Family Values and Impact

Over recent months, the investing community has witnessed a hearty debate regarding the role and purpose of investing in opportunities which express personal values while addressing social issues and environmental challenges. Placed under the broad banner of ESG and Impact investing, many conflate what is a rich and diverse area of investment practice into a single, often misunderstood approach to investing—in the process losing an appreciation of the incredible power of connecting intergenerational family values with capital investment strategies reflecting those values.

Some view ‘ESG’ (Environmental, Social, and Governance) investing as a risk mitigation tool to assess how “off balance sheet” factors such as climate crisis or social issues may affect a company (usually public market) or an investment’s capacity to deliver financial performance. In contrast, ‘Impact Investing’ is the investment of capital in strategies—usually private market—which seek to generate diverse levels of financial returns together with the generation of measurable, positive social and environmental impacts.

We will leave the debate regarding the positive and negative attributes of each approach to others and instead focus on a different though related point:

All capital and all companies have impact.

Capital has long been understood to fall across a diverse continuum of asset classes, strategies, and instruments, each of which has its own risk, return, liquidity and, yes, impact profile. Whether or not you embrace the specific label of impact investor, by virtue of deploying capital into markets you contribute fuel to those capital markets which then enable entrepreneurs to launch new ventures, companies to capitalize upon new opportunities and diverse and varied stakeholders to potentially benefit from your investment in one strategy versus another. What matters is not whether you are an impact investor but the degree to which you are managing the impact of your capital in alignment with the values which you or your family seeks to promote in the world. Make no mistake about it: Your capital shows up in the world—in markets, in communities and in eco-systems—the consideration is the degree to which your capital advances not simply your financial interests, but the full, blended value your family aspires to create in the world as a family.

While true of all investors—individual or institutional—this reality is especially relevant for multi-generational families. As the years roll by and generations evolve it is all too easy for the discussion of wealth management to devolve to one of simple financial investing and returns:

• How much will I inherit?
• How do I minimize tax exposure?
• How much will be left for generations to come? 

While critically important questions to consider, focusing on them alone runs a risk that the annual family meeting will resemble a shareholder conference more than a family gathering. 

While questions regarding the tools and structures of capital are important, what matters just as much (if not more!) are questions of that capital’s fundamental purpose—the task of capital. Too often we allow ourselves to confuse effective wealth management with responsible fulfillment of fiduciary duty when that duty is not only financial, but familial, providing not simply for the material benefits of family members, but their personal, spiritual, and psychological benefit. At its core, an understanding of capital’s purpose is an exercise in dialogue and discussion between generations and among family members exploring deep considerations of why, of meaning and of a family’s expression of the values that make them unique from every other family in the world.

In this way, families come to understand more regarding what they believe; what they hold true and how they show up in the world should reflect not simply who they hope to be but who individual family members are becoming and how family members as a whole manifest a vision of family consistent with their greatest and best aspirations.  

Understood in this light, impact investing is a segue for families to travel a deeper and critically important path, taking them from success to significance. Our job as family advisors is to act as a guide in that process—helping carry some of the load at the same time we work with clients to navigate the best path forward. Reporting on financial performance and the markets is an important part of our family meetings—but working with our clients to tease out the latest developments of family members’ own journey through life, of understanding more of their evolving experience of wealth and power of choice positions our clients to be not only wealthy but wise in their understanding of relationships among family members and between the family and the world in which we all live.

Understood in this way, impact investing is not something we do to others—the number of jobs we create or acres we set aside—but as a form of mutual impact, of personal development and family stewardship. It is through this process of connecting with our family members in discussions about more than money that we can invest to optimize the full, blended value of a family’s personal resources and shared assets.

Impact investing positions families to invest in solutions to the challenges that keep them up at night and the passions that get them out of bed in the morning!