Congratulations! Opening a donor-advised fund (DAF) is a significant step in your philanthropic journey. Now that you have this powerful tool in place, you may be ready to explore how you can use it to drive meaningful impact through impact investing. If you would like to do so, here are three key steps to help you get more impact out of your DAF with the help of impact investing to maximize its potential to create positive change.
1. Outline Your Priorities and Goals
Take time to consider the outcomes and causes you would like to support. Think about:
- What causes matter most to you? Whether it is addressing climate change, advancing social equity, or supporting health outcomes, clarify your priorities to guide your decision-making.
- What impact do you hope to achieve? Set specific, measurable goals for your investing to track your progress over time.
- Where do you want to focus your investing? In your local community, in a particular part of the country, or around the world?
- How do you think about financial risk and return? Are you comfortable with higher risk possibly leading to higher returns, or would you prefer lower risk in the hopes of preserving capital? Or something in the middle?
- How do you think about impact and financial return? Are you interested in impact-first investing, with a higher level of financial risk and potential for outsize impact? Are you interested in targeting impact investments with market-rate returns? Or would you prefer a mix?
- When do you need funds to be available for grant making? How much cash do you want on hand to respond to emergencies? Do you have a personal ask from organizations that you like to support?
By establishing clear goals and guidelines, you will create a roadmap for investing effectively and purposefully.
2. Investigate Opportunities with the Help of Your Advisor
If you are new to impact investing, navigating the landscape of opportunities can feel daunting. Working with a financial or philanthropic advisor can help you:
- Evaluate curated investment pools or custom strategies. Many DAF providers offer pre-selected portfolios, which can be an accessible starting point for impact investing.
- Understand options like recoverable grants. Recoverable grants allow you to support impactful projects with grants while potentially replenishing your DAF.
- If private investments make sense for you, identify funds that align with your goals. These could include nonprofits, social enterprises, or other mission aligned managers that address your chosen focus areas.
3. Make Your First Allocations
With your priorities set and opportunities identified, it is time to put your DAF to work:
- Make your first impact investments or recoverable grants.
- Monitor and refine. Regularly review the performance and impact of your allocations to ensure they are meeting your goals and aligning with the priorities you set in step one. Adjust as needed to stay aligned with your evolving interests and needs.
If you would like support in turning your vision into action and taking these three steps, please reach out to us.
Together, we can utilize your donor-advised fund as a catalyst for meaningful change.
CapShift does not endorse or receive compensation from any donor-advised fund provider in exchange for this post. This information is for educational purposes only.
