The IPO wave isn't (just) about billionaires

and

The IPO wave isn't (just) about billionairesThe real climate money is in the long tail
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The IPO wave isn't (just) about billionaires
The real climate money is in the long tail
Susan Su
Jun 11 

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Warning: this could radicalize you.
United Way Worldwide is the world’s largest privately funded nonprofit, serving 48 million people annually. Back in 1990, it was also the biggest — receiving $3.3B in contributions that year.
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Its massive scale was built almost entirely on automated corporate payroll deductions. It was an early ‘subscription economy’ mover that enabled it to become one of the biggest financial umbrellas for other charitable orgs of the time.
But today, United Way is #12 on the leaderboard, and its total dollar count has actually shrunk.
Instead, today 11 of the top 20 charities in the US by contribution are Donor Advised Funds, with Fidelity Charitable logging $15.9B in contributions in 2024 alone. And all before 2026’s blowout IPO season.
And while it’s easy to file this under billionaire problems, it’s more relevant than you might think. The median DAF at Fidelity holds $23,500. At the very long tail, these are regular person vehicles, not just UHNW luxuries, and that makes the rest of this story everyone’s opportunity.
In this essay, we’ll cover:
A brief history of DAFs and why the real innovation was financialization
How DAFs are a regulatory free pass
The real cost of DAFs to everyday members of society (hint: they’re not free)
The data hidden behind the headline 20% payout number
DAFs are a dark money ATM
The IPO wave will generate half a million little DAFs, not just a few big ones
What climate donors can do (and why we’re the perfect fit 👋)
Financialization drove a DAF explosion (what did you expect)?
The first DAF in the US was created by the New York Community Trust in 1931. For the next 60 years, these vehicles plodded along, staying small and local, with community foundations serving as the main sponsors.
In the early 1990s, the asset managers caught on.
Fidelity launched its charitable arm in 1991, Vanguard followed in 1997, and Schwab in 1999. In less than 10 years, Fidelity’s annual contributions exceeded $1B, and by 2014, it was the largest US charity by yearly contributions, dwarfing organizations that had been building their donor bases since the Victorian age.
The rise of DAFs in the 1990s is an illustrative example of the exponentially amplifying and accelerating impact of financialization. We’ve seen it play out elsewhere and while it usually has a negative connotation — as in housing where financialization has driven up prices and risk or in personal lending where it has aggravated inequality — one thing it’s really good at is increasing market participation.
Financial firms like Fidelity and Vanguard succeeded at breaking through where community foundations had been holding steady for decades thanks to a combination of structural advantages and genuine innovation:
1. They made it frictionless to convert illiquid assets that had appreciated. 63% of contributions to Fidelity Charitable in 2023 were non-cash, largely publicly traded securities and a little bit of private stock and crypto. Because Fidelity was already the custodian for the donor’s brokerage account, moving appreciated stock into the charitable account was a few clicks that conveniently could erase a bunch of capital gains. The New York Community Trust, which originated the first DAF, had no brokerage book to convert from. It was a charity offering a service to its community, while Fidelity was a sophisticated asset manager bolting a tax advantaged product onto assets it already held.
2. Productization, baby. Fidelity standardized a bespoke service into a cheap, no-minimum product that promised total fees of ~1% of your balance — a lot less than running a private foundation — plus an immediate deduction and none of the foundation’s board or Form 990 overhead. They lowered the entry price of “having your own philanthropic vehicle” by an order of magnitude and made philanthropy retail.
3. Distribution rules everything around us. Want to know why Anthropic is hiring so many “forward deployed engineers” these days? Distribution > all else. Financial firms had a built-in install base of millions of brokerage clients plus the independent financial-advisor channel, where advisors could add a DAF without losing the assets out of the parent’s investment products. This produced enormous scale. Commercial-national DAF assets grew 134% between 2012 and 2016, from $19.06B to $44.68B.
So what is all that money doing?
A lot of it is just sitting there, growing the fee base for sponsors like Fidelity, Schwab, Goldman and Vanguard — well known names in finance who collectively manage over $36.8B in DAF contributions in 2024 alone, and therefore operate 4 of the top 5 best funded US charities in any given year. DAF sponsors are on track to take in almost half of all individual giving in the United States. DAF totals are well over $326B and growing 30% YoY, and that’s before SpaceX and Anthropic.
DAFs are regulatory free pass on the way in, and on the way up
With no payout requirements and high anonymity, DAFs enjoy a regulatory free-pass unparalleled by operating charities and family foundations. With a DAF, donors realize an immediate tax deduction, but don’t face any rules around disbursement minimums or timelines. And you can put almost anything in there, from public company stock to private company equity to real estate to hedge fund interests. The transfer is untaxed and the growth is untaxed (and yes, this is a fabulously effective way to avoid cap gains, say, before an IPO).
This sounds shady, but is a DAF bad if it funds good? As usual, the answer is nuanced.
