Many of those interested in impact investing come to the practice with thousands to invest—not millions. While those with larger asset sizes often turn to donor advised funds (DAFs) to augment their direct and fund impact investing work, perhaps the best part of DAFs is that they can act as a tool to help “democratize” impact investing since they are available to those of virtually any level of wealth. Even if one just wants to support a set of local charities through making annual gifts—and would also like to move beyond grants to leverage charitable dollars through impact investing—DAFs offer an effective way to expand one's impact. Charitable giving is increasing annually in the United States and internationally and the expanding use of DAFs is a large part of that growth.

In addition to being a good tool to augment one's other impact investing practices, DAFs are also appealing in that they allow the investor without a lot of support or infrastructure to “offload” on to a community foundation or DAF intermediary (such as the groups profiled below) some of the paperwork, sourcing, reporting and other aspects of impact investing that can be onerous for individuals working on their own. For those who might otherwise create a family foundation, DAFs enable one to plug into an existing administrative infrastructure to support your efforts, while decreasing the need to hire operating personnel to manage your philanthropic investments.

Finally, DAFs offer the impact investor an opportunity to “dip a toe” into impact investing by funding higher risk projects that may still be in seed or early stage development. Depending upon what institution you're working with, your grants can cover research and development or program initiatives while the actual funds you have placed in your DAF may be simultaneously invested in a variety of impact investments, ranging from seed to growth to mainstream market-rate opportunities.

This chapter will help you understand how you may use DAFs to engage in impact investing and build upon your market-rate investments to advance positive change in the world.