Impact investing: Donor-advised funds

Kathy Merchant is president and chief executive of the Greater Cincinnati Foundation, one of some 700 community foundations in the US. Like most community foundations it offers a donor-advised fund product – pools in which local individuals and families invest as part of their federal tax-deductible charitable-giving allowance. The funds are invested in balanced portfolios, and the donors can ask the community foundation to make grants to non-profit organizations when they wish. Four years ago, Merchant started looking at social-impact investing as part of the foundation’s overall community investment strategy. "The idea was that you can make a grant, and then the money is gone, but we have a lot of creative and entrepreneurial people in Cincinnati, so we thought it would be attractive to look for opportunities where they could perhaps make a loan or invest in a local enterprise."