Ever thought about starting a business with your family, or collectively investing in something you all love to drive change? A recent article in The Family Office Professional spotlights how families are increasingly investing in “passion-driven ventures” – from craft breweries and local wineries to niche products like customized pet gear, artisan cheese, and personal fitness training – with the goal of making money around a shared interest or hobby. This type of alignment investing makes way for increased collaboration that can deepen family members’ relationships with each other. And if a family runs a business, charity or foundation, the collaboration can foster stronger leadership of the larger enterprise.
Wouldn’t it be great, however, if these passion-driven investments delivered not only a lucrative financial return and stronger family ties but a meaningful charitable impact as well? By going a step further, families can add a philanthropic component to their aligned investments to serve the greater good. For instance, a family’s shared interest around supporting local investments led them to a group of organized investors in their community that focused on venture capital for emerging businesses. They studied the group’s approach and vetted meaningful opportunities to support, which aligns with their family foundation’s focus on addressing community needs. For another family say, their core investment is an organic winery, their philanthropy could be sharing organic agriculture methods with farming communities. Or, if their core investment is owning a sports team, their philanthropy could involve the development of training camps in the same sport for under-resourced youth.
A more specific and targeted subset of alignment investing is impact investing, which explicitly intends to generate a positive, measurable social and environmental impact as well as a financial return. Alignment investing simply and more broadly ensures a portfolio’s holdings align and don’t conflict with an investor’s values or mission. The key difference is that with alignment investing, any positive or charitable impact it makes is considered an added benefit or bonus, rather than an intended and direct result of the investment. Check out our recent blog series with CapShift for more on impact investing.
With the generational wealth transfer underway from Baby Boomers to younger generations, we’ll likely see more alignment investments boosted with philanthropy. As our Shaping Tomorrow report confirms, Millennials and Gen Z place greater emphasis on creating positive impact in the world than their older counterparts and are expected to prioritize these activities as they assume more power and responsibility within their family units.
This generational shift was discussed recently in a private family office roundtable hosted by CNBC’s Inside Wealth team and reported in their weekly newsletter. Participants said the new priorities of today’s younger generations can be “challenging for family companies” and lamented that some of their younger family members have “zero interest” in their families’ businesses and investments. Interestingly, however, one family office leader shared how the son of his office’s founder chose to start a private foundation rather than running the family business because he was passionate about social causes. As the foundation became more active and visible within the community, it created a halo effect for the family business as well. “I think the dad would admit that the foundation is one of the main reasons the company is now worth what it’s worth,” the leader said.
In this exciting time of changing values and generational priorities, alignment investing paired with philanthropy offers families a powerful way to unite around shared passions while creating meaningful social good. When investments reflect both purpose and profit, they can strengthen family bonds, reinforce legacy, and generate impact that extends well beyond the balance sheet.
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