Learn how your investments can better align with your philanthropic visions.
Across the United States, this time of year heralds a period of reflection and a chance to consider making charitable gifts—a practice that has inspired the term “Giving Season.” Many families are gathering to discuss the causes they wish to support and how to extend the impact of their capital.
Giving Season can be a great opportunity for families to articulate, share and model their values, particularly across generations.
However, philanthropy isn’t the only place where you can express your values with your capital. Many of the most popular giving themes from our clients can be amplified through a suite of sustainable investments.1 Sustainable investing is an umbrella term we use to describe investing approaches that incorporate financial as well as social and environmental objectives.
Some of the most popular giving themes include education, climate change and social justice, all of which have sustainable investment opportunities. Here are some examples of how you can amplify your philanthropic goals while pursuing market-rate financial returns.
Education
Do you give to your alma mater, a scholarship fund or some other educational cause? You also might want to consider investing in market-rate bonds that finance student loans and educational facilities. You might even be eligible to receive tax credits if you purchase these securities within your own state of residence.2
The mechanics of supporting student loans are relatively straightforward. Each year, students and their families look for ways to make up any shortfalls between their financial aid packages and their tuition costs—a challenge that has only intensified as rising fees have outstripped the pace of inflation. In fact, nearly 30–40% of all undergraduate students take out loans, making student loan debt (which now totals USD 1.6 trillion3) the third-largest consumer debt category after mortgages and auto loans. Banks and other entities finance these loans, and then sell the loans into the bond market so they can free up space on their balance sheets to continue originating loans for others.
Similarly, schools often tap into the bond market to help pay for capital improvements (such as new dorms, classrooms and other educational facilities). These bonds are often issued through local nonprofits, development authorities and public agencies, and take the form of tax-exempt municipal (muni) offerings. If you live in a state that provides dedicated tax advantages for investors buying local muni bonds, you may be able to buy these tax-exempt bonds and simultaneously support educational institutions in your own community.
Environment
Has your charitable giving to environmental causes increased in recent years? If you make donations to nonprofits that help to mitigate climate change and promote biodiversity, you might want to invest in public companies that support the same causes but also provide compelling financial returns.
The Inflation Reduction Act, passed in August 2022, allocated over $370 billion to energy and climate investments, which is creating tailwinds for environmental investments across the country4. Some of these investments will land on the supply side of the equation, supporting technologies that harness wind and solar power more effectively. Others will be designed to meet growing consumer demand for less carbon-intensive technologies (such as electric vehicles, efficient appliances and “smart” buildings).
Historically, companies that participated in the development of clean energy technologies were relatively small and early stage, so the only way to invest in them was through private equity. Now—with the industry maturing rapidly—some of the strongest performers are publicly listed.
For families focused on protecting intergenerational wealth, the energy transition represents a particularly attractive opportunity to pursue growth in their equity portfolios. Although these types of investments can be volatile, they can also represent durable, intergenerational megatrends that we expect to see play out over an extended time horizon.
Inclusivity
One of the fastest-growing focuses for charitable giving is social justice, which became a focal point for philanthropy in May 2020, as protests swirled in the United States over police brutality and institutionalized racism. Since then, increasing awareness of the need for inclusivity in the workplace has begun to catalyse change across corporate America.
If you support social justice through your philanthropy, you may want to consider funding more diverse investment managers—as well as managers who prioritize diversity. For example, some investment managers are pushing their investees to publicly disclose the diversity of their staff, and others are filing shareholder resolutions that demand their investees undergo comprehensive Racial Equity Audits.
In many cases, these efforts are being launched through the lens of financial materiality. The demographics of America’s consumer base are changing rapidly, and some investors say that companies won’t be able to meet the needs of that changing consumer base if they fail to hire employees who reflect those same shifts.
Over time, diverse managers have delivered notably strong results. Across all asset classes, diverse managers performed similar to or better than majority-owned peers.5, 6
A season to reflect
Like seasonal giving, sustainable investing can give your family an opportunity to discuss and express your values through your capital. Best of all, these investments can simultaneously work to support your values and your financial goals: Historical returns from sustainable investing show that these opportunities can match market returns—and in some cases, even generate alpha.5
As a family, you can also monitor how closely companies match your own philanthropic aims: New tools are emerging that will allow you to track sustainable investment metrics over time—much in the same way that financial reporting requires the disclosure of auditable, historical results, year over year. While this market development is still new, it is being driven by consumer demand and regulatory initiatives, creating an environment in which it may be easier than ever to align your charitable and financial goals.
Reach out to your J.P. Morgan team to explore all the ways your investments might help support your charitable goals.
1Sustainable investments that still target the same financial returns as their corresponding benchmarks.
2This material is distributed with the understanding that it is not rendering accounting, legal or tax advice. Consult your legal or tax advisor concerning such matters. For a complete discussion of risks associated with any investment, please review offering memorandum and speak with your J.P. Morgan Advisor. JPMorgan Chase & Co. and its subsidiaries do not render accounting, legal or tax advice.
3Household Debt and Credit Report, Center for Microeconomic Data, Federal Reserve Bank of New York. Data as of June 2024.
4Building a Clean Energy Economy: A guidebook to the Inflation Reduction Act’s Investments, in Clean Energy and Climate Action, cleanenergy.gov, January 2023.
5Bella Private Markets and Knight Foundation, Knight Diversity of Asset Managers Research Series: Industry, September 2021.
6NAIC, Examining the Returns 2023, February 2024.
