Why we must invest in impact

According to the latest Australian Charities and Not-for-profits Commission (ACNC) Australian Charities Report, the sector’s revenue is growing, but costs are rising faster. Many organisations are feeling the strain, especially those without access to sustained funding or internal capacity to weather uncertainty.

That’s why now, more than ever, funders need to think beyond projects. If we want a resilient, high-impact sector, we need to fund the infrastructure that enables impact across organisations of all sizes.

Strong impact needs strong foundations

The ACNC’s 11th report shows:

• total sector expenses rose by $21 billion in 2023, outpacing income growth
• donations increased just 0.4 per cent (if you remove a massive $4.9 billion gift to the Minderoo Foundation)
• extra small charities (under $50,000 annual income) make up more than 30% of all charities, but receive only 0.1 per cent of sector income
• nearly 90% of those extra small charities operate with no paid staff, relying entirely on volunteers.

What this tells us is that even as demand grows, many organisations – especially those that are young or operate in niche areas – lack the infrastructure to absorb and scale resources effectively.

Whether you’re a multi-million-dollar institution or a grassroots startup, one truth holds: you can’t create an impact from shaky ground.

Why capacity building matters for everyone

Strong internal infrastructure – strategy, governance, fundraising, measurement – isn’t a luxury. It’s the engine behind every mission.

Funders who invest in this core capacity can:

• amplify the long-term return on their gift
• reduce organisational risk
• increase sustainability and scale
• support leadership succession and resilience
• strengthen sector-wide outcomes.

Think of it like this: you can fund a single meal, or you can invest in the kitchen, the chef and the delivery van that keep meals going long after the grant ends.

This isn’t just support, it’s strategy.

Don’t overlook the hidden gems

While large charities often have the internal resourcing to manage and scale major funding, there’s a parallel opportunity: discovering and backing small or emerging organisations that are doing brilliant work under the radar.

These organisations can be:

• agile: able to adapt quickly to changing needs
• innovative: often trialling new models without layers of bureaucracy
• deeply embedded: with strong community trust and leaders who have personal experience of the organisation’s purpose
• untapped: presenting unique, high-return opportunities for funders willing to go deeper.

For a funder, a small organisation can be the equivalent of the next great start-up – a place where your early investment isn’t just appreciated, it’s transformative.

The key is recognising that these groups don’t always come with fancy presentations or longstanding donor databases. They may need support to get funder-ready, but that’s exactly where smart, catalytic philanthropy comes in.

For small charities, support is available from organisations such as the Institute of Community Directors Australia (ICDA).

At Equitable Philanthropy, we’re often engaged by funders to work alongside the charities they support to help strengthen internal capacity, improve income diversification, and ensure long-term sustainability.

For example, we’re currently working with a small charity that’s being funded by one of the world’s most prominent business leaders. Our role? To build the charity’s fundraising strategy, assess income risks, and design a way to diversify revenue so it’s not reliant on one-off grants or donations.

This model is becoming more common: visionary funders aren’t just giving money, they’re investing in the capability of the organisations they care about. And they’re bringing in experts like us to help make that happen.

If we want a thriving, inclusive and resilient not-for-profit sector, we must start funding the conditions that allow good work to last.

Every organisation – regardless of size, age or geography – should have the tools, systems, and leadership support it needs to deliver meaningful change.

Catherine Brooks is a member of the Community Directors Council, the advisory body to the Institute of Community Directors Australia.

A version of this article was first published on Substack.