A Donor Advised Fund (DAF) is an opportunity for philanthropists to leverage their giving by investing in impact Funds that create positive social and environmental impact while also providing returns of up to 2-5-3X the original investment. A DAF does not return principal and profits back to the original donor, so these profits returned to the DAF provide up to 3X the funds to give to the donor’s selected charitable causes.
For example, if you wanted to give $100,000 to your alma mater university, you could just write a check for $100,000 and the university would benefit. Alternatively, you could invest $35-40,000 into an impact DAF and the impact companies would provide positive social impact, and could return $100,000 over time, which benefits the university. Ultimately, it provides leverage for your giving strategies.
Curious about how a DAF works? Here’s the flow of funds and mechanics of the DAF.
To use a DAF, an investor gives a tax deductible contribution to the DAF set up in their name or through a foundation or fund. This contribution is much like giving a donation to a non-profit in that it will not provide a return like an impact investment would, but allows the donor to plan and grow the funding base that they will have for their future giving strategy.
DAF donors are more strategic about their giving than most people. DAF donors typically think long term and have specific causes that they want to support vs. someone who responds to requests that may randomly come to them over time. A DAF is like a personal Foundation in that it allows the donor to set funds aside to give to their causes over a period of time, but it is unlike a Foundation in that it does not require a five percent minimum donation amount each year.
Joining or creating a DAF with a portfolio of impact related investments like the Rockies Impact Fund, gives investors a multiplier effect on their investments. First, the Rockies Impact Fund invests only in companies that create Primary Impact in Social or Environmental spheres. This means that the investment themselves are causing significant measurable impact. Second, those investments give back up to two to three times the initial capital to the Donor Advised Fund. Third, the DAF may now donate the profits from those investments to a selected philanthropic organization, or to a suite of causes specified by the donor.
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