Giving Trend: Impact Investments

NPT-UK has focused on global giving in every sense of the phrase, from working with international donors to making grants to foreign charities, since our inception. In the course of our work, I’ve observed several important trends—some emerging, some continuing, some evolving. In this post, we’ll continue our blog series on global trends in philanthropy. This month:

The growth of impact investing in philanthropy.

Many global philanthropists are re-visiting the conventional wisdom on endowment management. They are allocating a portion of their endowment capital to impact investing, where an investment achieves both financial and measurable social returns.

The concept of impact investments has been around for nearly 40 years, although the term itself is still relatively new. Investors can use impact investments as part of their personal financial portfolios or through giving vehicles such as donor-advised funds (DAFs). For example, a DAF donor can recommend an investment in a company that prioritizes sustainable energy and lowers carbon emissions. Any financial returns these investments generate will be re-invested in the donor’s DAF as charitable money that can be granted to qualified charities.

Through impact investing, donors can support the causes they care most about at every level of their philanthropy. The structure of impact investments is varied, and the causes that they can support are virtually limitless. The greatest challenge can be finding the right investors for the right projects at the right time.

I expect that impact investing will continue grow in popularity as donors look for ways to increase their philanthropic impact and as financial and philanthropic advisors learn more about the double-bottom line benefit impact investments can give their clients.