Finance trends for 2024

Now that the pandemic is over, financial developments are back in the headlines. At Charity Digital, we take a look into the crystal ball and underscore finance trends of 2024. 

Sustainable and ESG are now mainstream

Once relegated to hippie fanaticism, sustainable everything is here to stay. It’s no longer a trend, but a permanent fixture. Sustainable finance refers when investment decision-makers use information on Environmental, social, and governance (ESG) factors to evaluate opportunities.  The European Union defines the outcome of the approach as “leading to more long-term investments in sustainable economic activities and projects”.

Charities stand to benefit from sustainable finance because investors, policymakers, and bankers want, and are compelled to, look beyond the return figure.

What sustainable means to charities

Spotting the opportunities in sustainable finance is becoming easier. Unusual partnerships are emerging in the charity finance space. These new collaborations mix social impact with financial returns.

Earlier in 2023, the Church of England invested £1.1 million into Charity Bank. The investment means that the religious charity will own around 3.6% of the bank.

When speaking to Civil Society on the deal, Ed Siegel, chief executive at Charity Bank, says: “We are very excited about the potential of this partnership, particularly as we seek to grow our activities in the ‘green lending’ space, which is a specific area of interest for the church, and as we continue to expand our lending to housing and social care providers.”

Two points on the sustainability front. First, Charity Bank uses deposits to lend to UK charities and social enterprises. As a business, Charity Bank’s mission is to grow the third-sector. Second, the investment by the Church is considered aligned with ESG goals, and comes full circle towards supporting its own sector.

Higher for longer

While there is substantial activity in the sustainable and ESG space, the trends in inflation and borrowing rates are likely here to stay.

The Bank of England says that while inflation is anticipated to fall towards the end of 2024, there is still the expectation that prices won’t normalise until 2025. That means that the 2% inflation target inflation rate won’t be met until at least 2025.

Unsurprisingly charities and everyone else will bear the cost of higher prices until then.

The knock-on effect of high inflation means higher loan interest rates as the Bank of England uses monetary policy to temper prices. The bank has already raised base rates 14 times since December 2021. For charities and businesses, using loans to invest back into operations is now very expensive.

AI takes charge of the finance experience

ChatGPT’s explosive entrance is disrupting industry everywhere. Finance is not exempt. The AI system has the potential to analyse and learn from massive amounts of data means that when deployed at large, finance can be more streamlined.

Functions within the financial sector that could be impacted are investing, fraud, and customer experience. Leaning into financial advisors and their sway with charity donors, ChatGPT could revolutionise the opportunity and experience.

The AI has the ability to, first, dissect information into an understandable format and, second, learn from donor preferences and perform personalisation.

Forbes Magazine summarises ChatGPT’s two-fold potential: “ChatGPT allows donors to understand the charity’s work better and make more informed giving decisions…[and] can suggest the most suitable giving options, such as one-time donations, recurring gifts, or planned giving, allowing donors to make strategic decisions that align with their values and financial capabilities.”

Transparency and trust are here to stay

In the same vein that ESG and sustainability are expected to be long lasting, transparency and trust in financial matters remains permanent.

Donors and supporters need to be able to trust charity operations with money. Driving that trust through digital, events, and communications is crucial.

From a financial perspective, charities need to continue announcing and reporting on how money is spent. They need to ensure that a reasonable amount of funds goes towards the end-cause.

What charities can do about improving financial transparency is to be honest. Formally reporting to Charity Commission is a start. At Charity Digital, we recommend going beyond.

Manage stakeholders by letting them know when, how much, and what donor funds are spent on. Common strategies include reporting on the number of beneficiaries helped, cost of programmes, return on investment, and diversity, equality, and inclusion metrics. Publishing statements online makes the information public, which builds trust.

Finally, foster trust by using official charity communications. Be consistent in posting financial and impact data on all outlets. Where there are comments from audience members, respond publicly on the same forum. Let audiences know you are open to feedback.