Yay! Another charity knitter! :cheering:
We use acrylic yarn for our knitting for babies, unless we are making the items for a very cold climate.
Items knit for hospitals must be washable. The hospital staff washes items in hot water, so the yarn should be able to handle that kind of treatment. I would imagine that the rinse cycle would be cold, so wool would felt and could possibly damage their washing machine.
And some babies are allergic to wool, which would just cause another problem for the hospital to deal with.
Also, we must be careful to give items that are free from contaminants. Special care should be taken to insure that items are free of smoky smells or any chemicals which could cause problems for a child. Hospitals will not accept these items, and they will most likely be discarded.
If unusually strong smells due to chemicals used in detergents, fabric softeners and dryer sheets, mold and mildew or smoking products are apparent, most hospitals will discard the item, rather than jeopardize the health of a patient.
I used verbage from the Project Linus website to answer your question.