It’s That Time of Year... For Financial Optimization

During the last quarter of each year, many around the world spend time preparing for the Christmas holiday and tax season! If you are in the United States, there’s an option to optimize your impact investing with a vehicle called a donor-advised fund (DAF).

According to a recent article in Axios (COVID-19 spurs generosity among holders of donor-advised funds) more than $120B sits in DAFs and in 2020 at Vanguard Charitable, donors made $1.3B in grants, which was about 25% higher than 2019.

Accredited, entrepreneurial-minded givers from the United States can invest in companies in East Africa with RENEW from a DAF which would have the potential of earning a return on their charitable capital. It may be helpful to think of a DAF as a philanthropic checkbook. A donor transfers assets (e.g., cash, securities, other rights or assets) into a DAF account with a non-profit organization (like divisions of Charles Schwab and Fidelity, ImpactAssets, the National Christian Foundation and ImpactFoundation) that is set up to manage DAFs and facilitate transfers into and out of DAFs in line with IRS rules. Donors then receive a charitable deduction in the amount of the value of the assets transferred to the DAF in the year in which they make the deposit. The funds sit in the account until the donor is ready to make grants to charitable entities or to make impact investments. Any returns earned on the investments are returned to the DAF and can be reinvested or donated.

 

To make impact investments using a DAF, you’ll need to work with an intermediary like ImpactAssets or Impact Foundation, organizations that specialize in the work necessary to diligence and make an investment using a DAF. This is possible, even if your DAF is held at Schwab or another institution.

is an independent public charity first launched in 2001 by Calvert Foundation. The primary tool of ImpactAssets is known as the Giving Fund, an enhanced DAF that facilitates investments of $25,000 or more and provides socially responsible and impact investment options – enabling philanthropists to both “give and invest for the greater good.”

is an intermediary that can facilitate charitable investments of $100,000 or more. Impact Foundation was founded to provide a streamlined way to fund transformational businesses, make loans to charity, and grow the amount you have to give away. Impact Foundation has a working partnership with the National Christian Foundation to assist NCF donors in making private equity and venture capital investments.

Want to learn more? Here are some more resources:

Contact us at renew@renewcapital.com if you have questions. And if you aren’t already a member, we invite you to apply to join the Impact Angel Network.