Special focus: Foundations – facing a changing world head on

The corona crisis saw foundations right across Europe show just how resilient and innovative they could be as they swiftly adapted to urgent and changing needs. Since then, more recent months have seen Fundraising Europe cover significant news of growth in countries including Switzerland and Germany, and the sector’s response to the Ukraine war. But with other crises and issues also weighing heavily on the populations of many countries, we take a look at what shape the sector is in now.

Recent news from the foundation sector suggests that its stronger than ever across Europe with growth seen in a number of countries. Yet it’s undoubtedly a difficult time ­­– we’ve moved from one crisis straight into another with the Ukraine war and the resulting flow of refugees into Poland and other countries. There’s also the deepening climate crisis, and the number of people falling into poverty generally, increasingly exacerbated by a rising cost of living.

So, how are foundations really faring?

Across Europe, the European Community Foundation Initiative (ECFI) reports that while community foundations stepped up during the pandemic, often getting involved in unfamiliar areas of work such as the direct provision of medical supplies, and assistance to isolated vulnerable people, it was a challenging and exhausting time. Now, without pause, they find themselves dealing with the widespread impact of the Ukraine war, and the cost-of-living crisis.

Resilience & growth

As demand for the unique mix of services they provide has increased, the community foundation sector has also grown. Recent years have seen new foundations established in Belgium, Germany, Hungary, Italy, Serbia, and Spain.

James Magowan, ECFI’s coordinating director says:

“Community foundations offer an attractive approach to realising the potential of philanthropy at the local level, for engaging citizens in identifying needs and deciding how assets are utilised, and for fostering collaborative approaches with other local stakeholders.”

Abel Mon Jardin, director of international development, Philanthropy Services AG

As the foundation sector as a whole also strives to meet demand, last year Switzerland saw an explosion in growth with a foundation created for every day of the year, while at the same time liquidations grew slightly. Abel Mon Jardin, director of international development at Philanthropy Services AG, says that Swiss foundations have worked hard to remain resilient:

“Swiss foundations now realise they have to be more dynamic and whether that means more staff being able to work from home or a recalibration of internal budgets, they have shown they are up to the challenge and looking forward with increased dynamism and efficiency.”

In Germany, the foundation sector saw its strongest growth in a decade last year. Kirsten Hommelhoff, secretary general of the Federal Association of German Foundations says foundations are well recognised for their key role in supporting local communities, while an economy dominated by small and medium-sized businesses is also adding to the sector’s growth.

She explains:

“Nonprofit organisations have a high status in Germany, and the many foundations in particular are helping to maintain the local community. This is especially important to counteract an increasing political divide for example between urban and rural areas, which we can observe in many countries.”

Kirsten Hommelhoff, secretary general, Association of German Foundations

“At the same time, we have an economy dominated by small and medium-sized businesses, the backbone of the German economy. Many entrepreneurs are now planning their succession, and particularly when there are no plans for a family handover, family foundations are an option for ensuring company preservation.”

Over in the UK, thanks to foundations’ investments largely holding up during and since the pandemic, spend has held up. As a result, foundations here have also been able to increase their support of the country’s nonprofits during what remains an extremely difficult time.

Richard Hebditch, director of external affairs at the UK’s Association of Charitable Foundations says:

“While there have been issues for some, such as corporate foundations whose giving is tied to the performance of the company, overall, we’ve seen continued growth in giving and spending in the last few years. This is still the case now despite downward pressure on government spending towards charities and the voluntary sector, and worries about the declining base of support for charities.”

However, the squeeze on funding, along with an increase in demand for already stretched resources, is unquestionably taking its toll. Also in the UK, Josephine McCartney, chief executive of Kent Community Foundation, comments:

“The sector remained pretty resilient throughout the pandemic because of access to emergency funding from government and key grant makers but is not in a strong place at the moment especially with the cost of living increasing in the UK, combined with a reduction in statutory funding from central government and the ongoing demand for services. Fundraising still remains challenging for most and this is putting a significant strain on them.”

Financial concerns

Marcin Chmielowski, director, Polish Fundraising Association

In fact, despite the sector’s fortitude, the full story is often mixed. In Poland, where foundations account for 22% of all NGOs, research by the Klon / Jawor Association has shown that 68% of organisations believe their situation has worsened as a result of the pandemic. At the same time, many saw some positive consequences for their organisation, and Marcin Chmielowski, director of the Polish Fundraising Association says that while Poland’s foundations have been tested time and again since the pandemic, so far the sector has proved itself well up to the challenge.

“First, 2020 and the coronavirus tested our speed in adapting to changes, transforming activities, and moving to a virtual environment,” he says. “Getting money was harder with more than half of organisations reporting smaller budgets linked to the circumstances, but 52% also saw positive consequences, such as finding new areas of activity, allies, and opportunities.

“Shortly thereafter of course, another test took place, this time on our speed of reaction in providing support for Ukrainians attacked by Russians. Thanks to Polish NGOs, but also the dedication of ordinary citizens, it was possible to avoid a humanitarian catastrophe – in my opinion, one of the sector’s greatest achievements in the 21st century.”

Over in Germany, despite the sector’s growth, the economic situation continues to pose challenges, and is expected to do so for the foreseeable future.

