Giving Compass' Take:

• This Progressive Philanthropy Group examines donor-advised funds (DAFs) — a financial vehicle earmarked for charitable causes — and how impact-driven investments may be an avenue for them.

• The debate over the utility of DAFs continues (those against them feel there are too many tax loopholes and too little transparency), but impact investing may help give them more utility in the field of social innovation.

• Here are some policy recommendations to improve donor-advised funds.

Private foundations have been taking bolder steps toward impact investing in recent years. But with more individuals turning to donor-advised funds (DAFs) to facilitate their giving, how can those funds also be invested today to improve the world? That’s an important and intriguing question I’ve heard from donors and leaders in the philanthropy and impact investing sectors.

Today, an estimated $85 billion is sitting in DAFs. That’s $85 billion earmarked for charitable purposes, but waiting to be dispersed to nonprofits. Those numbers are climbing as DAFs continue breaking records with billions of dollars pouring into these charitable vehicles each year.

DAFs function like an individual donor’s personal philanthropy account. Donors put assets into these accounts, take an upfront charitable tax deduction, and then, over time, recommend to their account sponsor how the funds are to be granted to nonprofit organizations. Some of these funds could be in accounts for years or decades until donors (or their successors) recommend specific donations.

Read the full article about impact investing and donor-advised funds by Nicholas Salter at Progressive Philanthropy Group.