For many, the holidays and new year are an opportunity to open hearts and wallets to support the causes and issues that are most important to them. But what if you could double the impact of your philanthropic giving?
Through smart tax planning and growing opportunities to put philanthropic dollars to work in impact investing, more individuals are finding ways to expand the power and positive feelings generated by philanthropic giving.
Charitable giving is at all time highs. Powered by a booming stock market and a strong economy, charitable giving by American individuals, bequests, foundations and corporations to U.S. charities surged to an estimated $410.02 billion in 2017. Despite the recent stock market pullback, philanthropic giving is expected to be robust through the new year, paralleling the relatively strong economy.
Impact investing—investments made with the intention of generating measurable social or environmental impact alongside a financial return—are also growing rapidly. The Global Impact Investing Network’s 2018 Annual Impact Investor Survey, which surveyed 229 of the world’s leading impact investing organizations, found that respondents collectively manage over $228 billion in impact investing assets, double the $114 in 2017.
While there are so many issues and circumstances that split civil society these days, it is good to remember that through philanthropy, people across the political spectrum are unified in their desire to create change and make a personal impact through charitable giving—from climate change to education to investing in the UN Sustainable Development Goals.
Here are four ways expand the impact of your charitable giving:
Give appreciated securities: Donating appreciated securities is a smart strategy increasingly leveraged by wealth managers working with philanthropic clients. Giving long-term appreciated stocks, bonds and/or mutual funds allows you to give to a charity and get a full tax deduction on the fair market value of the securities. Since the securities are donated rather than sold, you don’t have to pay capital gains taxes. And best of all, 100% of the value of the donation can go to work towards your own impact investing and charitable granting.
Use a donor advised fund to make impact investments: With more than $110 billion in charitable assets, donor advised funds are the nation’s fastest-growing charitable vehicle, and for good reason. They are an efficient, low-cost structure that allows donors to reap tax benefits while putting charitable dollars to work in a strategic way. In addition, donor advised funds help eliminate paperwork by tracking contributions and grant recommendations and provide the donor with regular account statements and annual tax documentation. And unlike private foundations, which are subject to mandatory public disclosure requirements, donor-advised funds allow donors to give anonymously if they choose, providing a greater degree of privacy.
A new generation of donor-advised funds is taking these benefits a step further. Funds like ImpactAssets, RSF Social Finance and many community foundations across the country are now incorporating impact investment options into their menu of investments. On these platforms, individuals can help clients make investments in ESG-focused mutual funds, private debt and equity, climate solutions, global health and microfinance. Some, including ImpactAssets, are also enabling clients to source and recommend their own investment deals—like impact investing venture capital.
By putting the undisbursed charitable assets in donor advised funds to work in impact investments, these funds are doubling the impact of donations. They’re also giving individuals a chance to use charitable dollars to test the impact investing waters and develop an expertise in an emerging investment category.
Make philanthropy a family affair: Making philanthropy and impact investing a family activity is a powerful way to extend deeply personal values. Whether it is an informal family discussion, or the creation of a formal structure, such as a foundation or donor advised funds giving as a family is a powerful way for individuals and families across generations can learn about the power of philanthropy to help organizations address critical social and environmental issues.
Double down with organizations that you care about: Individuals can also maximize their charitable impact by aligning social enterprise investments with charitable giving. At ImpactAssets, donors are using their donor advised fund to “double down” by both investing in and donating to non-profits and social enterprises. In 2018, donors made nearly two such investments every week, in such social enterprises and organizations as NYC Inclusive Creative Economy Fund, Beyond Meat, NewsGuard and more than 300 other organizations.
Making charitable dollars go further with strategic giving and impact investing is a benefit to charities and individuals alike. So go ahead, make a positive impact this year—and lay the groundwork for a lifetime of giving in the future.