Charities take a beating when stock markets fall

With the fortunes of the rich being affected by the stock market crash, non-profit organisations in the US, such as this community healthcare centre in Seattle, will face funding problems.
With the fortunes of the rich being affected by the stock market crash, non-profit organisations in the US, such as this community healthcare centre in Seattle, will face funding problems. PHOTO: AGENCE FRANCE-PRESSE

As the stock market continues to tumble, Ms Kathleen Purdy was ordering more groceries for Hillside Food Outreach, a pantry that delivers to the elderly, disabled and needy in the suburbs north of New York City.

She was buying more supplies because Westchester County, the site of one of the United States' largest confirmed coronavirus outbreaks, asked her organisation to be ready to deliver food to residents who were quarantined in their homes.

"We don't want anybody to be hungry," said Ms Purdy, the organisation's founder and executive director. She was also recruiting volunteers who would not mind dropping off supplies for people afflicted with the virus. They did so with no personal contact or even door-knocking. "I am amazed at the number of volunteers who stepped up to do the deliveries."

The coronavirus outbreak puts non-profit organisations in a bind. The needs of charities are set to soar and the financial situations of many wealthy families and foundations that help fund them have deteriorated. "We can see charitable contributions starting to slow down," said Mr Tom Gabriel, chief executive of United Way of Westchester and Putnam.

"We know fund-raising events are being cancelled. At the same time, there's been an increase in demand for services."

Some rich and generous people are trying to fill the gap. Ten minutes into a recent board meeting for the Children's Museum of Manhattan, Ms Laurie Tisch, who has been involved with the institution for almost four decades, said she would give US$100,000 (S$144,000) if the board matched her donation.

The colourful and educational museum is now closed, with no date set for a reopening.

Ms Tisch wanted to start a fund to help the museum and its employees navigate the shutdown, to do things like pay wages for workers who will lose hours and extend online resources for families cooped up at home. The museum, on New York's Upper West Side, serves families of many income levels, including a programme that brings mums incarcerated at Rikers Island, the city's main jail complex, to the museum to spend time with their children. That programme also has been suspended.

Ms Lauren Tuck, wife of former National Football League player Justin Tuck, and 28 other board members more than matched Ms Tisch's donation by the end of the day.

Ms Tisch said the experience of making gifts after 9/11 and Hurricane Sandy served as her guide. "A lot of institutions are going to have to scramble," she said. "We're all losing money, but the people who have money still have money and they can do something."

The world's 500 richest people have lost over US$1 trillion since the beginning of the year.

Some of them are writing big cheques to fight the outbreak. The Bill and Melinda Gates Foundation said last month it would commit as much as US$100 million to the battle against the coronavirus. Half that money will go towards the Covid-19 Therapeutics Accelerator, a US$125 million initiative that is also funded by US$50 million from the UK's Wellcome Trust and US$25 million from Mastercard.

In Washington state, another area hit hard by the virus, the Seattle Foundation launched a Covid-19 response fund with more than US$2.5 million from corporate and foundation donors, including Alaska Airlines, Amazon.com, Microsoft and the Starbucks Foundation. The fund has surpassed US$9 million, fuelled by a US$3 million gift from Microsoft billionaire Steve Ballmer and his wife Connie.

As global markets crater, non-profit groups worry that such generosity could become increasingly rare. Foundations, which are required by law to give away 5 per cent of assets a year, could end up slashing their donations as the value of their investment holdings tumbles.

"People are seeing their investment portfolios decline and the natural inclination would be to pull back," said Ms Alison Powell of the Bridgespan Group who advises wealthy individuals about philanthropy. "Our advice would be: Double down."

Meanwhile, organisers are being forced to cancel fund-raisers and galas that take months to plan and often generate a substantial portion of a non-profit group's annual budget. One way donors can help organisations is by letting them keep contributions made for galas that are cancelled, Ms Powell said.

Another worry for charities is that a pandemic will put unique strains on the non-profit sector. Homeless shelters and programmes for the elderly and disabled could be especially hard hit, for example. Volunteers - who are often eager to help after natural disasters - may be harder to come by during an outbreak.

Rich donors should remember that charities are on the front lines of the coronavirus, facing realities and risks that their funders do not face, said Mr Henry Berman, chief executive of Exponent Philanthropy, an association of wealthy families and foundations with small staff numbers.

"We as funders need to remember we're in a position of privilege to give away money. Even as markets have dropped, these 'paper losses' just bring portfolios back to where they were a year or two ago.

"Let's keep some perspective here. There's still a lot of money available there for philanthropic purposes."

BLOOMBERG

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A version of this article appeared in the print edition of The Sunday Times on March 29, 2020, with the headline Charities take a beating when stock markets fall. Subscribe