It’s the most generous time of the year. From Giving Tuesday to last-minute donations to favorite charities, December marks the month when Americans most benevolently open hearts and wallets to support the causes and issues that are most important to them.
Of the $427.71 billion Americans contributed to charities in 2018, approximately 30 percent of giving occurred in December; nearly 10 percent of annual giving occurs on the last 3 days of the year.
This Holiday Season — with worries about climate change, economic inequality and other issues tearing at the fabric of civil society — philanthropy needs to do more than ever. The United Nations, for example, has identified an annual $2.5 trillion investment gap critical to realizing the Sustainable Development Goals by 2030.
The urgency of human needs and system risks requires creative solutions that put more capital to work. So, 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 new ways to expand the power and positive feelings generated by philanthropic giving.
Impact investing — investments made with the intention of generating measurable social or environmental impact alongside a financial return — is a rapidly growing way that some philanthropists are putting charitable dollars to work even before they are granted. A 2019 report by Global Impact Investing Network, found that over 1,340 organizations currently manage $502 billion in impact investing assets worldwide, up from just $10.6 billion in 2014.
“The impact investing industry is experiencing significant momentum,” noted Amit Bouri, Co-Founder and CEO, Global Impact Investing Network. “Major firms, large and small, are entering the impact investing market every week, and the industry has received a swell of support from governments, academics, and business leaders.”
Here are five ways to combine the generosity of the season with catalytic investments that can expand the impact of your charitable giving:
Donate Appreciated Securities: Although a tax break is not the major motivation for most philanthropy, giving in a tax-smart way allows donors to give more and plan giving more strategically. Donating appreciated assets such as stocks, mutual funds or real estate either directly to a charity or to a donor-advised fund is a one such tax-smart strategy. Giving long-term appreciated assets 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, meaning 100% of the value of the donation can go to work to support impact investing and charitable granting.
Bundle Charitable Giving: The Tax Cuts and Jobs Act of 2017 (TCJA) changed the math for charitable contributions by nearly doubling the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly. As a result, fewer Americans will itemize their expenses and charitable deductions than prior to the TCJA.
While it was feared that the TCJA could dampen charitable giving, donations were up slightly in 2018. One possible reason: ‘Bundling,’ a charitable strategy in which individuals make donations every two or three years instead of giving every year in order to meet higher standard deduction requirements. For instance, an individual who gives $5,000 annually could give $10,000 every two years, getting itemized deductions the first year and taking the standard deduction the next. Using a donor-advised fund is one way to take the bundled, invest the funds for potential growth and then grant money to charities over the course of two or three years.
Use a Donor-Advised Fund to make Catalytic Impact Investments: With more than 121.42 billion in charitable assets, donor-advised funds are the nation’s fastest-growing charitable vehicle. This efficient, low-cost charitable structure allows donors to reap tax benefits while putting charitable dollars to work in a strategic way. But increasingly, donors are finding ways to transform the charitable assets in donor advised funds into a catalytic resource for good.
At ImpactAssets, a $1.1 billion donor advised fund, donors are investing in breakthrough solutions to some of the world’s biggest global challenges, through a 100% impact investment platform of mutual funds, private debt and equity and custom investments. Other funds, including many community foundations across the country, are also incorporating impact investment options into their menu of investments.
With more individuals than ever turning to donor-advised funds to facilitate giving, the opportunity to solve problems with a combination of investments and donations will only grow. By activating the vast pool of philanthropic capital already set aside to do good, donor advised funds have the power to accelerate transformative change.
Extend Philanthropy Across Generations: Making philanthropy and impact investing a family activity is a powerful way to extend deeply personal values to next generations. Whether it is an informal family discussion, or the creation of a formal structure, such as a foundation or donor advised fund, giving as a family can help build stronger bonds while seeking solutions to some of society’s biggest challenges. The learning goes both ways. As millennials move up the ranks in business or take charge of family wealth, many are showing their elders how to put more of their family’s wealth to work for good.
Double Down with Organizations 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 donating to nonprofits and investing in related organizations. Donors have made more than 500 ‘Custom Investments’ in social enterprises, including TerraCycle, Beyond Meat, Komaza and many others that are driving positive change. Donors see this strategy as sensible risk mitigation because supporting a charitable organization’s philanthropic mission is far more efficient if it doesn’t need to undo damage done by unaligned investment management.
Making charitable dollars go further with strategic giving and impact investing is a benefit to charities and individuals alike. This giving season, challenge yourself to act with increased urgency in responding to the climate crisis, societal injustice and inequity around the world. Your donations can be a catalytic resource to fund social enterprises and move fast and fearlessly to create impact.