Corporate foundations be warned: the pandemic pinch will come

The financial shock of the Covid-19 pandemic is yet to be felt by many corporate foundations – but it’s coming.

This was the warning from one of the speakers at this year’s C Summit, hosted by EVPA and Dafne and being held online this week. 

Rosa Gallego, director of international relations at Spain’s representative body for foundations, the Asociación Española de Fundaciones (AEF), said: “One of the lessons from the 2008 crisis is that it always hits later.”

One of the lessons from the 2008 crisis is that it always hits later – Rosa Gallego

 

When funding becomes uncertain

On the afternoon of Thursday 3 December, the C Summit hosted a discussion entitled When Funding Becomes Uncertain: how corporate social investors can plan in times of economic recessions. The aim was to examine how corporate foundations could boost their resilience if their annual budget was based on their host corporate’s profits. 

Gail Cunningham (pictured), head of investment learning at the UK’s Association of Charitable Foundations, said that her organisation’s research had shown that corporate giving tended to follow economic conditions, but it tended not to drop suddenly after a crisis.

She highlighted that foundations linked with consumer-oriented corporates might suffer during this economic crisis more than others which were linked with companies that had profited from the current conditions, such as those working in technology and health. 

Discussion participant Simon Kaiser, analyst at Wider Sense, a philanthropy and corporate social responsibility consultancy in Berlin, pointed out that earlier this year he had feared a sudden drop in interest from clients, but actually there had been “way more demand than ever before”. “Do we think it’s possible that this crisis is different in character?” he asked. “Is there a rethinking of corporate social engagement that therefore doesn’t lead to a funding slump for corporate foundations and CSR?”

Cunningham responded that in the UK there had been an “uptick” in interest in impact investment since March. She also pointed to a feeling among society that “we are all in this together” which could be encouraging companies to maintain their philanthropic giving and think about other ways they could be contributing to communities.

Foundations should work in a counter-cyclical way. They should be ready to have more resources to act when there is a crisis

Magdalena Pekacka, executive director of the Polish Donors Forum, said: “When the pandemic started, I heard a few foundations panicking; there were a lot of concerns. But now no-one is thinking about it. It seems pretty stable in terms of funding for the next year.”

However, speaking to Pioneers Post after the discussion, Rosa Gallego warned that a crisis in funding was inevitable. She pointed out that it took at least two years for the effects of the 2008 recession to have an impact upon some foundations in Spain.

Gallego emphasised that, in addition to a drop in their resources, foundations should expect an increase in demands from their beneficiaries. “Foundations should work in a counter-cyclical way,” she said. “They should be ready to have more resources to act when there is a crisis.”

Foundations could only succeed in this if they diversified their income sources, she said. And for this to happen, they needed to be independent from, although still aligned with, their corporates. 

“Independence is the key to legitimacy and sustainability,” she said.

Pioneers Post is a media partner of the C Summit, which takes place online on 3-4 December. Find all our reporting from the event here.