How We Humanize Wealth Management

by Bruce Herbert, AIF®

Whenever money moves it has an impact.  However, without careful planning and forethought, often that impact has negative consequences – leading to increased inequality and exploitation of people and the planet. 

Fortunately, there are many ways to humanize that impact so it can benefit planet and people while also meeting an investor’s financial goals.

This post shows you how.

In it, I explain the five key strategies for humanizing wealth:  

• Responsible Investment (ESG)
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• Community Impact Investment 
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• Shareholder Engagement 
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• Direct Private Investment  
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• Philanthropy 

Each strategy has strengths and weaknesses, but individually or in concert they allow an investor to amplify and humanize the impact of their wealth. 

At Newground, we thrive on helping clients ensure their money creates positive impacts – not only for themselves and their families, but for their communities and the world, both now and into the future. 

Written to provide insight to both individuals and institutions, this post is necessary reading for any investor wishing to humanize their portfolio's impact. 

Introduction

At Newground, we strive to humanize wealth and wealth management. 

This involves at least two levels of consideration: micro – the relationships you and your family have with your assets (and those who help you manage them) – and macro – the larger impact your wealth can have in the world. 

At the micro level, we work hard to get to know our clients as individuals, to understand their unique circumstances, values, and aspirations, and then to craft a plan that achieves their financial goals. We work with clients to ensure that their wealth continues to perform well over time – through both life changes and economic cycles. In contrast to some advisors, we love conversations about sustainability, and about the impacts that investors’ decisions have on equity, fairness, and inclusion.

At the macro level, we understand that wealth is more than just a bank balance or status symbol – the presence of wealth creates both a privilege and a responsibility. Its use is an expression of human values, of choices about the kind of world we want to live in and the legacy we intend to leave behind. 

As an early pioneer in ESG (environmental, social, and governance) social-impact investing, the Newground team brings over 35 years of grounded experience to understanding how to maximize the impact money can have as a force for good, and how the use of money serves as an enduring expression of one's values.

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• Want to humanize your wealth?  Reach out today.
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The 5 Ways to Humanize Your Wealth

1. Responsible Investment

Responsible Investment involves considering financial as well as ESG factors when making investment decisions. This approach acknowledges that wealth creation and the well-being of society and the planet are inextricably linked. By investing in companies that prioritize sustainable practices and positive social impact, investors can use their wealth to make a constructive difference in the world while still generating financial returns. By constantly asking questions of companies about the ESG impacts of their policies & operations, responsible investment firms like Newground elevate these considerations internally and place them front-and-center – becoming part of what management starts to routinely measure and pay attention to. 

Responsible investment is also a way to hold companies accountable for their actions and to ensure that they are taking steps to mitigate negative social and environmental impacts. This can help drive positive change at a systemic level and it promotes a more sustainable future for all.

2. Community Impact Investment

Community Impact Investment involves investing in organizations or initiatives that have a specific, measurable, and beneficial impact on local communities – such as providing affordable housing, creating job opportunities, supporting small farms, or improving access to healthcare. 

This is typically done through a Community Development Financial Institution (CDFI) intermediary which conducts the initial research and due diligence. 

A CDFI acts as a revolving loan fund, making loans in their respective communities (both here and overseas) that focus on providing needed capital and banking services to groups that are traditionally underserved, if not outright excluded – such as women, minorities, and the poor. The revolutionary idea of micro-credit financing was created by Muhammad Yunus, who in 2006 was awarded a Nobel Peace Prize for this innovation. 

When a CDFI loan matures and is repaid, the investor can withdraw the funds for other purposes, or reinvest back into the community impact system so as to keep the flow of this focused money going. 

Community impact investing is a way for investors to use their wealth in support of initiatives that align with their values and have a direct, tangible impact on the ground – in the communities they most care about.

