Charitable donors are exploring alternate ways to give to their favorite causes, according to Sarah Gelfand, vice president for social impact programs at Fidelity Charitable.
Recoverable grants are just one example of the ways more money can be available for donors to support charitable organizations.
“I expect to see more donors experimenting with impact investing tools, like recoverable grants, to leverage more of their charitable assets and help nonprofits scale their impact,” Gelfand said. “More donors will choose to invest a portion of their charitable assets in strategies that reflect their values and philanthropic goals.”
Recoverable grants are similar to a loan in that they allow donors to support organizations of their choice, have the grant returned to the donor and then allow the donor to regrant it to another organization. Sometimes the donor also receives a return on the money, Gelfand said.
Organizations that provide direct services to clients can be the recipient of recoverable grants, as well as organizations that act as middlemen between donor and grantee.
“Recoverable grants give the donor flexibility and the ability to make an impact. They do not need hundreds of thousands of dollars to donate," Gelfand said. She adds that Fidelity Charitable has handled grants as small as $15,000, although the average is $250,000.
Recoverable grants also can be used as bridge financing while the nonprofit waits for a further infusion of funds. “Nonprofits are looking for new ways to raise funds,” Gelfand added. “Over the last few years impact investing has continued to grow and donors and nonprofits are finding these kinds of avenues to provide money in different ways.”
Among the philanthropic trends to watch going forward will be the growing influence of millennials as their wealth—and donation—levels increase, said Pamela Norley, president of Fidelity Charitable
The 2016 tax reform also is influencing giving, said Tony Oommen, Fidelity Charitable planning consultant.
“The timing of charitable giving has become even more important, since it can make the difference between being able to claim a tax deduction for charitable giving or not," Oommen said in a statement. "Vehicles like donor-advised funds will play a bigger role as donors will accelerate charitable donations into the right year for tax deduction purposes, but still support the charities they care about in a steady stream of grants year-over-year.”