High-Impact Giving: Grow a Company. Build a Nation. Leave a Legacy.
By Tom Scriven | Mon Dec 02 2019
Prior to joining RENEW, I helped launch a firm which evaluated poverty alleviation initiatives in terms of their social return on investment. The analysis measured the increased wages and other measurable benefits that beneficiaries realized and the government spending saved per dollar spent on the evaluated program. After evaluating dozens of organizations and causes and looking at third-party assessments of many more, I concluded that the most effective way to tackle poverty is through investing in SMEs in frontier markets. I was impressed by studies showing that, for every dollar invested in an SME in a frontier market, the local economy realized 12 dollars, with benefits reaching multiple stakeholders, including employees and their families, other businesses, and taxpayers, as beneficiaries depended less on public assistance . Few other programs could claim such 'bang for the donor buck', especially when factoring in the potential for recycling of returns from SME investments to other impact investments or high-impact donations.
This realization prompted me to join RENEW full-time and to invest both from my and my wife's personal assets and from our donor-advised fund (DAF). In 2017, we used funds from our DAF to make an impact investment and received a tax deduction to support a company and the local economy in Ethiopia. As our DAF receives funds back from this investment, we are able to then recommend that the funds be redirected to other investments or causes we care about. The use of our DAF allowed us to invest our philanthropic dollars into organizations that were supporting poverty alleviation with RENEW.
RENEW believes that the most effective way to move a country from poverty and dependence to prosperity is to help small and medium enterprises (SMEs) grow and, in the process, unlock their potential as primary engines of job creation and economic growth. We seek to invest in great companies that struggle to access what they need to grow and provide full and productive employment and decent work for all. Our strategy is to build great management and companies that in turn will support their employees and the community. RENEW has developed and implemented a unique blended finance model from our offices in Ethiopia and Uganda to pursue this strategy in partnership with the Impact Angel Network and the U.S. and Canadian governments.
As we enter the 2019 holiday season, many look back at the previous year and reflect on what they are grateful for - be it friends, family, successes, experiences, or other blessings. A few years ago, it was this holiday-centric, philanthropic mindset that created #GivingTuesday - “a global generosity movement unleashing the power of people and organizations to transform their communities and the world… and inspiring hundreds of millions of people to give, collaborate, and celebrate generosity.”
This year, RENEW wants to challenge the #GivingTuesday donors of the world to think a little differently about some of their philanthropy - why not invest your charitable dollars in a way that results in far reaching and sustainable impact for poverty alleviation?
Accredited, entrepreneurial givers can invest with RENEW from a donor-advised fund to make a dent in global poverty with the potential of earning a return on their charitable capital.
What is a Donor-Advised Fund?
A donor-advised fund, commonly referred to as a DAF, is a philanthropic vehicle administered by a public charity. Think of it like an investment account dedicated to supporting your charitable contributions over time.
As a donor, you can recommend where the charitable dollars will be focused and can also recommend your favorite charities or causes, which will then receive support from the fund, either in the form of grants or investments.
How does a DAF lessen my tax burden?
Contributions to a DAF result in an immediate tax deduction for those itemizing deductions. Any financial returns realized through a DAF investment simply return to the fund, tax-free, and can then be re-invested or donated through the DAF. DAFs can also eliminate capital gains taxes and reduce marginal income taxes on donated appreciated stock .
How do I go about creating a DAF?
Select a DAF manager.
Donate cash, publicly traded securities, or other illiquid assets to fund the DAF.
Receive a tax deduction immediately for your charitable contribution to the fund (if you itemize).
Working with your DAF manager, you can choose a strategy for growing your fund.
Recommend a target – such as a charity or impact investment – for your philanthropic investment.
At this time, DAF investing with RENEW is available only to investors who are ‘accredited’. (SEC definition).
 One notable study is the Small Enterprise Assistance Fund’s report, “From Poverty to Prosperity: Understanding the Impact of Investing in Small and Medium Enterprises” published in October 2007 summarizing the results of a survey of 50 SME investments.
 The information contained in this brief is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.