Crisis watch: Europe

Alliance magazine

Except for continued giving by wealthy individuals, Europe’s recession shows very few positive signs for foundations or charities, but the crisis is forcing innovation and new financial thinking. Alliance has reports from Russia, Spain, the Netherlands, the UK, Italy and eastern Europe.

We welcome contributions for future coverage of this issue. Please send updates to caroline@alliancemagazine.org

Foundations face tough times

The financial crisis has produced harsh conditions for many foundations across Europe, according to items posted on the web portal set up by the European Foundation Centre and the US-based Foundation Center to track responses to the recession.

‘The depth of the financial crisis has exceeded our expectations,’ admits the Wellcome Trust, the UK’s largest foundation, in its 2008 annual report. The trust has sold shares and property worth billions of pounds to increase its liquidity, noting that ‘ten-year returns for equities have now fallen to the weakest level since the US War of Independence in the 1770s’.

After what he called ‘a tough year’ in 2008, Giuseppe Guzzetti, president of Italy’s Fondazione Cariplo, said it had drawn €113.1 million from its reserves, cutting them to about €387 million, to maintain its annual grantmaking of €200 million, and will do so again if necessary.

In the Netherlands, the Bernard Van Leer Foundation is to cut its annual spending of €24 million on projects in developing countries to €18 million, but the Prins Bernhard Cultuurfonds spent €24.6 million in 2008 on cultural projects, compared with €24 million in 2007.

Spain’s Fundación Pedro Barrié de la Maza, in cooperation with Cáritas Diocesanas de Galicia, has launched a €300,000 emergency fund to assist Galician families affected by the economic crisis.

Source
http://www.efc.be/projects/crisis

Soros urges EU to do its bit

George Soros is to give $100 million to support organizations working with the poor in Central and Eastern Europe, especially Ukraine, the Baltic states, the Balkans, and parts of central Asia and the Caucasus, and to help them counter the impact of the economic crisis. Interviewed in the Financial Times, he urged the European Union to boost its aid to meet welfare needs and tackle political extremism.
 
Source
Financial Times, 18 June

Forward thinking

A spate of upcoming events in Europe will consider the state of philanthropy and foundations in this recession.
 

  • On 17-18 September, in Heidelberg, Germany, the Centre for Social Investment is organizing a symposium on The Global Crisis: What’s Next for Social Investment, Nonprofits and Philanthropy?
  • On 23 September, the Association of German Foundations is holding a special conference on foundations and the crisis for its members.
  • On 9 October, the Banque de Luxembourg is staging a symposium on Responsible Leadership in Times of Change, which will focus in particular on three main areas of leadership responsibility: governance, financial management and impact.

While the Heidelberg conference will bring together speakers from both sides of the Atlantic, the Luxembourg symposium has a more exclusively European focus, and hopefully will be able to bring in some feedback from the earlier events.

For more information
http://www.alliancemagazine.org/en/content/conference-calendar
http://www.stiftungen.org

Bank boost

The recession is prompting charities to shake up their finances, according to the UK-based non-profit CAF Bank. A CAF Bank survey of 280 charities found that 64 per cent have reviewed their finances and 32 per cent have moved some or all of their banking business. Three quarters are now more inclined to bank with smaller, non-traditional banks, 57 per cent say that the recession has made them even more conservative with money, and 43 per cent have restructured their investment portfolios.

Echoing the expansion of other UK social banks (Alliance, June 2009, pp24–25), since the global financial crisis began CAF Bank has been growing at the fastest rate in its 23-year history. In the year to April 2009, new account openings were up 49 per cent and total deposit balances grew more than 15 per cent.

For more information
http://www.cafonline.org

Tomorrows-PhilanthropistHope on the horizon

As reported in the Alliance eBulletin on 1 July, just over half of UK charitable foundations expect their grantmaking to fall in the next year, according to a member survey by the Association of Charitable Foundations. The longer outlook is more optimistic. Beyond two years, 45 per cent expect to increase grantmaking and another 33 per cent to maintain current levels.

With UK philanthropists, the picture is rosier. Almost all of those surveyed earlier this year plan to maintain or increase their giving during the recession, according to a poll by Coutts, the private banking arm of the Royal Bank of Scotland. The survey of 100 philanthropists found that 42 per cent planned to increase their charitable giving, and 45 per cent said they would maintain the same level of donations. These results are in line with the findings of a later survey of 500 Britons and Americans for the Tomorrow’s Philanthropist report, which found that three quarters have not decreased their contributions to charity and one in four has even increased their giving in the past year and a half (see Latest from Alliance, 15 July).

Sources
Philanthropy UK, 9 June
Third Sector Online, 3 June
Financial Times, 20 June

Maria ChertokRussia  Maria Chertok
Non-profits more prepared than other sectors

Most Russian charities face sharp cuts in funding while demand for their services rise but plan to continue or even expand their work, according to a survey of NGOs, corporate donors and foundations by CAF Russia, the Zircon Research Centre, Russian Donors Forum and PricewaterhouseCoopers.

Asked about the impact of the crisis, NGOs appeared most prepared, with many having diversified income sources or planning to do so. Despite 61 per cent reporting considerable funding reductions, 59 per cent face growing demands for their assistance and the overwhelming majority intend to carry on, maintain staff levels and, where possible, invest in training and professional growth.

With some NGOs acknowledging that developing services offers a source of financial sustainability, 51 per cent plan to widen the scope of their services while 34 per cent hope to expand client lists. Areas favoured for growth include advice on individuals’ rights and interests, professional training, job placement and small business development. Many NGOs are using innovative strategies to improve performance, such as marketing services, raising private donations and launching new fundraising technologies.

Despite proactive attitudes, NGO responses showed them looking first to other sector participants – state, companies, foundations – for financial support, with 66 per cent favouring state backing and 59 per cent looking to secure state or local government contracts.

Of 36 companies consulted, 13 had reduced their philanthropy, seven by more than 25 per cent, or even ceased entirely, but 20 firms planned to continue corporate giving to strengthen their reputation and demonstrate business sustainability. Corporate priorities included employee engagement through volunteering and raising the effectiveness of their giving.

Private foundations seem to have limited their response to the crisis to budget cuts, primarily in operational costs. They are proving very conservative. They agree with NGOs that the priority should be funding for institutional and capacity building, but no foundation actually provides such support. Both companies and foundations see tax advantages as the most effective way for the state to support philanthropy’s development.

Maria Chertok is director, CAF Russia. Email mchertok@cafrussia.ru

For more information
http://www.cafonline.org/russianrecession

Massimo LanzaItaly  Massimo Lanza
Banking foundations reach for reserves

 
The endowment funds of the Italian banking foundations were concentrated in banking sector investments that have been badly hit by the financial crisis, although less severely than in other countries.

Foundations are responding in two ways: by using reserves to sustain previous activity levels and by adjusting their strategy to give priority to projects that could leverage their contribution, such as co-financing. Often engineered in-house, these projects include putting their capital to work by investing in what are known under Italian law as ‘instrumental companies’. These firms pursue the mission of a charity or foundation through commercial operations that raise revenue for a cause, such as a corporate hospitality company working for an opera house.

Massimo Lanza is General Manager of the Fondazione di Venezia. Email M.Lanza@fondazionedivenezia.org


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