Impact investing could offer the next generation a way to get involved in managing family wealth.

Impact Investing for Generational Success

Impact Investing for Generational Success

by Bill High

How engaged is your next generation in your family wealth discussion?

For many families the answer would be not at all. In fact, many families haven’t even told their children or grandchildren about their net worth. It’s often a taboo subject.

But those who succeed generationally still often have a difficult time engaging their children in the discussion. Many next generation children view the conversation as too tied to financial statements and investment allocations.

 

Impact Investing to Link Generations?

Here’s an interesting twist. Alice Ross, in an article that published as part of a Financial Times special report last year, writes that “Impact investing is new, dynamic and at the frontier of investment.”  She notes that it’s becoming a trend in the family office space with about 1/3 of family offices now engaged in it.

Impact investing has received lots of attention in the financial world and beyond in recent months. The Global Impact Investing Network defines this type of investing as aiming to achieve positive, measurable social and environmental impact while still delivering a financial return.

Companies raising capital from impact investors face the unique demands of delivering progress on impact objectives as well as a return on investment.

Ross points out that impact investing is an effective way to bring generations together because of the socially minded nature of the upcoming generation. It’s a conversation that can bring together the generations on the subject of return—both social and investment returns.

Part of the discussion must include the emphasis on what constitutes “return.” For instance, at what level does a social return allow for lower financial returns?

(As a parallel for the nonprofit world, I’ve argued that ministries need to provide their donor “investors” with metrics on the measurable impact of their donations. Impact that goes beyond just the inspirational story or two.)

Whether this investing trend diverts funds from traditional philanthropic giving also remains to be seen.

The impact investing conversation is still early but worthy of pursuit—especially for those seeking success that spans the generations.

 

 

Photo by Mario Gogh on Unsplash

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Published September 19, 2019

Topics: Family Business | Family Legacy

Charitable GivingFamily WealthGenerationsImpactInvestment

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