When former investment manager Ron Cordes started a charitable foundation in 2007, he got frustrated because he could only “do good” when he was actively giving the money away to needy causes. Then Cordes discovered impact investing. “We became passionate about sustainability,” he told Reuters.
At first, the Cordes Foundation allocated 20% of its $10 million endowment to private equity investments aimed to make a beneficial social or environmental impact. Today, all of the foundation’s assets are invested in projects that promote the family’s values, including ethical fashion brands and sustainable supply chains. “There are real investing opportunities with impact. It’s not about disguised philanthropy,” said Cordes, who made his fortune primarily after he sold his firm AssetMark (AMK.N) in 2006.
For impact investors like Cordes, whose foundation is based in Maryland, financial gains are critical, but social returns are equally important. More than a quarter of family foundations are now engaged in impact investing in some form, according to a 2019 Global Family Office report from UBS and Campden Research. The average wealth of the families UBS surveyed was $1.2 billion. Climate change was the top cause supported by family offices, according to UBS, with health and clean water ranking high.
With so much capital involved, family offices – which can be managed privately or within a brokerage firm – rank with pension funds and institutional investors in the impact world. They might even be more important because they have the funds as well as the flexibility to make innovative investing decisions. “If some family is into renewable energy, they don’t have to ask 15 people where they can invest,” said Shawn Lesser, co-founder and managing partner of Big Path Capital, an impact investing firm. The push to make investment decisions with an impact is driven by a younger generation, but that does not mean it is exclusively a millennial pursuit.
Jennifer Kenning, co-founder and CEO of Align Impact, an investment management firm, said her oldest investor is 99 and she has other clients driving investments who are in their 80s. “We have investors across four generations,” Kenning said. The key for baby boomers and the generation that precedes them is to make sure everyone is speaking the same language. “If you show them they can make money, they start to see we’re talking about the same thing,” Kenning said.
For younger family members like Cordes (who technically is a baby boomer at 60), what is key is aligning investing with the values of the family. For Cordes, that has involved the Grassroots Business Fund and Women’s World Banking, non-profits that focus on developing economies. “A lot of foundations have a grant side where they give to environmental causes, but on the asset side, they are invested in big oil. Families are saying that doesn’t make any sense,” said Michael Whelchel, the other co-founder and managing partner of Big Path Capital. “So they say, ‘Let’s have a double bang for our buck.’ “