FAQs

CapShift is a mission-driven company that empowers philanthropic and financial institutions, along with their clients, to mobilize capital for social and environmental change.

CapShift provides the following services:

1. Expert Sourcing
We source impact investment opportunities – spanning all asset classes, geographies, and United Nations’ Sustainable Development Goals – from our global network of sector experts.

2. Research
Our Research Team leverages their deep financial expertise and our proprietary impact assessment methodology to review impact investment opportunities.

3. Trusted Partnerships
We partner with your preferred financial institutions and service providers to bring impact investments to you.

4. Technology Platform and Impact Reporting
We provide you with tools to explore investment opportunities based on your preferences and stay up-to-date on the impact and financial performance of your investments over time.

CapShift provides impact investing solutions for:

• Financial Advisors;
• Individuals, Families and Foundations;
• Donor Advised Fund Providers; and
• Impact Funds and Social Enterprises

In the United States, a donor advised fund is a charitable giving vehicle administered by a public charity created to manage charitable donations on behalf of organizations, families, or individuals. To participate in a donor-advised fund, a donating individual or organization opens an account in the fund and deposits cash, securities, or other
financial instruments. They surrender ownership of anything they put in the fund, but retain advisory privileges over how their account is invested, and how it distributes money to charities. (Source: Wikipedia)

CapShift definition of DAF from website:

A donor advised fund (DAF) is like a private foundation, but more accessible to the average
person and without the costs and overhead of a foundation. An individual contributes to their
DAF and receives an immediate tax deduction, then makes recommendations on where to invest
and grant out their funds. DAFs are similar to a “charitable savings account” in that they house
charitable donations that are waiting to be granted out. The entity hosting the donor advised
fund is called the sponsoring organization, or “provider.”

Most of the larger financial institutions and community foundations offer DAFs. The provider manages the donor advised fund account, its investments, and its grantmaking – the latter two based on the donor’s recommendations. With over $121 billion in DAFs in the U.S., they are a popular way to make charitable gifts and, increasingly, impact investments.

While the ultimate purpose of a DAF account is to distribute the assets as grants to qualified charities, one advantage of DAF accounts is that they give a donor the ability to take a long-term, holistic view of their philanthropic goals. There is currently no legal requirement for a DAF account holder to make annual grants.

As such, capital in the account can be advised by the donor and invested in a wide variety of opportunities, subject to the approval of the DAF sponsor organization. Impact investments that align with the donor’s vision of positive social and environmental change can supply important catalytic capital to changemaking organizations.

No, but any profits will increase the value of the account and can be used for additional investing or grantmaking to a qualifying charity. A donor typically receives a substantial tax benefit for the initial funding and subsequent contributions to a DAF account.

Yes. Our FlexDAF for Impact program offers tools to select an appropriate DAF provider for your needs, access competitive fees, select and approve impact investments, and provide ongoing oversight.

Yes, we can work with you to propose opportunities to your DAF sponsor that you’d like to invest in. CapShift will pre-screen them against your sponsor’s guidelines and advise you accordingly.

A wide range of investments can be held in a DAF, including mutual funds and ETFs, private debt and equity funds, and direct investments in companies.

However, each DAF provider specifies its own policies regarding permitted investments. With our FlexDAF for Impact program, we can help you identify providers that meet your investment needs.

The approval process varies by DAF sponsor but typically takes between XX and XX weeks. CapShift can facilitate the review and also provides the required due diligence services, for which a separate fee applies. Typically, the minimum size for donor-directed investments is $100,000, but in certain cases may be lower.

CapShift works with numerous leading DAF sponsors, including Fidelity Charitable, National Philanthropic Trust, Chicago Community Trust, among others.

As we provide a variety of services to a diverse client base with unique needs, account pricing is dependent on the particular services we provide. Please contact CapShift for details.

Impact investments are investments made with the intention to generate positive, measurable, social and environmental impact alongside a financial return (Global Impact Investing Network).

At its core, impact investing means aligning your investments with your values. In doing so, you can advance solutions to the causes you care about – from affordable housing and income inequality to climate change mitigation and sustainable agriculture. The United Nation’s Sustainable Development Goals is a great starting point for learning about the different issue areas that impact investing addresses.

Examples of impact investing include:

For public investments

• Using negative screening – avoiding investments in specific industries that the investor views as causing harm, such as fossil fuels or weapons.
• Using positive screening – incorporating Environmental, Social, and Governance (ESG) criteria into investment decision-making.

For private investments

• Investing in private funds whose investment thesis focuses on companies improving the lives of people in their communities and beyond.
• Investing directly in companies, nonprofits, and organizations whose mission and business activities drive solutions to social and environmental challenges.

A donor advised fund (DAF) is like a private foundation, but more accessible to the average person and without the costs and overhead of a foundation. An individual contributes to their DAF and receives an immediate tax deduction, then makes recommendations on where to invest and grant out their funds. DAFs are similar to a “charitable savings account” in that they house charitable donations that are waiting to be granted out.