Once assets go into a DAF, the contribution is irrevocable. The donor has legally surrendered ownership and can advise as to how it’s used, but can’t get further personal financial benefit or return. So the charitable contribution is real in that sense. And in aggregate, DAFs have a strong track record on payout — with annual payout estimates exceeding 20% every year, as compared with the 8% payout rate for private foundations.
But when we double click on the numbers, we see a slightly different story. Because there’s no legal payout requirement, DAF money can sit there for years, or forever, growing in volume and driving fee revenue for sponsors. For example, Fidelity Charitable itself charges a modest administrative fee, but kicks back incredible revenue to its parent investment company, which manages the mutual funds that soak up the vast majority of DAF dollars as they’re sitting undeployed. Influence Watch and others have estimated that Fidelity Investments DAF-attributable fees generate revenue on the order of $1.5B over a five year period (there’s some keiretsu for you!). This is a small slice of Fidelity’s overall revenue, but still a nice kicker for what might otherwise have been a marketing cost function.
Ok, but so what if the sponsor or its parent firm makes money? Isn’t more charitable dollars just increasing the pie for everyone?
This misses a core mechanism underlying charities and our tax system.
DAFs aren’t free – at least not to you and me
Charitable donations aren’t just “free money” given by the wealthy. They’re heavily subsidized by the government through foregone tax revenue. The reform-oriented Institute for Policy Studies estimates that every $1 in DAF carries a taxpayer subsidy of $0.74, including $0.37 in foregone income tax, $0.20 in lost cap gains tax, and $0.17 in foregone estate tax.
This isn’t exclusive to DAFs though. Any charitable dollar that’s tax-deducted gets to bypass these layers of federal taxation. But the difference is in the return.
When a donor gives money to an operating charity like a food bank or an early childhood program, the public gets the benefit of that money immediately. The taxpayer subsidized the donation, but the money otherwise went straight to the greater good.
But when a donor puts money into a DAF, they receive the exact same $0.74 tax subsidy today without any legal requirement for the DAF to ever distribute that money to a working charity. The funds can sit invested in the account for decades — or forever — generating ever-growing fees for parent firms, while the public waits for the charitable benefit they already paid for.
But DAFs pay out 20%??
DAFs are estimated to pay out around 20% annually, as compared with foundations at around 8%. This is good, right?
In reality, a lot of this payout is driven by hyperactive single issue funds, and none of it is regulated — a problem we’ll dig into further later in this essay. Single issue charities, like those that are religiously affiliated or hospital funds, dominate DAF giving and hit 35% payout in 2023 — with funds like Jewish Communal Fund of New York and National Christian Foundation disbursing billions in payout. This is awesome, and there’s nothing wrong with a passionate community willing to put their money where their heart is.
But for every head, there’s a long tail. The DAF Research Collaborative analyzed over 50K accounts across an 8-year period and found a median annual payout of just 11%. And the tail gets really thin, fast. 35% of accounts paid out under 5%, including 29% that gave zero grants in a given year, and 14% that paid out nothing at all across a 4-year analysis period. A separate study focused on giving in 2020 found that 57% of accounts paid out less than 5% and 35% made no grants at all.*
So the public is paying for DAFs, but DAFs aren’t quite paying us back yet.
The upcoming IPOs will mint half a million new DAFs
As we head into the IPO bonanza of H2, there’s going to be an explosion of wealth creation among those who didn’t come up as “professional rich people.” I’m optimistic about this cohort’s potential to relate to the average person because not so long ago they used to be an average person themselves, until a fateful recruiter call changed their lives forever.
However, AI billionaires are not the only reason why this matters. The average DAF account has $91,600 worth of assets. The median account, however, is even smaller. At Fidelity Charitable, the median balance is around $23,500, and 51% of all accounts hold under $25,000. In affluent urban centers, that is a lot of you and me, and our neighbors and the people in line at the grocery store. The typical DAF holder is not a dynasty. They’re someone who had a good year, or is about to.
The gap between the average and the median account balances means that most of this “warehoused” money is sitting in accounts owned by regular people, and it means the upcoming IPO wave won’t just create a handful of new mega philanthropists but also hundreds of thousands of average donors. 
There are currently 3.56 million DAF accounts in the US. A single $25,000 account is admittedly limited in its impact. But a thousand of them is $25M. A hundred thousand* of them is $2.5B.
*While the number of direct employees is in the tens of thousands, there are lots of smaller IPOs happening this year, plus all the investors, bankers, lawyers, accountants, audit firms and more that will see at least a decent bonus from this year’s activities.
DAFs are already a dark money ATM
At their best, DAFs are a way to do good at varying scale and speed, but their real impact depends on how you define “good.”
DonorsTrust and Donors Capital Fund are DAF sponsors that have been called the dark money ATM of the anti-climate, anti-science movement. They work like any other DAF and that’s precisely why they work so well here: a donor contributes and the fund regrants under its own name, which means the original donor disappears. These two DAFs alone have handled $479M in donations that could not be traced back to its source, with measurable impact. Peer reviewed research published in the journal Climatic Change found that the share of anti-climate funding running through these two funds alone rose from 3.3% in 2003 to 23.7% by 2010.
