Philanthropic Investment: people and the planet

Developments in science, environmental concerns and the rise of social media have created greater awareness of human activity and the ensuing damages we effect around the world. Along with this greater understanding, comes a more responsible investor who takes specific interest in how investments may be used for the benefit of the planet.

Today investors are more questioning. They want to know where their money is going and how it is going to be spent. Returns are of course, still key, but with the rise of new industries and green technology, there are many more opportunities today to ensure both profit and protection of the environment. And that is what the more astute investor is looking for.

Philanthropy as a strategy

There are several ways to put your goals into practice when investing for a better world – from simply donating to a charity, or investing directly in a venture with a social mission. However, there is a balance you need to strike between financial risk and creating the desired social or environmental impact. And there are several ways you can do this.

Venture philanthropy

Venture philanthropy specifically focuses on social causes and may not necessarily be concerned with making a profit. These ventures are looking to get good works up and running with the intended beneficial effects as quickly as possible. Venture philanthropists are not investing for the long term, preferring to see the effects of their vision within 3 to 6 years. This type of investing is purely about bringing a socially or environmentally focussed venture to fruition.

Impact Investing

On the other hand, impact investing looks for wider contribution across both social and environmental issues with the clear goal of generating a financial return while making constructive change. There is a definite sea-change in the approach of the modern investor:

  • With impact investing there is no time frame. Investors expect measurements and reports along with financial returns – but tend to remain patient on long-term project results as long as they are ultimately worthwhile.
  • The intentional use of investment capital to create positive social and environmental outcomes sees more investors investing in a way that makes their money work for them, while also working for betterment in an area of their choice.
  • Supporting small business start-ups is one way of effecting change in communities. If sufficiently persuaded by the premise, an investor will contribute on the expectation that the business will succeed and pay dividends. Investments can also be made directly into employment, education, healthcare, sustainable agriculture, affordable housing, and clean energy.
  • In this way, impact investing is experiencing explosive growth. Assets invested have grown from $50 billion in 2009 to expectations of more than $500 by 2019. Impact investing offers an alternative to those who reject the notion that investing for profit and giving money to social causes cannot be combined. The traditional donation route is often flawed whereas impact investing leverages the power of the markets to create change.
  • When investing is company-specific, investors may take into account a company’s environmental and social responsibility policies and practices. In particular, attitude to social issues and contributions to reducing carbon footprint is evaluated. Investing in a company that invests in more than just profits, is a very popular form of impact investing.

Trends and changes

Philanthropists and businesspeople alike believe that investing in this way can address some of the world’s most challenging problems. While a shortage of this type of opportunity and poor measurement practices are sometimes highlighted, leveraging private capital for social good is trending.

Over 40 trillion dollars will be transferred from baby-boomers to millennials in the next couple of decades – and this new breed of investors sees the world differently. Social impact investing is a priority for these younger investors, and impact opportunities are emerging as a promising new asset class for these socially conscious investors.

Young entrepreneurs who amass wealth quickly from the new tech revolution are also keen to engage with more impactful investment. They no longer consider charitable donations enough to change things radically. And there is a greater demand for transparency and accountability since the credit crunch of 2008. Specific objectives, due diligence and good corporate governance are the new watchwords of a younger, upwardly-mobile and outwardly-looking generation.

Growing your wealth, changing the world

At Foster Wealth, we pay great attention to clients’ interests. All investment requires insight and a broad understanding of the markets. You can develop a personalised portfolio that not only looks to meet your life goals, but also your desire to make a positive contribution to worthy causes or valuable social programmes. While ongoing developments in science and technology create more opportunities for this popular approach – the financial knowledge, experience and personal attention of a professional advisor are still key to making your decisions work effectively.

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