Does Social Activism Divert Funds From Investments To Philanthropies?

Throughout the last three months, as activists resisted policy changes on immigration, trade and the environment, donations to the American Civil Liberties Union, the Sierra Club and other nonprofits reportedly spiked.

But the trend wasn't entirely unexpected.

Expect Resistence, Activism

“In general terms, activism and donations move in the same direction, upward, and this is a fairly secular trend,” said Angela Bies, associate professor of global philanthropy and nonprofit management at the University of Maryland. “U.S. history is characterized by the dual phenomena.”

A trend less clear is how generous swells in donations alter benefactors’ economic decisions. Is the money shaved off the grocery budget? Does it diminish the entertainment fund? Or is it diverted from investment portfolios?

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Bies suggested that stocks, startups and other investment models are generally unaffected by philanthropic pledges.

“The [impact on investments] is less well researched, but my answer is decidedly no: It's generally not a zero-sum game,” she said. “In fact, the modern paradigm offers a fourth wave of economic activity where investment, philanthropy (broadly defined as doing good or voluntary action for the public good) and action go hand in hand, either in philanthropic activity that furthers corporate activity or through the direct economic contributions of enterprising nonprofits that employ people, produce needed goods or contribute to communities or through impact and social investing.

“These activities are absolutely not contrary.”

Still, the issue has not been well researched by economists, and many top scholars in the field declined to comment on it, citing insufficient background.

Activism And The Stock Market

However, recent performance of the SPDR S&P 500 ETF Trust SPY substantiates Bies’ assessment. In fact, whether or not coincidentally, the index growth rate accelerated with post-inauguration donations.

In the four weeks since President Donald Trump took office and prompted a surge in policy protests, the S&P 500 ETF spiked 4.06 percent. Comparatively, the index rose only 1.03 percent in the four weeks preceding the inauguration, and it declined 0.63 percent over the same period in 2016.

Varying market, economic and policy factors certainly distinguish the measured timeframes, but consideration of the recent absolute — rather than relative — growth of the performance index testifies to the independent or positively correlated natures of donations and investments.

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Image Credit: By JackGavin (Own work) [CC BY-SA 4.0], via Wikimedia Commons
Posted In: American Civil Liberties UnionAngela BiesDonald TrumpnonprofitphilanthropySierra ClubSocial ActivismNewsEducationPoliticsEventsGeneral