Hommelhoff says:

“For our members, the long period of low interest rates was a major challenge, especially when the focus of investment was in securities. Here we are seeing an improvement due to slightly rising interest rates, but this is overshadowed by the challenge of inflation. Maintaining basic capital will become a new challenge.”

In Spain, where Spanish Association of Foundations (AEF) figures show that there are around 9,000 active foundations, the sector continues to expand, but at the same time, to grapple with falling income.

“Since the last crisis in 2008 and according to AEF studies, the foundation sector has maintained the level of expenditure, estimated at around 8,499 million euros, while income of the sector is somewhat lower, so Spanish foundations have been consuming their own reserves and resources for a quite long time,” says Isabel Peñalosa Esteban, AEF director of institutional relations and legal affairs.

What does the future hold for foundations across Europe?

Moving forward, foundations across Europe will have to deal with these issues whilst also responding to an ongoing mixture of local and global challenges.

For Poland, the biggest challenge is likely to remain providing sufficient and ongoing support for Ukrainians fleeing the war. Helping at least its larger foundations is the sector’s move towards greater professionalism coupled with support from the state.

Michał Twardosz, project manager at the Project PL Foundation, & vice-president of the board of the Polish Fundraising Association, explains:

“The third sector in Poland continues to develop in the most critical area – the professionalisation of activities and services. This offers the chance to establish relationships and gain support from international businesses. The Project PL Foundation, which has been in operation for only two years, can already boast cooperation with Google Poland and Mastercard. At the same time, this professionalisation poses a threat to smaller organisations, especially those operating in local communities in small towns and villages. Thus, there may be a significant stratification and lack of representation in the third sector of parts of society.”

In the UK, Kent Community Foundation’s McCartney says its focus is on addressing the problems that have always been there but which have been exacerbated by the pandemic:

“Through our research we have identified the five key issues affecting the whole county following the last 24 months of COVID.  These are: the increase use in foodbanks; demand for debt advice; domestic abuse; the mental health of both adult and children with a significant increase in demand for children’s mental health services; and substance misuse.  We are adapting our grant making strategy to better address these needs. I can’t really call them emerging as they have always been there. The pandemic has just magnified them.”

Responding to a changing world

Other wider reaching challenges driving change across Europe include the need for greater cooperation between countries, digitisation, and of course the deepening focus on the environment, rising poverty, and equality.

Philanthropy is also undoubtedly changing. Younger generations have different philanthropic interests, expectations, and approaches to supporting (read more on this in Simon Dickson’s Expert View) while the dominant causes are also shifting. All of this will have an impact on the nonprofit sector – including foundations – going forward.

Increasing digitisation will help with collaboration, and it will also help to keep the sector relevant, effective and transparent, says Mon Jardin, but, he adds, foundations also need to look at where their funding comes from:

“In Switzerland, the challenge is now increasing the diversity of funding and the efficiency of the foundations themselves. This will go hand in hand with Swiss law updating itself to protect and regulate the sector and make it as transparent as possible.”

Peñalosa Esteban agrees, adding that improving awareness of the role foundations play will also be critical in helping the sector meet these challenges. She points to the finding of an AEF study, Strategies of foundations in the post-covid-19 era, saying:

“If the situation is to improve, foundations must strengthen their presence in society to improve public awareness and perception of the sector. The study also recommends a certain reinvention of the sector to develop common structures and strategies that enable foundations to work better together – because without greater cooperation, it will not achieve its maximum social impact. Foundations must also guarantee their financial sustainability, and this is where diversity in financing is key. More than 70% of the Spanish sector’s resources come from private sources, so foundations need to look more widely.” Read more in Isabel’s blog, also published this month.

Positive action

Collaboration is key to success, agrees Carola Carazzone, secretary general of Italy’s Assifero and vice president of Philea, and it’s already happening with the sector’s response to the Ukraine crisis:

Carola Carazzone, secretary general, Assifero

“To untap their full potential and face the challenges of our time, foundations need to collaborate and learn from each other.”

“When the war in Ukraine burst, we, as Assifero, aligned with the European vision and strategy of Philea, invited foundation not only to allocate additional resources for immediate needs, such as food and shelters for the refugees, but to take a mid- and long-term view to sustain the Ukrainian civil society’s efforts in rebuilding democracy.”

To support this vision, Philea, in partnership with a number of other organisations including Ariadne, CFF, ECFI, and EDGE Funders Alliance, launched PhilanthropyForUkraine. It’s a portal that brings together initiatives and calls for donations from the European philanthropy sector and NGO community in Ukraine and neighbouring countries. The initiative aims to better coordinate efforts and improve communications between foundations and CSOs.

Collaboration is already helping in another key area too. Around Europe a number of national funder commitments on climate change have been set up, as well as the International Philanthropy Commitment on Climate Change, which launched last year. In the UK for example, the ACF hosts the Funder Commitment on Climate Change, which around 100 of the country’s funders have joined so far. Others exist in France and Spain with national associations of donors and foundations elsewhere also looking into setting them up.

It’s initiatives like this that show that, despite the multiplying challenges for foundations across Europe, this is a sector that does not sit still but faces each one head on. It’s this resilience and adaptability that will help to see it through not just today’s challenges, but those that follow.

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