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Key Points

Editor’s Note: This article, first published in print and online in 2022, has been republished by The Foundation Review with minor updates.

Any discussion of foundations embracing impact investing must include some discussion of one of the largest — and growing — sources of philanthropic capital: donor-advised funds. These philanthropic accounts allow donors of all sizes to access many of the functions of a private foundation, including the potential to invest for impact. Sponsors of these funds, however, face unique challenges in catalyzing impact investments.

Like the larger institutional foundations that have led the way as mission investors, sponsors must often educate and inspire governance boards and investment committees. Unlike foundations with professional program staff, decisions regarding philanthropic resources at sponsors of donor-advised funds are guided by multiple account holders, often numbering in the hundreds or thousands. This may help to explain why these funds and their sponsors have not yet achieved their potential in investing for impact.

This article takes a practitioner’s view on the issue, reflecting lessons learned by a sponsor of donor-advised funds that has long accommodated the impact investing interests of its donors. Experience demonstrates some promising approaches that build on sponsors’ particular strengths: their deep expertise of the nonprofit sector; the scaled platform offering operational efficiency along with technical assistance; and their ability to apply their operational expertise to new areas of collaboration with foundations and other philanthropically minded actors.

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