Charity finance policy Environmental, social, governance (ESG)

Could political instability create financial instability for charities?

Charities have operated for some time in the midst of economic instability. This has become the bread and butter for most organisations - the recession, cuts in government spending or ...

Charities have operated for some time in the midst of economic instability. This has become the bread and butter for most organisations - the recession, cuts in government spending or fundraising regulation changes. However over the past two years, we have also seen increasing political instability (the snap election and Brexit just a couple of obvious examples) has certainly created policy uncertainty for charities. But could political instability also have a financial repercussion for charities? Earlier this week, I attended a seminar led by David Hart of Northumbria University on a new report Charity Begins at Home which has tried to understand the role of national identity on the propensity to donate to local, national and international charities. The report is available for free on the Marketing Trust’s website. The report seeks to answer that age old question – do people believe that they should focus their donations on helping fellow citizens first? Or should national identity not matter?

What does the report say?

The report is interesting because it seeks to categorise people demographically but also in terms of their values. It has six clusters: educated liberals, young urban altruists, cautious pragmatists, disengaged cynics, home-first casuals and anti-EU nationalists. The report finds that there is a significant portion of the populace, perhaps around 1 in 3, are in clusters that favour “charitable ethnocentrists” (i.e. they believe that focus should be given on charitable help for British citizens and beneficiaries). Another minority, perhaps around 1 in 10 people, are in clusters that lean more towards “charitable cosmopolitanism” (i.e. they have a preference for giving to causes that help beneficiaries in other countries, with no attachment placed on nationality). Unsurprisingly, a large group stay in the middle with elements of charitable ethnocentrism and cosmopolitanism. The report also has insight into the types of causes people are likely to donate to and the methods of donating that they feel more comfortable in giving to charities.

Why does this matter?

As times change, so too do the values of individuals. Unfortunately, we don’t have longitudinal data on the work in this report, but it does feel like feelings of patriotism and nationalism have increased relative to where they were a decade or so ago. If this research is right, and these values give preferences towards certain causes (e.g. nationalists being more interested in emergency service charities or animal charities, than overseas aid) then they could have a significant impact on fundraising in the years ahead. Although these have to be put into the context of the economic situation, regulatory changes (e.g. GDPR) and general human decency (the report finds high support for international disaster relief charities, for example) – these are things that charities should not ignore. These values also have an impact on trust. For example, it seems that charitable ethnocentrists are more concerned about waste in the charity sector. While this is hardly surprising, this may help us better communicate with the public. This also has a financial impact, with those with lower trust levels likely to give less and also be less interested in regular giving, but more focused on irregular cash donations. For me, one of the most useful things is that this research could be combined with data on opinion polls and “policy surveys” which are carried out on a regular basis to help us build models the potential impact about changing values within the country on charity finances.

Investment and understanding of donors is important

Most charities regularly assess the views of their donors and potential supporters. However in the current economic conditions such understanding is even more important. As I have noted in previous blog posts – the overall pot of fundraising income is unlikely to grow significantly due to strained household finances. Charities need to be better at understanding the prospective return on their investments in fundraising, and plan accordingly. We know that giving isn’t just about money. It’s a deeply personal matter, and values shape our decisions as much as our ability to give. This research is an important contribution that could practically help charities as they plan for the future. Will the current political instability add to the financial instability in the sector? It is hard to say. But given the current state of society and politics, we should what we can to find out. « Back to all blog posts