Financially savvy individual, family, and corporate donors are increasingly instrumenting impact investments using DAFs with an expectation of both social or environmental impact and financial return, much of those investments have remained in the sidelines, their potential impact diminished.
DAFs, or donor-advised funds —a philanthropic vehicle managed by a wide variety of public charity sponsors that allows donors to retain advisory rights—take the form of both prudent impact investments and charitable impact investments, depending on the donor’s preferences and their sponsor’s policies related to prudent investments and its ability to process qualified charitable investments. Some are outright traditional grants.
A quick peek of the notable stats that stood out to me, via Eileen Heisman’s very good NP Trust 2017 report (Ms. Heisman was my non-profit funding instructor at UPenn’s Executive CSIS program):
- Over $85 billion in DAF assets are waiting to be deployed – in other words, they are passive underused investments, consisting of money market accounts or investment products lacking any impact orientation.
- $16 billion are one-time, non-recoverable grants to non-profits.
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There are approximately 285,000 individual donor-advised funds across the country.
Why This Matters
Unlocking capital of this magnitude and potential can go far in closing the gap and help address the world’s biggest problems in social justice, poverty and the impacts of climate-related change.
About $135 billion a year in official development assistance, according to World Bank Group president Kim Yong, finances the poorest and most fragile countries. According to Mr. Yong and others, there are ample ways to leverage the billions of dollars in official development assistance to trillions in investment of all kinds, whether public or private, national or global.
Some Steps Forward Ryan Macpherson, a portfolio and investment manager at Autodesk Foundation, and Sarah Kearney and Emma Kulow of PRIME Coalition, a non-profit that partners with philanthropic investors to support early-stage, for-profit climate solutions, have shared best practices with how best to use DAFs. Among them: Read More Stanford SSIR, “How to Use Donor-Advised Funds to Make Impact Investments.” Sept 2018, Macpherson, Kearney and Kulow. https://ssir.org/articles/entry/how_to_use_donor_advised_funds_to_make_impact_investments National Philanthropic Trust, “Donor Advised Fund Report.” 2017. Heisman, https://www.nptrust.org/daf-report/pdfs/donor-advised-fund-report-2017.pdf Worldbank, “Billions to Trillions: Ideas to Actions.” 2015. Jim Yong Kim. http://www.worldbank.org/en/news/speech/2015/07/13/billions-trillions-ideas-action-event
