May 4, 2022

How Impact Investing Can Address Worldwide Challenges

For clients with money set aside for charitable purposes in donor-advised funds, impact investing offers the chance to align their investments with their grant recommendations to amplify the change they hope to see in the world.

Author National Philanthropic Trust

For financial advisors, impact investing requires not only an understanding of different investment strategies but a firm grasp of the problems that clients want to solve. That can be a tall order, given the complexity of the various challenges that clients may hope to address. A good place to begin learning about these issues is from the United Nations’ 17 Sustainable Development Goals (SDGs). These objectives provide a blueprint for a sustainable future, with the simultaneous goals of ending poverty, protecting the planet and improving the current lives and future prospects of every person on Earth.

To achieve the ambitious goals set by the U.N., we must close an estimated $2 to $3 trillion annual financing gap. This is an enormous amount of capital and even robust annual charitable giving ($471.44 billion in the U.S. in 2020), falls far short of what is needed. For clients with money set aside for charitable purposes—with donor-advised funds (DAFs) or family foundations—impact investing offers the chance to align their investments with their grant recommendations to amplify the change they hope to see in the world.

To ease the process for advisors and to best serve our donors, National Philanthropic Trust partners with CapShift to offer four thematic portfolios and a curated menu of private investments that address the areas of greatest concern to our donors: Equity and Inclusion, Environmental Stewardship, Gender Lens and Broad Social Impact. As you talk to clients, you can use this information to deepen your understanding of the issues that matter to them.

Helping underserved communities and families gain economic wealth and opportunity

At a glance:

  • The impact of COVID-19 has setback global poverty alleviation, and economic growth has been slow during the recovery period in middle and low-income countries. The World Bank found in June 2021 that the pandemic had led 97 million more people into poverty, a slightly lower number than their original estimate, but still an “historically unprecedented increase in global poverty.”
  • While economic recovery support helped blunt the worst impacts of the pandemic in the U.S., middle-income and low-income families still experienced greater hardship. Median incomes decreased for both groups between 2019 and 2020, and both experienced higher levels on unemployment than previous years.

To aid long-term recovery, our Equity and Inclusion portfolio invests in companies and municipalities that are funding healthcare facilities and other essential services. It also invests in companies taking the lead in protecting employee wages and benefits, as well as companies that are creating products and services to help underserved communities. 

Additionally, our Broad Social Impact portfolio includes many of the same publicly traded investments that are in the Equity and Inclusion portfolio, as well as private investments that provide capital to nonprofits, small businesses and families impacted by COVID-19. This helps women, minorities and other communities that lack access to the traditional banking system obtain affordable loans.

Protecting our environment and conserving natural resources

At a glance:

  • Our natural resources—clean air, clean water, healthy soil and diverse ecosystems—fuel economic growth and keep communities healthy. This natural capital is threatened by a combination of overconsumption, pollution and climate change.
  • Climate volatility and environmental degradation directly harm human health and welfare through food and water insecurity, disease spread and natural disasters.

With our Environmental Stewardship Portfolio, your clients can support the environment with investments in companies that are working effectively to reduce their carbon emissions, conserve resources, and develop new technologies.

Supporting women in the workplace and beyond

A glance at the problem:

Studies suggest that companies with significant women in leadership—as well as policies that support women—demonstrate lower share price volatility, higher operating margins and stronger risk-adjusted stock market returns. Additionally, funds with women on their investment committee perform better than the industry average. With NPT’s Gender Lens Portfolio, your clients can invest in companies that have more women in leadership positions.

DAFs can help your clients meet their philanthropic goals, with impact investing, their philanthropic capital can accomplish measurable social change even while it’s invested. If you would like more information about impact investing or how you can help clients use their DAF to have a bigger impact on causes that matter to them, please contact us at (888) 878-7900 or by email at npt@nptrust.org.

About the Author

Janos Major is NPT’s Regional Director, West based out of San Francisco. Janos works with advisors on meeting their clients’ philanthropic needs through donor-advised funds. He earned a Bachelor of Science in Business Administration from Drexel University with a concentration in Finance and Legal Studies.