Promote Giving is shaking up the world of philanthropic investment. This innovative model, spearheaded by Ares Management’s Joel Holsinger, allows investment managers to donate a percentage of their performance fees (the “promote”) directly to charities, promising millions in new capital for nonprofits without impacting investor returns. It’s a game-changer for long-term charitable funding in a tough economic climate.
In the complex world of finance, few innovations truly bridge the gap between profit and purpose. Yet, Joel Holsinger, a partner and co-head of alternative credit at Ares Management Corp., is doing just that with his new initiative: Promote Giving. This groundbreaking model, launched recently, seeks to funnel millions in charitable donations by integrating philanthropy directly into the investment management fee structure. It’s a fresh perspective for investors looking to make a difference while still prioritizing financial growth.
Holsinger’s journey to creating Promote Giving began with a transformative trip to India in 2019. While serving on the board of the global health nonprofit PATH, he witnessed a tuberculosis prevention program in Dharavi, India’s largest slum. The program was effective, but its expansion was severely limited by a fundamental issue: a lack of funding. This firsthand experience solidified his belief that more needed to be done to support charities on a grand scale.
“I wanted to do something that has purpose,” Holsinger shared with The Associated Press. “I wanted a charitable tie-in to whatever I do.” This conviction led him to develop a novel approach within Ares Management.
The Mechanics of Promote Giving: A Dual Mandate for Returns and Impact
Upon his return from India, Holsinger established a new line of investment funds, the Pathfinder family of funds. Under this model, Ares Management committed to donating at least 5% of its performance fee—the “promote”—to charities. This initial venture proved highly successful, raising over $10 billion in investments and pledging more than $40 million to charity by June.
Building on this success, Holsinger expanded the concept into the broader Promote Giving initiative. This initiative encourages other investment managers to adopt the same model. It has already launched with funds from nine firms, including Ares Management, Pantheon, and Pretium, representing approximately $35 billion in assets. Projections indicate this could generate up to $250 million in charitable donations over the next decade.
Distinguishing Promote Giving from Other Socially Responsible Investments
For investors, understanding how Promote Giving differs from other socially conscious investment strategies like ESG investing or impact investing is crucial.
- ESG Investing: This approach incorporates environmental, social, and governance factors into business decisions, influencing how companies operate and how investors screen their portfolios. You can learn more about ESG investing from the Associated Press.
- Impact Investing: Here, investors actively seek a measurable social or environmental return alongside a financial one.
Promote Giving, in contrast, maintains a laser focus on maximizing financial returns for investors first and foremost. “We’re not doing anything that looks at lower returns,” Holsinger explained. “It’s basically just a dual mandate: if we do good on returns for our institutional investors, we will also drive returns that go directly to charity.” The charitable donation is generated solely from the manager’s fees and only after investors receive their promised returns. This structure offers a compelling proposition for those who want to contribute to social good without compromising their investment goals.
Addressing a Critical Funding Gap for Nonprofits
The launch of Promote Giving comes at a particularly challenging time for charities, especially those involved in international work. The current funding landscape is precarious, marked by significant disruptions such as the dismantling of the U.S. Agency for International Development and massive cuts to foreign aid. These changes have ripple effects across the nonprofit sector, leading to increased competition for grants even for organizations not directly reliant on government funding. For deeper context on this, the Associated Press has covered the impact of foreign aid cuts.
Kammerle Schneider, PATH’s chief global health programs officer, highlighted the fragility of public health systems in the current environment. She emphasized the urgent need for “agile catalytic capital” that initiatives like Promote Giving can provide. “There is nothing that is going to replace U.S. government funding,” Schneider noted, viewing Promote Giving as a hopeful step towards new private donors stepping in to solve specific public health challenges more effectively.
Sal Khan, the visionary founder and CEO of Khan Academy, echoed these sentiments. He pointed out that the consistent income stream provided by Promote Giving could free nonprofits from the constant pressure of fundraising, allowing them to dedicate more resources and time to their core charitable missions. For Khan Academy, which offers free learning resources globally, this stable funding could be transformative.
“It’s actually been hard for us to raise the philanthropy needed for us to have the maximum impact globally,” Khan stated. Despite widespread interest and a robust knowledge base, the nonprofit often struggles with the substantial costs associated with software development, localization, and building educational infrastructure in various countries. Khan sees Promote Giving as a potential major funder to help them “literally educate anyone in the world.”
The Win-Win for Businesses and a Vision for Broader Impact
Holsinger’s ambitions for Promote Giving extend beyond the investment management industry. He envisions a future where more industries adopt similar mechanisms, making charitable donations an inherent part of their business models. He draws a parallel to the Giving Pledge, where billionaires commit to donating a significant portion of their wealth.
This integration of purpose with profit isn’t just altruistic; it’s good business. Kate Stobbe, director of corporate insights at Chief Executives for Corporate Purpose (CECP), highlighted research showing that companies with mission statements extending beyond mere profit generation often experience higher revenue growth and deliver superior returns on investment.
“Having initiatives around corporate purpose help employees feel a connection to something bigger,” Stobbe explained. This sense of shared purpose significantly boosts worker engagement and productivity, while also aiding companies in recruitment and retention efforts. Such initiatives, she emphasized, genuinely “contribute to that bottom line.”
Holsinger believes this “win-win” scenario is key to solving many of the world’s most pressing issues. The solutions often exist, but the capital to implement them does not. “We just need to drive more capital to these nonprofits and to these charities that are doing amazing work every day,” he affirmed. “We’re trying to build that model that drives impact through charitable dollars.”
Investor Takeaway: A Model for Sustainable Philanthropy
For investors on onlytrustedinfo.com, Promote Giving presents an intriguing model. It allows institutional investors to participate in significant philanthropic efforts without sacrificing their financial objectives. By aligning with firms that have adopted this model, investors can indirectly contribute to vital global causes, knowing their capital is managed with a dual mandate: superior financial performance and direct charitable impact. This could represent a sustainable, long-term avenue for integrating social responsibility into core investment strategies, offering a powerful alternative to traditional charitable giving.
