Investing With Impact: How To Make Your Money Work for You and for Society
Impact investing has become more than just a passing trend, with millennials being the most interested in investment opportunities that align with their ethical and moral obligatory goals. Contrary to the historical investing gender gap, women appear to be leading the way in this type of investing.
Morgan Stanley’s recent “Sustainable Signals” survey reports that 84% of millennial women prefer investing in social and economic initiatives, compared to 67% of men. A relatively new impact investment option, called Opportunity Zones investing, presents women with the ability to make a positive impact with their investments while making a market rate return.
I discussed Opportunity Zones (OZ) investing with Julia Wilkinson, Principal at Imvest, a multinational consulting company focused on advancing social entrepreneurship and impact investing worldwide. She explained how OZ investing helps local communities and offers her advice for women investors interested in making a positive impact by investing in Opportunity Zones.
How opportunity zones are making an impact in local communities.
As of 2018, there are over 8,700 Opportunity Zones (OZ) in the US representing low-income neighborhoods typically limited or excluded from investment capital. The sizable long-term tax benefits that are included in the recent tax legislation were seemingly intended to provide fund managers/investors an incentive to take more risk than they might otherwise in order to invest equity in real estate, infrastructure, and small businesses in these areas. Thus OZ investing offers innovation and advancement for some of the most vulnerable communities, and even helps mitigate displacement and gentrification.
Wilkinson: The OZ tax law gives private investors an incentive to invest in some of these critical projects where the government has been unwilling or unable to assist. For example, regarding infrastructure, OZ funds are being structured around improving the transportation systems, building new bridges, renewable energy, sewage systems, and other resilience efforts in the face of climate change. And with OZ investing, individuals can invest in innovative small businesses and enterprises led by minorities and women.
Getting started in OZ investing.
In order to invest in an OZ, you have to invest in an OZ fund, which must meet certain qualifications established by corresponding states.
Wilkinson: In principle, anyone should be able to invest in OZ funds, as long as they are realizing capital gains starting in Dec 2017 and do so within 180 days of realizing the gain. However, many vehicles are structured for accredited investors, which means the individual needs to meet certain income and net worth criteria. For females that fit these criteria, there are about 70-80 funds we know about that have already been structured in real estate and infrastructure.
To ensure that you are investing in the types of causes you care about, like advancing renewable energy initiatives, for example, Julia recommends investing with managers who have a clear impact-investment thesis and are thinking about the long-term value of sustainable economies. Julia also recommends impact-screening your investments.
OZ investing may not be the right choice for everyone, and some investors may not meet the eligibility requirements. Julia suggests asking yourself three questions that will help you decide if OZs are right for you, and if your investment profile meets the criteria:
- Do you need liquidity? If you don’t need to liquidate your investments for at least seven years, then you may be a good fit for OZ investing.
- Have you realized gains from the sale of a home or stock in the last six months? You’ll need to have realized gains within the last six months to be eligible.
- Do investments like these align with your personal values and objectives for the long-term? Again, these types of funds are meant for long-term investors.
Other ways to make a positive impact with investments.
There are other ways in which you can ensure your investments are impact-focused. For example, ask your investment manager if they are screening your investments against ESG (economic, social, and governance) indicators.
Wilkinson: If your managers aren’t screening using ESG indicators, then you have the right to ask to see alternatives in the space and make the decision that is right for you. If you have a particular theme you care about, such as gender equality, clean energy, or health and wellness, you can also find opportunities in early stage, private equity, and public companies that meet your criteria.
For individuals driven to give back to society through their investments, Opportunity Zones investing may be a great choice. As Wilkinson suggested, the first step is determining whether or not you qualify for OZ investing. From there, you and your investment manager can start looking at which Opportunity Funds closely align with your impact interests.
Not only is impact investing paving the way for positive change in areas that need it most, but avenues like OZ investing may very well be a sustainable way to both deliver financial returns to you and guarantee a better future for low-income communities.
Franziska Alesso-Bendisch, Ph. D. is a resilience and sustainability consultant, employee well-being expert, author, and speaker. She advocates for an impact economy that provides a better future for the planet and society.
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“We are passionately committed to improving the state of health in Corporate America.”—Franziska Alesso-Bendisch, Ph. D., MBA As a Well-Being Specialist and Sustainable Food Expert, I collaborate with executives to innovate BOTH human resources and operational solutions that drive productivity in mindful ways. BUILDING RESILIENT & HIGH-PERFORMING WORK CULTURES: Do you believe people are your company’s most important resource? My company, Well Work Solutions, is a boutique performance and well-being firm specializing in the creation of... Continue Reading
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