3. Shareholder Engagement

Shareholder Engagement – a Newground specialty – is the process by which shareholders, as owners of a company, communicate with management and the board of directors to directly influence the company's actions and policies. 

One of the rights of share ownership is the ability to place a proposal in the company proxy for a vote of all shareholders. When this happens, the proxy is printed (at company expense) and sent to every shareholder on earth – which also launches it into the business press. This creates tremendous leverage, both for education and for shifting the company in a more positive direction. 

Through shareholder engagement, shareowners can use their investments to promote socially responsible and sustainable practices within the companies they own. They can voice concerns about issues such as human rights, environmental degradation, or governance practices, and work with the board and management to find solutions that are in the best interest of the company and shareholders as well as other stakeholders – including employees, communities, and society at large. 

An early pioneer in the responsible investment movement, Newground is particularly well known among professional colleagues and peers for our innovations in shareholder engagement. 

View an NPR feature on a Newground shareholder engagement success: 
Click to view an explainer on the three levels of ESG investing, plus lobbying & policy work: 

4. Direct Private Investment

Direct Private Investment refers to investing directly in private companies, real estate, or other assets (in contrast to investing in publicly traded stocks, bonds, ETFs, mutual funds, etc.). 

This strategy is related to Community Investment (#2 above), but usually involves much larger investment sums, and results in direct ownership of portions of a project or business – in contrast to a micro-credit entity that directs your capital in the form of loans that support others. 

By investing directly in private companies, investors can have more control over the types of businesses and initiatives they support and can ensure that their investments align with their values and priorities. For example, a direct investor may choose to invest in companies that are addressing social and environmental challenges such as renewable energy, affordable housing, or access to healthcare. 

While direct, private investment can sometimes offer the potential for higher returns compared to more traditional options, it is important to approach direct, private investments with caution as they typically involve a much higher degree of risk than publicly-traded investments, and invested funds are typically locked up – illiquid and unavailable for some number of years (often 3-7 years, though occasionally with “gated” access which may allow limited liquidity at intervals along the way).

5. Philanthropy

Philanthropy can humanize wealth in a variety of ways. Through philanthropic activities, people with financial means can give back to their community, create social impact, build empathy, and encourage ethical values. Philanthropy is also essential because it can direct money in the form of grants or donations to places and activities that cannot currently be addressed via market mechanisms. 

Philanthropy takes many forms, ranging from donations of money or appreciated shares of stock, to in-kind donations of goods and services, volunteering time and expertise, and providing space to host meetings or fundraising events. This can all be done at a local, national, or global level. 

Often, depending on a client’s situation and the type of philanthropic activity, this can provide significant tax benefits – tax deductions which can be strategically used to offset gains in other areas – such as from sales of land, a business, or a concentrated and highly appreciated stock position (where the investor may benefit from becoming more diversified).

Trusts, Foundations, Endowments, and Donor Advised Funds (DAFs) are all tools to be weighed in the strategic planning we do with clients around philanthropy, tax, impact, and estate matters. 

By promoting social impact, empathy, and ethical behavior, philanthropy is a clear and powerful tool for creating a more equitable, sustainable, and compassionate society.

In closing

There are 5 key strategies for humanizing the impact of your wealth on people and the planet: responsible investment, community impact investment, shareholder engagement, direct private investment, and philanthropy.  These can be practiced individually or collectively, enabling you to maximize the positive impact your wealth has whenever it moves, while also benefitting yourself, others, and the world. 

The Newground team has extensive experience with each of these five strategies for humanizing wealth, in both the individual and institutional investing context. 

To better humanize the impact of your wealth, let’s start a conversation. Please reach out today. 

Bruce Herbert, AIF® is the founder and chief executive of Newground Social Investment, an early innovator in Responsible Investment and now the nation’s oldest still-independent Registered Investment Advisor with an exclusive ESG-impact focus since inception. Before Newground, Bruce started practicing responsible investment in 1986 while still at Merrill Lynch.