PRINCE SILUMA | Add impact investing in wealth planning for a legacy

The beginning of the year is an ideal time to assess your overall wealth plan and to plan for your family’s future and legacy. Given the emphasis on economic and sustainable challenges, intentional impact investments should be included as part of your overall wealth plan which will help create measurable and positive impact. Impact investing has disrupted this paradigm and provided new avenues for amplifying your philanthropic goals.

Traditionally, investing and philanthropy has served two separate purposes, namely: invest to make as much money as you can without regard for its social or environmental impact; and dedicating more of the earnings and asset growth to philanthropy.

Sadly, most individuals who are contributing to social and environmental solutions under a carefully thought-out strategy continue to separate it from their wealth plan. The scale of the problems SA faces is significant and overwhelming.

With the official unemployment rate at 31.9% [1] in the third quarter of 2023, 55.5% of South Africans living below the poverty line and a Gini co-efficient of 0.67 indicative of the fact that we are one of the most unequal societies in the world. Delivering developmental solutions at scale and impact is key to creating employment solutions, clearing pathways out of poverty.

One’s isolated personal giving may be insufficient unless one works collaboratively and leverages each donated rand for greater impact. In this context, how can private philanthropists make their funds go further and be even more effective?

Impact investing, a strategy that is characterised by an intentional positive social or environmental return together with a financial return, is a steadily growing field. From affordable housing to quality education to water and road infrastructure – impact investors are investing in innovative solutions to better serve people at the base of the economic pyramid.

Increasingly, endowed philanthropic foundations and high-net-worth individuals and families are using impact investing strategies to ensure that every cent of their available capital is used most effectively toward their social and environmental objectives. 

While not fitting the pure definition of impact investing, these investing-for-impact approaches are a useful starting point to embark on a process that may lead there. Most importantly, make each rand work harder for both a financial return and the desired social or environmental impact.   

As an individual or as a family, how can investing for impact be utilised in one’s approach? 

Beyond personal giving, a starting point is to develop a social impact strategy for one’s giving. One should ask what specific measurable impact do you want to achieve? For example: A change in the early childhood development outcomes from informal crèches; improving the quality of agricultural farming production from emerging black farmers. 

Once the impact outcome has been defined, it becomes easier to pull the same threads of that impact ideal through to all one’s broader wealth planning and investment activities. In this way, you are expanding your impact intention. 

You must also consider your current investments. Are there any that contradict the impact of one’s giving strategy in broad terms? 

This alignment to the mission is often tricky to implement. Merely asking the question of a financial adviser or asset manager, sensitises them to one’s interest. Over the long-term, constructive alignment changes can be made. 

A constructive way to garner support from extended family and friends as well as the public at large, is by setting up a foundation that can leave a legacy that extends way beyond personal giving. 

If one does establish a foundation, ensure that its investment strategy is aligned to that of the mission from inception.

A little bit of preparation and planning can help you achieve your long-term wealth plans and legacy goals. Spending time early in the year to review and develop a wealth plan that addresses these goals holistically will help you make better decisions, avoiding mistakes and rushed decisions.

• Siluma is head of FNB Philanthropy