Mission-related investing is a powerful way in which donors can leverage their philanthropic dollars at iGiftFund. Mission-related investing enables donors to use different forms of financing, in addition to outright grants, to achieve their charitable goals.
Mission-related investing encompasses a number of related fields: impact investing, program-related investing (collectively referred to in the philanthropic marketplace as “MRIs”) are creative investing strategies that are opening up new frontiers for donors to leverage and expand assets in their donor-advised funds beyond traditional grant-making. Given the current constraints on governmental funding, greater pressure is being placed charitable dollars to meet a widening range of human social needs. The demand for capital outstrips the supply…often grant-making alone cannot fill that gap.
Where in the past, donors had only one tool in their toolbox…grants…today donors engage in cutting edge strategies to carry out their charitable legacy. Mission-related investments enable a donor-advised fund to become a tax-free reservoir for the donor’s philanthropic venture capital.
Mission-related investments are expected to earn two returns: a financial and a social rate of return – with the mix determined by a) assets available in the donor’s fund, b) investment opportunities in the marketplace, c) the donor’s tolerance for risk and d) the donor’s creativity.
Mission-related investments are used in donor-advised funds to make financing available to qualified charitable organizations or for-profit enterprises, where commercial sources are either not available or not available at attractive terms, They have been used to acquire property; create jobs; develop new beneficial products or services; build or preserve affordable housing or community facilities; improve public health and for a host of other social purposes. Mission-related investments are often made to share risks and/or attract other commercial partners. MRIs also serve as points of leverage to promote public-private partnerships and to allow ESG organizations (companies that measure performance on environmental, social and governance criteria) to raise funds to serve public and programmatic purposes.
Mission-related investments offer creative opportunities for a donor-advised fund to act as a catalyst in facilitating loans (senior and subordinated), loan guarantees, lines of credit, linked deposits, cash deposits, bonds, equity investments, the creation of limited liability arrangement (LLCs/LPs) and other transactions designed to help non-profit and for-profit social enterprises access capital funding.
The iGiftFund donor-advised fund platform is uniquely positioned to meet that challenge… the donor-advised fund is not constrained by the rules and regulations that burden private foundation including: 5% annual payout requirements, excise taxes on income, expenditure responsibility…not to mention lack of privacy.
At iGiftFund, we offer a level of creativity not typically available in other donor-advised fund programs.
Mission-Related Investment Case Studies
- Donor A wants to assist his church in managing their finances until a new church is built and the old church is sold. The donor recommended a 10-year loan agreement that provides for the church to make regular quarterly payments of principal and a rate of interest, well below the current adjustable rate and more within the church’s means. If the church demonstrates fiscal responsibility in servicing the loan, the donor intends to grant back to the church the value of interest paid over the course of the loan.
- Donor B recommended a maximum $250,000 insured deposit with a charity to help finance its program that provides bi-lingual support and financial literacy training to its growing Latino immigrant community. If successfully launched, the donor intends to grant the charity an additional $100,000 for administrative expense.
- Donor C recommended a $200,000 five-year loan at an average interest rate of 3% to help support his community’s loan fund to finance child care and family-based centers in low-income neighborhoods.