Philanthropic Investing To Double The Impact
Whatever strategy or vehicle the family selects, they’ll want to invest the funds so that they can grow until they’re used for giving. And those funds can be put into impact investments that also support a family’s goals—for instance, into companies that support diversity, equality, education, health care, clean energy, the environment or workforce development. Families can employ values-aligned investing strategies; environmental, social and governance (ESG) strategies; thematic options; or catalytic impact investing, which focuses on higher-risk or lower-return investments meant to have an outsized impact.
Find A Sustainable Approach
We encourage families to discuss their interest in partnering with organizations and to define when and how the family will commit to multi-year gifting. Take families’ work with nonprofits. Right now, we’re seeing non-profit organizations struggle to stay up and running as they deal with a greater demand for services coupled with increased financial strain. Families so inclined can make sure their impact work continues when they partner with a non-profit by committing multi-year grants.
But efforts like these require a sustainable approach. To ensure long-term success and a lasting impact, families and their advisors should proactively define things like foundation governance, including the foundation board’s bylaws, due diligence and evaluation processes, multi-year grant criteria and leadership succession plans.
Then there is the matter of succession planning for those who will take over the family’s philanthropic efforts. We know many families strive to pass down the value of generosity to the next generations, and shared family philanthropy is an opportunity to accomplish that. We encourage families to engage children from a young age in volunteering and learning about the power of philanthropy.
All too often, we see wealthy individuals who are incredibly passionate about the charities in their lives or those who have set up a foundation but have not taken the time to integrate their families into the process. When the families engage younger members early on, it allows those younger members to learn from their elders and practice before they take the reins. It’s critical to multigenerational sustainability.
With 2020 behind us, we must remember that one person and one donation—no matter the size—cannot solve all of society’s problems. And while there's no one-size-fits-all approach to giving, integrating consistent and sustainable philanthropic considerations into financial planning is one way to create change moving forward. We remain encouraged to see so many inclined to use their wealth in ways that positively impact the community and world. To ensure a lasting impact, families should work with an advisor to choose the giving option that is best for them.
Jill Shipley is head of family governance and education at Tiedemann Advisors LLC.