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Fidelity Charitable Adds New Impact Investing Options

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Fidelity Charitable reported Tuesday that its donor-advised fund account holders had increased the assets invested for impact to $856 million at the end of the first quarter, a 110% year-over-year increase.

The firm also announced that it has added more impact investing options for DAF account holders.

Impact investors are part of the surging trend of purposefully making investments that help achieve certain social and environmental benefits while generating financial returns.

In a new study of affluent, charitably minded investors, Fidelity found that 77% of millennial and 72% of Gen X donors had made some type of impact investment, compared with only 30% of baby boomers and older donors who had done so.

The study said this generation gap implied a huge influx of investors who will prioritize a mission-based approach.

The report was based on a survey conducted earlier this year by the independent research firm W5 of 475 consumers with investable assets of at least $100,000 who claimed charitable giving on their most recent tax returns or donated at least $10,000 to charity.

Investors in the study said they were most interested in investing in public companies that had good environmental or social practices, with 58% indicating they would invest directly and 56% through exchange-traded funds or mutual funds.

Forty-eight percent showed a strong interest in investing in small businesses and startups that focus on social or environmental benefits, 45% in similarly focused venture capital or private funds and 42% in making loans to charitable organizations.

The study also found a robust correlation between a donor’s attitude toward charitable giving and the likelihood that they would make an impact investment. Seventy-nine percent of respondents who rated charitable giving as very important to them also said they engaged in impact investing.

Financial advisors have an important role to play with clients interested in impact investing. Forty-three percent of study participants with a financial advisor reported having had a conversation with that advisor about impact investing, most of the time initiated by the advisor.

Advisors can raise awareness of impact investing and provide counsel to those interested in this type of investing. According to the report, less experienced investors are less likely to have discussed impact investing with an advisor.

Data from the survey showed that only 51% of the women had ever made an impact investment, compared with 69% of the men. Similarly, women were much less familiar with the concept than men.

The study ascribed this gap to higher adoption of impact investing among the most experienced investors. Forty-eight percent of men surveyed described themselves as very experienced investors, versus only 30% of women.

New Investor Options

In its statement, Fidelity Charitable said it had broadened its impact investment capabilities, providing more options for its donors to recommend impact investments within their giving account.

The Sustainable U.S. Index Pool, the Sustainable International Index Pool and the Environmental Impact Access Pool are available to all Fidelity Charitable donors, regardless of their giving account balance.

Account holders in the Private Donor Group at Fidelity Charitable can recommend a recoverable grant, which is made with an expectation of repayment, often tied to specific outcomes or milestones. By recommending a recoverable grant, a donor can support charitable organizations that have a mechanism to repay — allowing recycling of these funds for future grants.

One recipient of recoverable grants is Calvert Impact Capital, a community development organization that lends funds to organizations working in low-income communities.

Account holders in the Private Donor Group or those using the firm’s Charitable Investment Advisor Program can recommend investments in a broader set of sustainable mutual funds, ETFs and fixed-income products. Some of these donors may also consider recommending investments in impact-oriented private equity or venture capital funds.

— Check out Impact Investing Takes Flight With Big Investors on ThinkAdvisor.


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