How Donor Advised Funds can create more good through Social Impact Investment

Earlier this year, Big Society Capital convened a Donor Advised Fund (DAF) Advisory Council made up of leading DAFs in the UK to establish a collaborative partnership for DAFs.


Written by

The Advisory Council is a group that shares the same vision in enabling more donors to use some of their philanthropic capital for social good through social impact investments. We came together to raise the profile of social impact investment across DAFs, donors and referral partners, and to lower barriers for DAFs to participate in social investments. 

Donor Advised Funds: A Practitioners Guide to Social Impact Investing was launched in late November at a London Guildhall event with DAFs, professional advisers, donors, social impact investment managers and charities and social enterprises. The report called for DAFs, donors and referral partners such as philanthropy advisors, wealth and professional advisers into DAFs to:

  1. Learn about social impact investment
  2. Educate and inform donors on social impact investment
  3. Explore whether social impact investment is right for you and your client
  4. Think about governance structures and business processes
  5. Think beyond high net worth donors

The event kicked off with Sir Harvey McGrath, a donor and social investor, who talked about his own experience of allocating money from his DAF account to make social impact investments. His funds allocated to social impact investing were recycled many times back into his charitable giving account to enable further investing and giving.

“I initially made a £1.5m allocation for social investment through my DAF account. Since then, given a low loss ratio on the lending, the funds have been recycled many times, so that my initial investment has enabled a total commitment of £6.6m in more than 400 deals.” Sir Harvey McGrath, donor & social investor

Alexander Hoare, another donor and social investor, and winner of the City Philanthropy Beacon Award also shared his experience. Alexander has made a number of direct loans to support charities and social enterprises through his DAF account. One of these loans was to Adoption UK, a leading charity providing support, awareness and understanding for those parenting or supporting children who cannot live with their birth parents. CEO Sue Armstrong explained the loan was made at a time when adoption rates in the UK were at record lows and revenues from delivering adoption support services were down. The loan gave Adoption UK some breathing space whilst it diversified its income streams and enable it to continue providing invaluable support to adoptive families.

Ed Sigel, Managing Director at Big Issue Invest talked about his experience of raising investment from DAFs and other investors. This type of funds made it possible for Big Issue Invest to on-lend to a diverse mix of socially driven organisations to deliver impact in the UK. Fair for You, an ethical credit provider set up by Angela Clements, is one of these social enterprises. Fair for You has been funded by a mix of grant and social impact investment to enable its growth. Social impact investment that offers patient, risk tolerant and concessionary capital is crucial for many social enterprises at their early growth stage, making social investment that come from philanthropists such as those made available from DAF so invaluable.

"I commend all of you for all of the work that you're doing for growing the Donor Advised Funds market in the UK. This should absolutely be encouraged." – Sir Harvey McGrath