In today’s complex economic landscape, nonprofit leaders are under increasing pressure to innovate their fundraising strategies. After all, the nonprofit sector is growing year after year, so your organization needs to leverage whichever revenue sources it can to stand out in an increasingly saturated market.
That’s why it’s so important for nonprofits to understand financial trends. Using these insights, you’ll be able to capitalize on new opportunities. For instance, recent federal incentives—like transferable and advanced manufacturing tax credits—are further motivating corporations to fund projects with social and environmental value.
With that said, let’s explore how nonprofits can use funding models like impact investing, DAFs, and social bonds to improve financial resilience and social outcomes.
What’s Driving the Shift Toward New Funding Models?
Multiple larger social shifts have contributed to new funding models gaining traction across the nonprofit sector. Like any new revenue stream, understanding where the demand for these funding models comes from is the first step in integrating them into your strategy. Some key aspects to note include:
- Economic uncertainty and tightening grant budgets. Widespread social changes, like inflation and reduced government grant funding, have put historically reliable funding in flux. This uncertainty has prompted nonprofits to look elsewhere for critical funds for their missions.
- Rise in hybrid nonprofit-business models. Some organizations are merging their nonprofit missions with business models to diversify revenue. For example, a nonprofit focused on workforce development might launch a fee-based training academy that both advances its mission and generates earned income to fund future programs.
- Public and private investors seeking ESG (Environment, Social, and Governance)-aligned opportunities. As ESG becomes more prevalent in the business world, nonprofits strategically seek aligned opportunities to secure more funds. For instance, a foundation might prioritize grants and investments in nonprofits that meet environmental benchmarks, aligning their capital deployment with broader ESG goals.
Emerging Financial Trends and Opportunities for Nonprofits
1.) The Rise of Impact Investing in the Nonprofit Sector
Impact investing involves funding ventures that generate both measurable social returns and financial gains. This market is on the rise following the popularization of ESG initiatives—in fact, recent reports show that there are over $1.5 trillion in impact investing assets worldwide.
Nonprofits can leverage this massive financial opportunity by:
- Launching social enterprises (e.g., a nonprofit coffee shop funding youth programs). This approach allows nonprofits to become investable entities by generating both earned income and measurable impact, aligning directly with the dual-return focus of impact investing.
- Accepting program-related investments (PRIs) from donor institutions. These low-interest or forgivable loans can help nonprofits launch or scale programs with measurable impact.
- Building impact measurement frameworks. According to UpMetrics, an impact framework is “a visual and mental map that helps your team think about impact as something you can measure and leverage.” These frameworks allow you to demonstrate tangible results, which can attract impact investors.
New impact investing opportunities are becoming available daily. To quickly secure new funding, nonprofits can monitor financial publications, follow reputable nonprofit finance thought leaders on LinkedIn, and attend sector-specific webinars and conferences.
2.) The Growth of Donor-Advised Funds
Few financial opportunities have impacted the nonprofit sector like donor-advised funds (DAFs) have. According to FreeWill, DAFs are “a philanthropic financial vehicle in which donors contribute money to an investment fund managed by a sponsoring organization.”
In 2024, donor-advised fund (DAF) assets rose 9.9% to $251.52 billion. It’s easy to see why: DAFs allow nonprofits to accept flexible, high-value gifts from committed philanthropists, while donors can both contribute to causes and get a tax deduction.
To maximize DAF giving, nonprofits should:
- Become DAF-recognized with major financial institutions, which involves registering your nonprofit with platforms like Fidelity Charitable, Schwab Charitable, and Vanguard Charitable to ensure donors can easily select your organization when recommending grants.
- Host DAF-focused giving campaigns by educating your donor base about DAFs and promoting DAF giving during lucrative campaigns, like GivingTuesday.
- Steward DAF donors with personalized impact reporting by sending tailored updates that link their grants to specific outcomes with stories, data, and visuals.
- Use giving platforms that support DAF donations which make it easy for donors to recommend grants directly from their DAF accounts while visiting your website.
As an emerging fundraising source, DAFs are still establishing credibility, which means your nonprofit must be prepared with information to build donor confidence. Work with nonprofit financial advisors to understand the nuances of DAFs and how to talk about them with donors.
3.) Explosive Growth in Social Bond Issuance
Social bonds are debt instruments that raise funds for projects with measurable social outcomes. Compared to 2023, social bond issuance jumped 30% worldwide to $142 billion in 2024 and stood at $52 billion by May 2025.
Social bonds allow your nonprofit to participate in public and private infrastructure projects, fortifying your community connections while fundraising. To get started with social bonds, nonprofits should:
- Align initiatives with common social bond categories, such as housing, food security, and education.
- Collect output and outcome data to attract investors—for instance, an output might be 10,000 meals distributed to families over the course of three months, whereas an outcome is 85% of recipient families reporting reduced food insecurity and improved meal consistency.
- Build partnerships with community development financial institutions (CDFIs) to co-develop projects, secure underwriting support, or gain access to social bond markets that prioritize local impact.
- Explore eligibility for government programs, like the resources allocated by the Inflation Reduction Act for environmentally friendly projects. A quick note: These resources typically come in the form of tax credits, but since nonprofits lack tax liability, they can receive equivalent cash payments for qualifying projects (e.g., installing solar panels on a facility).
Before investing time and funds in social bonds, ensure your nonprofit is a good fit and has the resources to pursue them effectively. For instance, a new, small nonprofit in a less populated area might have less access to local community resources and want to focus on building a loyal donor base first.
As financial technology and new funding streams become more accessible to nonprofits and donors alike, pursuing as many revenue streams as possible can seem tempting. However, don’t overload your strategy. After all, different revenue streams are better suited for different nonprofits.
Instead, research innovative options and work with a nonprofit financial advisor to determine which options offer the most value for your unique circumstances. Over time, stay on top of changes in the economy and political landscape as a whole that can open up new chances to secure funding.
