“RENEWABLE ENERGY
COMPANIES ARE AN
OBVIOUS INITIAL TARGET
WHEN CONSIDERING
NET ZERO, BUT YOU MAY
WANT TO THINK MORE
LATERALLY...”
As net zero has moved
stage centre in the public
consciousness, socially aware
investors and philanthropists
are increasingly motivated to
play their part. However, the prospect
is complex and overwhelming – can
individuals move past ‘greenwashing’
to make a meaningful difference, what
does supporting net-zero initiatives
within the Donor-Advised Fund (DAF)
model look like, and what are the
challenges involved?
THE ADVANTAGES OF THE
DAF MODEL
The ease and convenience of the DAF
model has made it the fastest growing
philanthropic-giving vehicle over the
past few years. Like a charitable trust or
foundation, a DAF is a powerful giving
vehicle but much less costly and time-
consuming to run; while the former
can take several months to set up, and
the process incurs substantial legal and
other administrative fees, a DAF can
be opened immediately and carries no
start-up costs. Moreover, a DAF allows
you to give anonymously, an option
not afforded by the traditional model
as its charitable status means it must keep public records.
Another attractive
feature of a DAF is the flexibility it
permits; donations can be made in
the form of shares, cash, investments
or property. In short, a DAF offers
maximum flexibility, efficiency, and
privacy, if desired, without limiting your
giving impact.
The National Philanthropic Trust’s
(NPT) findings in its 2021 DAF report
reflect the growth in the US market with
both contributions to DAFs and grants
from DAFs to charitable organisations
reaching new highs in 2020 of $47.85
billion and $34.67 billion, respectively.
The report summarises as follows:
“DAFS increased in all key metrics
in 2020, continuing more than a
decade of DAF donor commitment to
philanthropy.”
NPT UK’s 2021 report, which is
based on DAF data from 2016-20,
reflects a similar growth story with
UK contributions at an all-time
high in 2020 of £609.8 million. The
compound annual growth rate for both
contributions and grants in the 2016-
20 period was 14.6 per cent. Charitable
assets under management in all DAFs
totalled over £1.8 billion in 2020, another record which represents an 8
per cent growth rate compared to 2019.
MAKING A MEANINGFUL
DIFFERENCE
The enormity of the net-zero challenges
that we all face is overwhelming. We
know that we, as individuals, do not
have the power, resources or legitimacy
to make the urgent changes needed at
scale to achieve net zero. The extent of
the task can demotivate us as donors:
we perceive that what we can give will
have minimal impact; we worry that our
gifts will be squandered on inefficient
bureaucracy; and we’re sensitive to
the charge of ‘greenwashing’, nervous
that we will inadvertently be guilty of
supporting an initiative whose green
credentials are not all they seem.
Yet the net-zero goal remains one of the
most pressing needs of our time and one
in which we all have an opportunity to
play our part as individuals, to optimise
our resources to support and advocate
for positive change. The DAF model
empowers investors and philanthropists
to do just that, with maximum flexibility
and minimal hassle.
SUPPORTING NET ZERO
USING A DAF
Start by developing your net-zero
strategy. Do your research and work out
which areas you want to support.
Renewable energy companies are an
obvious initial target when considering
net zero, but you may want to think more
laterally; perhaps you want to support
organisations working for positive
environmental change, or you prefer to
target initiatives that are educating and
equipping younger generations to be
effective environmental ambassadors for
our planet.
Thinking more widely, you may wish to
help tackle some of the social injustices
created by environmental issues. For
example, climate change is having a
devastating impact on people in poverty
as rising global temperatures create
extreme weather events more frequently.
In areas like sub-Saharan Africa, where
the weather oscillates between extreme
floods and extreme droughts, food
production is hit adversely, and millions
are put at risk of starvation. According to
Tearfund, without radical action, climate
change will push 132 million more people
into poverty this decade.
If you’re looking to leverage the longer-
term impact of your giving, then the
DAF model also gives you the option
to have your giving balance invested
before it is granted out; if you choose
to invest in opportunities that support
Environmental, Social and Governance (ESG) criteria, and that may also seek to positively address the UN’s Sustainable
Development Goals (SDGs), then you
really start to create power with your
giving, firstly by supporting ethical,
environmentally-friendly investments,
and then secondly by making grants in
line with your net-zero strategy.
CHALLENGES INVOLVED
As investors and philanthropists
consider their net-zero options,
navigating a way forwards can be
tricky: how can you identify high calibre
organisations that meet your criteria?
Once you identify them, how can you be
sure that they are upholding the ESG
principles they purport to follow? If there
are complex supply chains involved, how
can you assess ethical risks that might be
buried two or three layers down?
When reviewing your investment and
giving portfolios with these questions
in mind, how can you ensure that
you don’t inadvertently neutralise or
cancel the positive impact in one area
by also supporting companies that
are not engaged with net zero and/or
are not ESG-compliant?! An obvious
example would be to ‘cancel’ the positive
impact of a grant to an environmental
care organisation with an investment
elsewhere in your portfolio in a non-
renewable energy like coal.
You can mitigate the risk by conducting
an impact audit on your wider
investment strategy. At Stewardship, we
have adopted the Bull’s Eye framework
developed by Access, the Foundation for Social Investment.
It asks the primary question – what is the positive impact
that our investments seek to generate?
Tiers are then created in relation to the
decided impact, with the most important
goal at the centre. In Stewardship’s case
this is what we call ‘Kingdom Impact’,
that is investments in organisations
devoted to supporting and building
Christian ministry and resourcing
the Church. We also support ‘Broader
Impact Investments’ that support the
UN’s SDGs as these are compatible with
our Christian ethos of being the best
stewards we can be with the planet’s
resources. Once you have established
your ESG investment goals, the longer-
term aim is then to move as many of
your investments into the inner two
rings of the Bull’s Eye as possible. [For
more details, see Achieving Impact with
the Donor-Advised Fund Model written
by our CFO Janie Oliver in the Winter
edition of Philanthropy Impact].
MEANINGFUL IMPACT
In conclusion, while navigating the net-
zero challenge is daunting, three steps
will empower you to create meaningful
impact in this area: firstly, take the
time and advice you need to determine
a ‘green’ strategy for your investments
and grants that will allow you to create
impact in the areas that matter to you
most; then ensure you audit your existing
portfolio in line with that strategy and
put in place an action plan for progress;
and finally, take advantage of the
flexibility and efficiency of the
DAF model to deliver on your net-zero
goals.
By Nicola Johnson, Stewardship