iSelect was not conceived as an impact investment fund. When we started the idea was (and continues to be) to find the best and brightest entrepreneurs outside of Silicon Valley and make lots of small bets investing to support them in their new ventures. When the winners emerge, double down on those. This is an investment strategy, not altruism at play.
It just happens to be the case that in St. Louis the best and brightest are working on revolutionizing agriculture and healthcare. In Kansas City they are staring the next generation of animal health companies. Some of the brightest minds in soil health and agronomics come from Southern Illinois, near Champagne. What we should have known all along is that generally when a really smart person dedicates their life to solving a problem they are working to have an impact. About a year ago we realized that our portfolio looks an awful like an impact fund.
The concept of “impact investing” has gained a lot of traction in recent years.
Originally associated with environmental and sustainability causes, the concept has increasingly been expanding its tend to include diversity issues, social impact, healthcare and more. In general, it’s about investing in companies and organizations with the intention to generate a meaningful, beneficial impact alongside a positive financial return.
This can include everything from backing companies that have pledged to reduce their carbon emissions, placing funds in industries such as renewable energy, or supporting those working to improve access to sustainable agriculture and more. Impact investing can involve many different asset classes, including equities, fixed income, private equity, venture capital and more.
But that’s just the beginning.
I like to refer to this idea as “investing with impact,” rather than “impact investing.” Investing with impact is the way we pass on not just wealth but our core values to the next generation.
There are many different ways to make a difference through your investments. Maybe you’re trying to pay attention to the long-term interests of your family, to make sure that they have the financial stability that they need after you’re gone.
That’s investing with impact.
Or maybe you’re worried about long-term risk in the stock market and illiquidity risk, that you’ll outlive your money.
The answer to that is investing with impact.
Maybe you have young children in your family and you’re afraid that they’re not developing the same kind of work ethic that you did at their age, that modern society is holding them back. So, you set up an investment structure that allows them to shadow you and learn from what you do directly.
That’s investing with impact.
A new definition
Because “impact” is just a word.
But by saying “invest with impact” we’re able to cover all angles of the Venn diagram — both those who mean investment as a way to make a difference in the world, and those that are trying to have impact in their own lives and the lives of their families. Doing well by doing good isn’t exclusively the realm of social causes.
This overlap is important, and investors should be taking notice.
According to BNP Paribas, approximately 70% of high net worth individuals say they are worried about their legacies, and this percentage is only expected to grow as more and more of the Baby Boomer generation fades into retirement. Over the next 30 to 40 years, an estimated $30 trillion worth of financial and non-financial assets is expected to pass down from the Boomers to their heirs in Gen X and the Millennial generations.
This transfer isn’t going to happen in a straight line, with advisors changing names on accounts and calling it a day.
There’s more at play.
For the Boomers, it’s very important that they figure out what to do next with their wealth. It’s their highest priority. That doesn’t mean they’re going to give it all away; they are much more interested in transferring it to their kids in a way that comprehensive and achieves greater goals. This means the process needs to be more involved than what past generations did with their wealth.
Because investing with impact is all encompassing. It’s about investing for your children. It’s about investing for your legacy. It’s about investing for society as a whole.
iSelect is dedicated to helping advisors and clients who are seeking to make their own impacts. Interested? Contact us to learn more.