Impact Investing

“If the head has been making investments and the heart giving it away, it’s time to unite the head and heart and make money more” – The Case Foundation

The following is a brief summary of the panel discussion entitled Families Embracing the Future at The Campden North American Family Office Conference held in Boston this past November. The moderator was Northland Wealth Management’s CEO, Arthur Salzer. Arthur’s panellists were Justin Rockefeller and Antonio Ermirio de Moraes Neto.

An estimated 60% of families lose their wealth by the second generation and 90% by the third. Many multi-generational families are exploring what they can do in order to improve these odds by uniting families around values and positive legacies, thereby more closely involving family members in responsible long-term investing. Over the past few years, “impact investing” has gained in awareness and popularity with families of significant wealth. 

Impact investing is when investments are made into companies , organizations, and funds with the intention to generate measurable social and/or environmental impact alongside a financial return. The key is that the impact gets measured along with the financial component, because, as the saying goes, “what gets measured gets done”.

Mr. Moraes,  27 years old, and a member of the Brazilian family that the industrial conglomerate, Votorantim, believes that impact investing can be one of the crucial components to generate financial wealth for families. Done prudently, impact investing can deliver the required financial return but at the same time have the potential to excite the passion and dedication of the next generation.  By encouraging the participation  of the next generation impact investing attempts to create an environment  conducive to fostering the commitment necessary    for maintaining the wealth of the family.   

Antonio shared his thoughts on why he was drawn to impact investing and how it  lead him to form his firm, Vox Capital.

“Being a 4th generation member of a large family business in Brazil, I was since young inspired by the example of great entrepreneurs and innovators. As my own path, it became absolutely clear, when I was 16, that my purpose in life is to reduce social inequalities in the world. And nothing better to do this than an innovative and scalable business model, with a new mindset to serve society”.

Vox is targeting investment in companies that serve Brazil’s household with  a monthly income of less than $1,500 USD – this demographic represents  nearly 160 million people or 85% of Brazil’s population. Vox is investing in companies that operate in the healthcare, education and the housing sectors. So far, it has made 4 private equity investments and 5 convertible debt investments. While the track record of Vox is just under 4 years, it has been generating more than acceptable double digit returns since its founding.

Mr. Rockefeller, at 36 is a member of the Board of Trustees for the Rockefeller Brothers Fund – an international philanthropic organization. The fund  was formed in 1940 in New York City by Mr. Rockerfeller’s grandfather and great uncles.   The Rockefeller Brothers Fund drew some large media attention recently as it divested of its oil & gas investments this past fall – this is a monumental change as the Rockefeller wealth came largely due to its ownership of Standard Oil. Standard Oil  was the largest oil refiner and first multinational company in the world during the early 1900s. Before its divestiture, Standard Oil eventually gained control of nearly 90 percent of theUnited States’ oil production.

However, it is Justin’s new venture, The ImPact (www.impact.org), which he co-founded, to which Mr. Rockerfeller is dedicating much of his attention.

“The ImPact is a non-profit/NGO membership organization comprised of investors who pledge to make impact investments, track their social impact and financial performance, and share that data with others who have made The Pact. The mission of The ImPact is to increase the probability and pace of solving social problems by improving the flow of capital to businesses that have measurable social impact.”

While every family’s motivations, operational context and goals are unique, impact investing may not fit every family. Therefore, rather than prescribing a single approach, there are many approaches available. Using groups such as The Impact, or investing in private equity funds that specialize in this area may be a start.   

Rest assured that impact investing will be an area that Northland Wealth will be exploring further and sharing its findings as to how it may benefit your family.