Donor-advised Funds Provide Impact On-ramp For Smaller Investors

Giving Compass’ Take:

• Donor-advised funds offer an opportunity for individuals who want to make a difference to begin impact investing. 

• What barriers to understanding and access exist that might prevent donors from using donor-advised funds? How else can impact investing be made more accessible to the public? 

• Not everyone is excited about donor-advised funds. Find out why some people are worried that donor-advised funds are being used for financial, rather than social gains. 

---

Donor-advised funds have long been seen as effective philanthropic vehicles administered by public charities. Here’s another way to look at these tax-preferred investment products that are designed to do good: an untapped pool of assets that is naturally aligned with the impact investing approach.

Using donor-advised funds is a logical way to accommodate investors and further the goals of aspiring impact investors who aren’t large-scale philanthropists or institutions with billions of dollars at their disposal. The 285,000 individual donor-advised funds nationwide already have more than $85 billion under management, according to the National Philanthropic trust.

ImpactAssets, RSF Social Finance and increasingly others have begun to tap the deep well of philanthropic resources for impact investing. More can be done.

Institutional-grade

Banks and other organizations are noting annual double-digit percentage jumps in the institutional assets dedicated to impact investing. On a smaller scale, we have seen similar increases in impact asset managers partnering with philanthropic individuals and families to amplify the impact of charitable donations held in donor advised funds. This presents a broader set of opportunities to educate the so-called “mass affluent” segment of the investing public about becoming impact investors.

Lower minimums

The people we’re talking about are wealthy enough to make meaningful charitable gifts, but aren’t putting millions of dollars into their own private foundations. Many of the funds furthering the broad objectives of impact investing require minimum commitments of $250,000 to $500,000.

Donors who’d like to channel philanthropic dollars into deep impact investment objectives can do so at much lower minimums at some donor-advised funds.

We hope with investments in donor-advised funds, people with limited capital, but dedicated interest in positive change, will be able to get involved in impact investing and continue doing good work. The urgent need for constant capital flows to address pressing global challenges like poverty and climate change shows no signs of abating.

Read the full article about the benefits of Donor-advised Funds for smaller investors by Gil Crawford at ImpactAlpha.