NEW YORK (Reuters) – Doubling the capital of your charity seems self-evident, but investors are just beginning to understand.
PHOTO FILE: Power generating wind turbines are photographed at sunset in a wind farm at Moeuvres near Cambrai, France, on November 12, 2018. REUTERS / Pascal Rossignol
An increasing number of them use special accounts called donor advised funds, which allow investors to designate assets for charitable purposes.
In the United States, approximately 500,000 donor-advised fund accounts totaled $ 100 billion in fiscal 2017, an increase of 23% over the previous year, according to the National Philanthropic Trust. Donations have increased by about 20% to reach about $ 19 billion during the year.
Gil Crawford, managing director of MicroVest, an asset management company based in Bethesda, Maryland, focuses on sustainable investing. Many donors use these funds when they receive a large injection of cash from, for example, the sale of a company or an inheritance.
Donor-advised funds are likely to become more popular, as US tax laws this year have encouraged charitable savings over several years until they exceed the new, larger standard deduction.
The money from a donor recommended fund is usually placed in a general selection of mutual funds and exchange traded funds (ETFs). This is where socially responsible investing is gaining ground – instead of an S & P 500 general investment fund, donors are demanding options that eliminate environmentally irresponsible businesses.
"Many people have a generalized feeling – this is the wallet of my charity, I do not want to do anything wrong and, better yet, do good," said Sarah Gelfand, vice president of Fidelity Charitable, the largest donor of funds advised by donors.
According to Gelfand, about eight years ago, customers began to say that they wanted their money to be used to do good, even if it was not sent directly to charity .
Fidelity Charitable offers a selection of sustainable investment options. Three are ETF index funds selected for their ratings on environmental, social and governance issues, such as the Fidelity American Sustainability Index FENSX.O Fund or the TIAA-CREF Social Choice Stock Fund (TICRX.O), and one does not contain fossil fuel, on about two dozen options.
Vanguard Charitable and Schwab Charitable, the other main players, offer similar offers in their menu of funds available to donors.
TAKE MORE CONTROL
Some major institutions will allow your personal financial advisor to oversee the investments, but this is not as common as the ability to choose a fund menu, said Jonathan Harrison, a licensed financial planner in Overland Park, Kansas, whose company, Sound Stewardship, directs impact investing with a Christian purpose.
The typical entrepreneurial client is not satisfied with a portfolio of 60-40 stocks and bonds, said Harrison, who previously worked for the National Christian Foundation, a large fund advised by donors.
"They say," It's not there to pay my mortgage or feed me. So if I'm going to invest it, and I have the opportunity to invest it in something that has a bigger impact, that's what I want to do, "said Harrison.
Donors also have other ways to make more direct investments through charities. Companies like Crawford's MicroVest and advisors like Harrison help clients who want to do more than just make a simple donation to a non-profit organization.
Instead, they can allocate their funds to groups such as ImpactAssets or Water.org, which can turn charitable donations into micro-investments in developing countries. Returns can be reinvested or reinvested in the fund recommended by the donor and then distributed to another organization.
Edited by Lauren Young and Richard Chang