Political Uncertainty Proves Greatest Challenge to Philanthropy

Political uncertainty is the greatest challenge to global philanthropy according to a new report, which holds both opportunity and warning for Australia.

The Global Philanthropy Environment Index, released by The Indiana University Lilly Family School of Philanthropy at IUPUI on Monday, shows the philanthropic landscape is improving globally, but has grown significantly more restrictive in key regions with two out of five economies having a generally restrictive environment.

Of the 11 regions studied, the Middle East and Northern Africa ranked lowest on political environment followed by Sub-Saharan Africa and Latin America, while economies with higher economic indicators, such as per capita GDP, were linked with favourable philanthropic environments.

It marks the first such report since 2015 and aims to equip policy makers, philanthropic and not for profit leaders, the business community and the public with a clear understanding of the environment for global philanthropy.

Philanthropy Australia CEO Sarah Davies told Pro Bono News it was a “fabulously useful study” that was rich with insight and message “both in terms of opportunity and warning for us”.  

“I think there’s an awful lot in here to mine and understand properly. And I suspect that when we all go through this in detail we will have some really clear lessons and pathways come out of it,” Davies said.

“The thing that really stood out to me is the critical nature of having a positive regulatory and operating environment for philanthropy, both politically, economically and culturally. And what that actually does to the whole health of the nation.

“I think that the evidence is really clear that for those economies that have a favourable regulatory philanthropic operating environment, there is a direct link with the overall economic health of the nation. I think as a lesson for us in our current context that is a really powerful message that we have to pay attention to.”

The GPEI evaluated 79 economies on a five-point scale across five key factors that measure the ease with which philanthropic organisations can operate, both within countries and across borders.

The five factors include: regulations about the formation and operation of philanthropic organisations; laws governing the giving and receiving of donations domestically; laws governing donations made across borders; the political and governance environment; and the socio-cultural environment.

Una Osili, professor of economics and associate dean for research and international programs at the IU Lilly Family School of Philanthropy, said it was the only report of its kind.

“At a time of significant challenges and political uncertainty around the globe, our ability to achieve development goals and respond to crises through philanthropy demands the type of insights included in this report,” Osili said.

“With billions of dollars in philanthropic aid and other resources at stake – we need to understand the factors that enable philanthropy to thrive and those that restrict it.

“This is the only report of its kind to capture each of them in a way that can be useful and informative to global leaders who can, ultimately, help channel resources to meet the world’s most pressing problems.”

According to the study, while the regulatory conditions for philanthropy showed improvements in six of the 11 regions from 2015, the overall philanthropic environment in about 40 per cent of countries and economies evaluated remains restrictive.

The report found that cross-border flows of donations were becoming more restricted, with legislation targeting illicit financial flows and laws penalising foreign donations a growing trend.

It highlighted that since early 2010, several economies had introduced regulations to increase the scrutiny of organisations that accept foreign charitable contributions with

China, Egypt, Hungary, India and Israel all creating new laws, or amending existing laws in the last three years to regulate the inflow of foreign funds received by philanthropic organisations.

One of the key findings was that the political environment – even more than the regulatory environment –  was found to greatly undermine the work of philanthropic organisations.

Davies said there was a message in there that Australia needed to heed.

“About the importance of a healthy democracy and the importance of maintaining our deliberate inclusion of multiple voices in the democratic discussion and debate,” she said.

“The other thing that I think is really interesting is this finding that mass migration, cross-cultural border migration, influences this and I think that it is interesting because it can influence it and make it healthier or it can influence it and make it more vulnerable.

“In the context of the political environment and the broader social and cultural context within which a nation welcomes, or otherwise, mass movements of people who’ve been disrupted from their homes for whatever reason, whether it’s a natural disaster or political upheaval or persecution or religious intolerance or whatever, I think there are some very profound messages and signals for us in that.”

With particular reference to Australia the report found the philanthropy environment was “generally good” however it highlighted the “growing tension around advocacy activities of environmental organisations” as a key issue.

It described this as “a surprising development” given Australia’s statutory recognition of the importance of advocacy by charities in the Charities Act 2013.

Davies said she was not surprised the report had drawn on this, as Australia’s national discourse around advocacy had attracted global attention in the last 18 months.

“Both the activities last year around considering limiting DGR for environmental organisations or mandating or restricting the types of activities that they can undertake in order to still be compliant with their DGR status and equally now the electoral reform bill, and the In Australia provisions that we’ve been flirting with over a couple of years, all of this has without doubt [attracted attention],” she said.

“We know because we’ve had calls from our peers around the world, New Zealand, Canada, America, Europe saying ‘what is going on? We look to Australia really as a leader in creating the environment within which philanthropy can flourish and then the direct correlation to the broader national benefit that that helps seed’.

“So there is concern globally about some of the discourse that we’ve had. And look it’s just obvious the relationship between the messages in here and the electoral reform bill and what is actually at risk if we do not significantly amend the content and the terms of the bill – in terms of our regulatory conditions and the restriction, and the danger that that has really significantly across the whole of our nation economically, socially, culturally.”

The report referenced the In Australia conditions and pointed to Australia’s regime for tax treatment of cross-border donations as presenting significant barriers.

It also said Australia was affected by a “lack of harmonization of state fundraising legislation”, creating a significant burden for charities operating in more than one state in Australia.

But in spite of the challenges, the report found that “in general” the economy showed a “highly favorable environment” to form, operate and dissolve philanthropic organisations.

Krystian Seibert, an industry fellow at the Centre for Social Impact at Swinburne University of Technology, told Pro Bono News that Australia was rightly recognised as having a relatively good environment for philanthropy.

But he pointed out that Australia was not in the top tier of countries assessed in the report.

“In part this reflects the problems with our deductible gift recipient (DGR) framework, which is in need of comprehensive reform to broaden access to DGR status. The ongoing debates around advocacy by charities are also problematic, as the report points out,” Seibert said.

“On a positive note, our rating when it comes to cross-border philanthropy has increased considerably. The relaxation of the ‘In Australia’ requirements for charities has helped in this regard, with the government confirming in December that legislation to tighten these requirements is off the table.

“It’s great that the Lilly Family School of Philanthropy is producing this report, which will help inform efforts to improve the environment for philanthropy in Australia going forward.”