 were for specific purposes. This targeted approach allows foundations to actively shape the impact of their giving and drive change in their chosen areas of focus.
In terms of asset allocation, smaller foundations maintain higher allocations to public equities (57.9%), fixed income (15.5%), and cash (12.2%). These allocations provide liquidity for their higher levels of giving. On the other hand, larger endowments have the highest allocation to alternatives (28.0%), seeking diversification and return potential for their long-term portfolios. The report also highlights how market performance has affected endowments’ asset allocations, with equities dropping to an average allocation of 47.0% and alternatives peaking at 20.2% in response to market conditions.
Emerging Headwinds: Challenges for Nonprofits
While private foundations have demonstrated their commitment to giving, the report also highlights the challenges facing nonprofits. In 2022, market conditions, including lower realised gains and weaker investment performance, resulted in a 14.5% decline in foundation net assets. The year-over-year change in asset value was -31.5%, which could have a significant impact on foundation giving in 2023. The report underscores the need for nonprofits to navigate these headwinds and highlights the growing blind spot in the philanthropic sector regarding unclassified organisations.
Outlook and Conclusion
The 2023 Report on Private Philanthropy provides valuable insights into giving and investment trends among private foundations. Despite economic uncertainties, private foundations have continued to give generously, exceeding minimum distribution requirements and making a significant impact on charitable causes. However, the challenges and emerging headwinds demand careful planning and strong partnerships between foundations and nonprofits to mitigate the potential impact on future giving.
