From idle cash to active impact

Why charitable capital shouldn’t sit still — and what you can do instead

Many donors assume the impact begins only once grants are made. In practice, a significant portion of capital held in donor advised funds (DAFs), trusts or foundations is left in cash. While this may feel like a safe choice, it is increasingly an unproductive one — both financially and in terms of positive impact.

With interest rates now trending downward and inflation continuing to reduce the real value of money, the opportunity cost of holding cash is rising. Donors and foundations have more options than ever to align their capital with their values, even before it is granted.

Cash is safe, but it’s not serving

In 2022 and 2023, with interest rates at elevated levels, holding cash was defensible. Today, the picture is changing. In the UK, interest rates are already below their recent peak, and further cuts are expected. This reduces the return on cash and increases the appeal of alternatives such as fixed income — particularly for those with a short- to medium-term investment horizon.

Importantly, holding capital in cash means it is not supporting any social or environmental outcomes. In a time of significant global challenges, this matters. The capital in DAFs and foundations can do more than wait — it can be used as a tool for change.

Total portfolio impact: aligning capital with purpose

Impact investing is the practice of directing capital towards measurable environmental and social outcomes, alongside financial returns. Increasingly, this is not limited to equities or specialist funds.

The idea of total portfolio impact is gaining ground — ensuring all assets, including cash, reflect the donor’s mission and values. This approach increases coherence across a giving strategy and helps ensure that capital is working continuously, not intermittently.

Since 2019, we have only held investments that set out to create a meaningful positive environmental and/or social return. This combination of both investments and grants doing good helps us achieve total portfolio impact.

Rennie Hoare, Hoares Bank

In the UK, regulation is evolving to support this shift. The Financial Conduct Authority’s Sustainability Disclosure Requirements (SDR) aims to provide greater clarity for investors and accountability for fund managers. These developments are improving confidence and expanding the universe of investable impact options.

The opportunity in fixed income

Impact doesn’t have to come at the expense of stability. With the right structures and level of diversification, steady flows are possible. Some asset classes, like fixed income, are built around predictable cash flows and valuations that are tied to market changes that are typically gradual and anticipated, like interest rate changes, rather than sudden events or changes in sentiment.

Fixed income markets — government, corporate, and supranational bonds — play a central role in global finance. They are also a growing space for impact. More than $6 trillion of bonds are now labelled green, social, or sustainability-linked, supporting areas such as renewable energy, affordable housing, and access to healthcare. 1

These aren’t niche or experimental products. They form part of a growing mainstream market, with improved transparency, regulatory oversight, and measurement standards.

For investors seeking lower-risk options that remain liquid and accessible for future grant-making, impact-aligned fixed income can be a compelling alternative to cash.

You can read more about the impact in fixed income in our article by Impact Manager Archie Cage.

Working with Tribe

Tribe has extensive experience supporting DAFs, charitable trusts and purpose-driven investors. Our approach combines financial discipline with clear impact objectives, using our proprietary ImpactDNA™ framework to align portfolios with the outcomes our clients care about most.

This includes sourcing high-quality, measurable investments across asset classes — not just avoiding harm, but actively supporting positive change.

The world is changing, and so is the role of philanthropic capital. With interest rates declining and labelled bond markets maturing, donors have more tools than ever to ensure their capital is both protected and purposeful.

For those holding cash in DAFs or charitable structures, now is an opportune time to review. Aligning investment and giving strategies can unlock greater impact, strengthen financial sustainability, and reflect a broader commitment to change.

To learn more about integrating impact into your investment objectives – get in touch.