What is Impact Investing?
Impact investing appears to be all the rage with the tech crowd and has been growing in popularity for the last 2-3 years. Whether or not it is the right strategy for you completely depends on what your goals are and what you have accumulated so far.
Just to be clear: Impact investing is not the same as “Charitable Giving,” which is when you endow or gift something to a charity, non-profit, or private foundation.
Impact Investing, according to Michael Drexler and Abigail Noble of the World Economic Forum, is “an investment approach intentionally seeking to create both financial return and positive social impact that is actively measured.”
That sounds great because the goal is to both positively impact a community and also make money.
People have differing approaches to legacy planning and whether impact investing should be a part of it. Why?
Some people believe that you’re either in it to maximize profits (traditional investing) or you are in it to do good (charitable giving). See this 2012 article from Stanford Social Innovation, it makes an interesting case for the benefits of traditional investing and charitable giving while maintaining that there is a place for impact investing.
However, others believe, that many of the world’s most pressing needs require real capital to effect change. Also, they trust the corporations that they are investing in. They trust them to run a tight ship, since they will be running it as a business. And they trust them to carry out their social purpose since they have to answer to the shareholder(s) (presumably you).
If this is something that interests you, many wealth managers specialize in impact investment strategy. They can build you a diversified portfolio based on the causes that you care about. Just know that there is more than one way to leave a legacy. You can build lasting wealth that also positively impacts the world around you and that conveys your values to future generations.
An estate planning attorney should work with your strategy, once it is created. An estate planning attorney (or an asset protection attorney) can create the vehicles through which you invest your money. This person can also create the structure to reduce potential liability or risks in the strategy.
— Have questions?
Shreya Ley is a Seattle estate planning attorney. She is also the co-founder of LayRoots along with her husband, Colin.