About Recoverable Grants

Like traditional grants, recoverable grants provide critical funding to further a charitable purpose. But unlike traditional grants, recoverable grants have the potential to be returned back to your DAF account, which can enable you to re-grant funds in the future.

While recoverable grants may return capital back to your DAF account, they differ from financial investments (like TBF’s Impact Pool) in that the funds temporarily leave your account like a grant. Moreover, their primary purpose is to help you achieve your impact goals, whereas TBF’s Investment Pools are focused on helping you preserve and grow your assets for long-term charitable giving.

Because there is an expectation of repayment, recoverable grants are most suitable for impact-driven organizations with business models that generate income. Our recoverable grant portfolios are composed of financial intermediaries like Community Development Financial Institutions (CDFIs) and funds that invest in enterprises and projects (think small businesses/entrepreneurs, clean energy projects, affordable housing developers, etc.) and have experience returning capital to investors. 

Recoverable grants may have higher financial risk than traditional investments. Unlike publicly-traded securities, there is no secondary market for recoverable grants. Repayment is not secured by assets or guarantees but will be contingent on the success of the investments the recipient makes with recoverable grant funds and the recipient’s overall financial health.

All organizations in our Recoverable Grant Portfolios have gone through a robust vetting process conducted by our partner Social Finance, and we believe there is strong likelihood of repayment based on their track records returning capital to investors, experienced management teams, and historical financial health and performance. Nonetheless, a strong track record does not guarantee the ability to repay future investments or recoverable grants.

If a donor does not recover any or some of their recoverable grant, the unrecovered amount would be treated in the same way as a traditional grant. Any amount that is recovered would be returned to the donor’s account and available to the donor to redeploy as a traditional or recoverable grant.

Recoverable grants help you maximize your impact objectives for your DAF by allowing you to deploy capital for impact in Greater Boston while still preserving assets for future grantmaking. While our Recoverable Grant Portfolios are expected to return capital, they do not provide a return on capital. We encourage every donor to think about how recoverable grants fit as part of a spectrum of charitable tools that includes grants (full loss of principal, high impact) and traditional investment pools (market-rate returns, no to low impact). We illustrate an example below of how recoverable grants might allow donors to deploy more capital for impact now. 

Let’s take an example

Donor A and Donor B have $100 DAFs.

• Donor A allocates the entirety of interest earned from their DAF (assuming annual returns of 7%, net of fees) to traditional grants each year. After seven years, Donor A will have deployed $49 for impact through grants ($7 grant x 7 years) and have maintained a DAF balance of $100.

• Donor B makes the same amount in grant allocations each year as Donor A, and allocates 10% of their DAF balance to a 6-year recoverable grant in Year 1. After seven years, Donor B will have deployed $59 to impact through grants and a recoverable grant (($7 grant x 7 years) + $10 recoverable grant).

While Donor B will have a slightly lower DAF balance at the end of Year 7 ($95 vs. $100 for Donor A), they will have deployed 20% more assets toward impact cumulatively, and preserved 95% of DAF assets over a seven year period.