Navigating the 2023 Tax Season: Unveiling Strategies for Employee Stock Options
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Philanthropy has been at the heart of wealth management since the practice began. It is the alignment of your wealth and values, and a chance to invest back into the communities that have been integral to your success. Philanthropy is opportunity, the opportunity to positively shape the world with few limitations to your vision, and the opportunity for new generations to follow in your footsteps so that they may do the same. However, we often have a narrow view of what philanthropy can look like. Traditionally, philanthropists look to establish or invest in foundations, funds and scholarships, where they can directly advise and support worthy causes. While these are great philanthropic examples, a conversation with your advisor will tell you that there are other paths where you can put your investments to work on behalf of your charitable mission.

Philanthropy through investing is all about how you put your assets to work and through what lens you make portfolio decisions. In this case, looking through an impact lens could mean screening for environmental, social, and governance (ESG) factors as you seek opportunities like program- and mission-related investments (PRIs and MRIs). ESG is becoming an increasingly popular metric by which to measure investment decisions, as there are ever-increasing implications for, and awareness of, corporate-social responsibility. Key investments also provide opportunities within newer sectors, and we’ve seen that impact investing can have significant influence on corporate behavior such as: encouraging more diversification on boards and encouraging company growth towards sustainability. The increased presence of ESG considerations in the market has also advanced the tools we have to measure their effectiveness. Advisors, like those at Whittier Trust, can now demonstrate the impact your investments will have in tandem with their fundamental investing analysis.

What does this analysis look like? Environmental metrics include how a company sources its raw materials, their commitment to recycling, the effects of a company’s manufacturing practices on the environment and even supply chain sustainability and its relation to natural resources. You could also think about a company’s social responsibility before investing in them. How do they treat their employees and customers? Do they report high levels of satisfaction? Does the company have low client and employee turnover? Are they working actively or passively against values you hold? Are there socially conscious sectors in which you want to encourage growth? For example, if you’re concerned about climate change, you could seek investments in exciting new green technologies. Lastly there’s governance. How does management score on integrity, accountability to investors, diversity, and community engagement?

When investing through an impact lens, remember that you are an important piece in these considerations. You have your own values and goals, both philanthropically and financially, and it is important to seek out solutions specifically tailored to those values and objectives. A well customized portfolio of ESG recommendations should actually enhance returns. Companies that score high on the ESG scale are mitigating risks, reducing taxes and ensuring long-term sustainability. It is essential to communicate with your advisor about your investment goals in order to maintain maximum flexibility for your charitable giving vehicle as you also seek to continue growing your assets. Consider impact-screened equities, fixed income, MRIs and PRIs and venture capital along with other private investments. With your philanthropic goals in mind, your advisors should stay away from recommending mutual funds and other investing opportunities over which you won’t have any control.

While there are a multitude of benefits to pursuing impact investing, you have to determine if it is the right path forward for you and your assets. Talk to your advisor about your philanthropic goals, and how impact investing could possibly be incorporated into your investment strategy.