The Road Ahead: 2023 Grants Outlook
For many charities, foundation grants have proven to be a "safe harbor" for support as grantors have tried to maintain their philanthropy through the pandemic and its aftermath. As we look ahead to 2023, we are trying to evaluate the potential grants landscape . Here are some observations from 2022 and some things to watch as we move into the New Year.
Foundations responding to industry surveys from Candid and others report portfolio gains in 2020 and 2021 averaging 15.1% and grant payouts averaging 5.1% of portfolio value. Additonally, some foundations reported making investment shifts in 2021 to protect assets and “lock in” earnings in anticipation of a market downturn in 2022. We certainly saw first hand how good financial management left many grantors in a position to invest generously over the past 12 months: in a difficult economic climate, our clients increased their aggregate grants from $8.5 million in 2021 to more than $10 million in 2022. Areas that experienced robust grantmaking include health equity, essential human services for economically challenged communities, STEM education, health care (particularly for high-risk individuals), and workforce development.
But, what goes up eventually comes down. The historical precedent is that foundation giving will trail a downturn by 12 to 18 months as market declines are factored into grant budgets. In 2023, many foundations will begin considering market performance in 2022. How this will impact grantors will vary based on their investment and asset protection strategies. That said, any of us who has taken a look at our own investment portfolios have a pretty good idea of where the general trend is headed, alas.
So, 2023 may mark the beginning of a period where grantmaking at best plateaus and, at worst, may begin a decline. Anecdotally, some foundation staff have informed clients that during the coming year they should expect no increase or possibly a decline in support.
Which leads us to planning considerations for the coming year. Some approaches to consider:
Have a conversation with each of your current grantors well in advance of requesting renewed support. Websites never tell you what the Board of a foundation is thinking or what policy changes may be under consideration. Better to know sooner rather than later.
Sharpen your case for support to demonstrate the relevance of your mission and programming. We need to clearly state why our work is essential and why grant support is needed NOW. This messaging is crucial to making the case to maintain funding levels.
Assess your programs to identify those that are likely the most "grantworthy" and crafting your outreach strategy to emphasize them. We find Bridgespan's Program Strategy Map to be an invaluable tool for this work.
Create an outreach calendar to continue to apply for funding to best prospects, even if the response may be "wait and see" or "no." Keeping your organization and its mission in front of funders is essential to future success.
Wishing you great success with your mission and your important work in the year ahead!