This isn’t just limited to purpose built ideological funds like DonorsTrust though. Since 2020, Fidelity, Schwab, and Vanguard have helped donors route at least $171M to the organizations behind Project 2025. The anti-climate contingent understood early on that DAFs are the most efficient way to fund a cause quietly and at scale, and set about building dedicated infrastructure to do it.
The good news is that the tool takes no sides, but it is up to us to use it. Today, there’s no pro-climate equivalent of DonorsTrust or Donors Capital Fund, and only about 3% of all U.S. charitable donations go toward all environmental causes, including animal welfare, conservation and climate. By contrast, religious causes received 28% of all donations in 2020.
Against this backdrop, it’s easy to become cynical about philanthropy — and worryingly, the darkest cynics I know are those who work in the philanthropic sector, those who have “seen too much” — but there’s still a lot we can do.
Well-intentioned donors can have a massive impact
I believe there are many well-intentioned people looking to make a real difference.
Here are a few things donors can do to make sure their intentions become reality:
1. Set a payout floor and a spend-down horizon, pre-committed in writing, such as granting 10%+ annually, or fully deploying within 7 years.
2. Choose your sponsor carefully. There are mission-aligned sponsor that will keep fees and assets inside the charitable ecosystem rather than feeding it over to their sister for-profit arm. If you use a commercial sponsor, you can still direct investment into low fee or values-aligned pools and — crucially, everything comes back to #1. If you grant out fast enough, your fees will never exceed your impact.
3. Use DAF money for what it’s uniquely good at: converting illiquid or appreciated assets (ahem, pre-IPO stock) into deployable charitable capital — then deploy it.
...Including a massive *climate impact
And I’d be remiss if I didn’t explicitly call out the massive opportunity for DAFs to have a positive climate impact.
There are a few ways DAFs can be uniquely well-suited to the climate impact case:
1. As catalytic / first-loss equity 
A recoverable grant is a grant that returns to the donor’s charitable account if impact and financial milestones are hit, after which the capital can be recycled into other charitable activity, creating a multiplier on the original dollar. Used as first-loss or junior equity, this de-risks financing to enable commercial capital to come in on top. Prime Coalition has done pioneering work here, and I’m proud to serve as a member of their Mission Alignment Committee, but we’re not the only ones anymore!
2. Catalytic debt for FOAKs and other
First-of-a-kind projects are too capital-intensive and risky for venture equity but too unproven (and risky!) for project finance. Concessionary loans and recoverable grants from DAF capital can play a critical role at the subordinated/mezzanine layer, and pair with guarantees to get senior lenders in the door. Again, Prime Coalition continues pushing the edge here, but Los Angeles Cleantech Incubator (LACI), Enduring Planet, Elemental and others are also doing important work in this area.
3. Pooled / fund of funds
Funds like Social Finance’s Impact First Fund are a single, professionally managed, open-ended fund that individual DAFs invest into via recoverable grants. The fund pools that capital and deploys it as a fund of funds into a portfolio of emerging climate and impact funds rather than single deals. This enables an individual DAF holder to get diligence, diversification, and access to deals they could never source or vet alone, with returns cycling back to the originating accounts to be redeployed.
4. Funding the unfundable
DAF dollars are arguably best spent where there are no returns to attract any other flavor of capital: policy and regulatory advocacy (shout-out to the Carbon Business Council’s and SilverLining’s important work here), open source climate data and tooling, community based adaptation, ultra early-stage research, ecosystem infrastructure and pure conservation. This is the opposite of catalytic capital. It’s not about derisking a deal to make it legible to capital markets but about funding public goods that market capitalism has no direct answer for.
—
As we enter IPO season, and many of us are wracked with FOMO, it’s a good moment to embrace gratitude. Even if we don’t have 9 figures in our DAF (yet?), most of us sitting here with these ideas do have a lot — we have the ability to influence how some of that capital moves by sharing our thinking, and even more critically and as recently outlined by Nan Ransohoff, we have the ability to shore up or invent the structures that will unlock capital and get it flowing to the right places.
When I started Climate Money my thesis was that money ruled everything around us, that solving climate change would create enormous wealth, and that we needed more experts at the intersection of both. These things are all still true, but as AI ushers in a new era of mega abundance (in the upside case!), we have a renewed responsibility to think about our impact on current and future life.
Climate is an especially great fit for DAF resources because of its unique ability to absorb a blended capital stack — its infinite “money stomachs.” Just like my 4 year old’s capacity for dessert, climate’s answer to DAFs is this:
“We have room for that.” :)
I’ll be writing more on this topic in the weeks to come, so please subscribe to catch the next one.
Special thanks to Elaine Walsh Carney for turning me on to this topic. 
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