Impact alignment through donor-advised funds
Tuesday, April 13, 2021
Tuesday, April 13, 2021
A more in depth exploration of key sustainability topics
Impact alignment through donor-advised funds

Our main goal at Ethic is to leverage the power of the capital markets to address the most defining issues of our time. Whether it’s racial justice, deforestation, or corporate ethics, we are constantly seeking out ways for our clients to do the same—to maximize the impact they can have on the causes they care most about.

Creating a Mission Statement

When organizations and families embark on Ethic’s interactive values-discovery process, they’re asked to think critically about what is most important to them, and what change they’d like to see in the world. The result of this exercise is a unified mission statement, essentially a roadmap, outlining the key issues that will drive an ongoing impact strategy. This strategy can be applied immediately to the client’s equity allocation and to other parts of the client’s balance sheet such as philanthropic giving. Additionally, this exercise is a thought-provoking and engaging way to get multiple stakeholders, family members or generations involved in the conversation and to even inspire enthusiasm surrounding their collective legacy. Lastly, the educational resources provided by Ethic leaves both clients and advisors better informed on the issues they seek to address. 

What is a DAF and why is it important?

Many clients have historically taken the philanthropic route, and used charitable giving to enact change on the issues most dear to them. One particularly powerful and fast-growing vehicle for philanthropic giving is a donor-advised fund, or as many like to call them, “DAFs”. They act as a charitable investment account, giving the owner the ability to recommend grants to virtually any IRS-qualified public charity using the assets they’ve contributed to the account. What makes these vehicles attractive is that they generally qualify the owner for an immediate tax deduction after contributing cash, securities, or other assets to the account.  It also serves as a great way to utilize highly appreciated securities in your portfolio without having to realize the capital gains tax associated with them. Tax-efficient, low maintenance, and set up for legacy planning, DAFs are a great way for clients to align their investments with their values, which is also our core focus at Ethic. 

The combination of a DAF and a customized, values-aligned Ethic portfolio is a perfect match. By combining the two vehicles, clients are able to elevate their philanthropic impact, while gaining a deeper understanding of the issues they’re impacting. 

By aligning a DAF with an Ethic portfolio, donors are able to have immediate impact through their investments while still considering their grant-making strategy. Our separately managed accounts are customized according to a client’s impact goals, meaning they’re only invested in companies demonstrating positive behavior as it relates to those goals. If the client’s charitable giving is focused on ocean cleanup efforts, their Ethic portfolio would invest in companies promoting safe and plentiful access to clean water. The DAF can also be a great test drive for applying Ethic’s strategies in other areas of a broader portfolio. 

For advisors and clients who have prioritized charitable giving with a donor-advised fund, layering it with an Ethic strategy is the ultimate tool for maximizing philanthropy. If a philanthropically-oriented client is looking to create real change in the world, then why not double down?

Sources and footnotes
Contributors

Claire Quigley works on the Client Relationship Management team at Ethic, and previously worked in a client service role performing market research for institutional investors. She’s originally from Connecticut, and studied English and Urban Studies at Trinity College.

Will Maher is originally from Pittsburgh, and previously worked at AllianceBernstein in the Private Wealth Management Division. Will graduated from Wake Forest University with a BS in Business Enterprise Management with a concentration in Finance.