The entity hosting the donor advised fund is called the sponsoring organization, or “sponsor.” Most of the larger financial institutions and community foundations offer DAFs. The sponsor manages the donor advised fund account, its investments, and its grantmaking – the latter two based on the donor’s recommendations.

With over $110 billion in DAFs in the U.S., they are a popular way to make charitable gifts and, increasingly, impact investments.

While a donor’s funds are sitting in a donor advised fund waiting to be granted out, they are invested, typically into traditional investments such as ETFs and the money market. 

At CapShift, we believe that, by aligning investable assets – i.e., those not yet earmarked for grants – with the donor’s overall mission, DAFs are positioned to create catalytic change even before the first dollar is donated. 

Impact investment opportunities exist that meet every donor’s needs – from market-rate public funds focused on ESG factors, for donors who seek high liquidity so they always have funds available for grantmaking, to high-impact private investments, for donors who want their investments to be as impactful as their grants. 

Activating DAFs for impact investing offers donors the exciting opportunity to multiply their DAF’s impact while using the returns for even further philanthropic activity.

A grant that offers donors the potential to recover the granted capital and potentially a small return if the recipient meets a predetermined ‘success scenario.’

The conditions for the success scenario are typically established in a document signed between the donor and the nonprofit before the grant is made. If the nonprofit satisfies the success scenario through its activities related to the grant, the donor is repaid according to the best efforts of the grant recipient . The repayment must be made to an eligible charitable organization (e.g., a foundation or DAF sponsor) and not directly to an individual.

Recoverable grants are a type of charitable giving and are not securities. As such, recoverable grants are high impact because they advance charitable purposes and when successful capital can pursue additional charitable purposes. While this typically means recoverable grants must be made to 501(c)3 entities, some exceptions are possible where charitable intent is well documented.

Unlike lending, in which an investor has recourse if a borrower defaults on a loan, the donor has limited recourse if a recipient is unable to repay the recoverable grant but did use the funds for the documented charitable purpose.

Recoverable grants can play a uniquely catalytic role. For example, they may provide funding that allows a nonprofit to experiment and develop programs beyond their core competencies without the risk of impairing their existing programs. At the same time, recoverable grants allow donors to take a financial risk in pursuit of impact that, if it pays off, can return some or all the grant dollars for future charitable use.

Many donors use recoverable grants alongside traditional grants to strategically expand the impact of their philanthropy. By incorporating recoverable grants, donors can support the charitable causes they care about while recovering and reusing capital when supporting revenue generating programs or expansion efforts, allowing for greater impact.

Recoverable grants can serve as catalytic capital when used to:

1. Bridge funding gaps that occur during the lag in timing between when government sources, pledges, or foundation funders commit grant dollars to a nonprofit and when the nonprofit receives the capital. Recoverable grants provide immediate funding so the nonprofit can quickly and effectively address the needs of its community and then gets repaid once the nonprofit receives the committed capital.

2. Scale a program quickly to help nonprofits deliver critical revenue-generating services in response to new and rising needs, such as the demand for healthcare that has skyrocketed as part of the Covid-19 crisis. Recoverable grants supply the up-front capital necessary to grow programs and are repaid from revenue over time.

3. Make big bets that may entail high-risk, but also carry the potential to positively and significantly transform societies and environments. Recoverable grants fill gaps that traditional grants and venture funding do not address, including research and development, pre-seed, and seed financing for promising technologies that are too high-risk for traditional investors. The recoverable grant is paid back if these efforts ultimately scales and achieves success from an impact and financial lens.

• Covid-19 Bridge Fund: A recoverable grant enables this nonprofit fund to provide short-term bridge loans for social enterprises and nonprofits experiencing unexpected roadblocks due to Covid-19. If the borrower can recover and continue operations, the fund will repay the grantor upon receiving the borrower’s loan repayments.
• Water Quality Fund: A recoverable grant helps this nonprofit fund lend to microfinance institutions that fund water and sanitation projects in low-income communities, helping reduce the future spread of disease. The grantor recovers principal and potentially a return to the extent that the water and sanitation projects repay the microfinance institutions which in turn repay the fund

To explore recoverable grants more and understand whether they’re a fit for you and your clients, we welcome you to reach out to Scott Nance, Vice President of Business Development, at snance@capshift.com.

Impact investments are investments made with the intention to generate positive, measurable, social and environmental impact alongside a financial return (Global Impact Investing Network).

At its core, impact investing means aligning an individual’s investments with their values. In doing so, they can advance solutions to the causes they care about – from affordable housing and income inequality to climate change mitigation and sustainable agriculture. The United Nation’s Sustainable Development Goals are a great starting point for learning about the different issue areas that impact investing addresses.

Examples of impact investing include:

• Use negative screening – avoiding investments in specific industries that the investor views as causing harm, such as fossil fuels or weapons.
• Use positive screening – incorporating Environmental, Social, and Governance (ESG) criteria into investment decision-making.

• Invest in private funds whose investment thesis focuses on improving the lives or environment of people in their communities and beyond.
• Invest directly in companies, nonprofits, and organizations whose mission and business activities drive solutions to social and environmental challenges.