Donor-advised funds make it easy for charitable donors to set aside money they can later distribute to nonprofits or mission-aligned for-profit companies. A small but growing number of donors are now realizing they can also potentially make an impact on the front end depending on where they park their donor-advised fund assets prior to distribution.

Cornerstone Capital Group, a New York-based RIA firm that focuses on impact investing and sustainability, is starting to see some of this stepped-up interest.

Its public-charity clients that host donor-advised funds are hearing their donors say they want to see more options for impact investing, says Katherine Pease, a managing director and head of impact strategy for Cornerstone Capital Group. Some of the firm’s individual investor clients have asked about including an impact lens in their donor-advised funds.

“Individuals and families with charitable intent are increasingly realizing how much more impact they can be having with DAFs if their DAF assets are being invested for impact as well as for grants,” said Pease, lead author on Cornerstone’s report “Mobilizing Donor Advised Funds for Impact Investing.” It’s also a way for people to mesh their investing activities with their values, she noted.

Overall, though, impact investing in donor-advised funds remains “a very underutilized tool,” she said. “There’s over $100 billion in DAF assets, most of which is not being invested with impact intentionality.”

She’s trying to change this by helping clients (donor-advised fund hosts and users) understand their options and figure out their impact thesis.

The best strategies to use for impact are where there are natural payer opportunities, said Pease. These opportunities often focus on conservation and economic development, she said, such as investing in affordable housing projects that will collect rent or providing low-cost loans that’ll be repaid with interest. This capital can then be recycled to help support donors’ future philanthropic or impact priorities, she said.

According to Pease, donor-advised-fund capital can be deployed in eight different types of vehicles to achieve financial and impact goals. They include direct investments in social enterprises, specialized pooled funds, funds for specialized initiatives, loan guarantees, endowments invested for broad social impact, endowments invested for specific impact priorities, advisor managed funds and corporate donor-advised funds.

A donor’s impact priorities should be matched with the right vehicle, she said. Someone with a specific mission goal (such as helping women in a local community) might be most comfortable making a direct investment in a social enterprise. A donor with a broad interest in climate change may be happier investing in a pooled fund.

So far, Pease has mostly seen loan guarantees used around economic development in low-income communities that lack access to capital. Loan guarantees can be used to underwrite the risk and make the investment safer for traditional investors, she said.

She suggests that donors try to articulate more specifically what they’re looking to achieve, such as make loans or investments to support their regional community. “That’s a clearer ask than saying, ‘Hey, do you have an impact investing strategy,’” she said. “You’ll sort of cut out the static, the noise.”

If donors’ impact priorities are regional, she suggests that they or their financial advisors start talking to community foundations to see if they’re set up to do impact investing. Some community foundations can help with grant making and impact investing outside of the region, she said. If community foundations don’t turn out to be the right fit, she said, look to other donor-advised fund hosts including ImpactAssets, Tides Foundation and RSF Social Finance.

“They’re designed to do higher-touch impacting investing—as are the community foundations—more so than the big investment houses,” she said.

To measure impact in general, Cornerstone Capital Group looks at ESG (environmental, social and governance) metrics and uses its Access Impact Framework. The impact of a private enterprise could be evaluated by examining many measurable factors such as the number of individuals served and their increase in income, she noted.

“If people could see what is possible and how they are leaving all this impact sitting on the table, by not using the investments of their DAFs for impact,” said Pease, “I think it would be a game changer.”