Over the past few days, Iceland’s banking system has imploded. Newspaper headlines grimly warn that the collapse will affect individuals and local councils with money in Icelandic accounts. But what’s received less attention is how charities are also amongst the meltdown’s victims.

The UK charity sector has over £75bn of investments. £15bn of that belongs to a single organization – the Wellcome Trust – but there are thousands of smaller charities with more modest nest-eggs. It’s a safe bet to say that some of those charities will have deposited cash in Icelandic institutions.

That’s bad news for everyone who cares about the health of the charity world – but it’s difficult to know how much the sector will suffer as a result. Charities rarely report clearly on where their investments are held, so it’s hard to guess how much they’ll lose. So, if you’re worried about the finances of a charity you support, give them a ring, and ask where they’ve got their cash stashed.

One broader conclusion is also clear. Charities across the board are going to suffer from this downturn. Grant-giving trusts – even those which have been careful with their investments – are going to be forced to cut back as their endowments shrink. Charities with endowments of their own are likewise going to lose out.

We’re in the midst of dark times. But, once the crisis is over, charities should begin to think more seriously (PDF) about how they invest. That, at least, offers some hope for a more stable financial future.
 

 

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