There is a plethora of tools to help the individual donor—those with a giving heart—give back to their community and make it better. In this blog, we will cover one of those new tools—the leading-edge philanthropic tool of social impact investing.

What prompted this specific blog is a confluence of events that highlighted the need for me to share a little bit about social impact investing. First off, at the recent Auburn University’s Cary Center's Women’s Philanthropy Board's annual Spring symposium, one of the topics introduced was the concept of social impact investing to transform communities. Secondly, there is increased visibility and excitement about opportunity zones (OZ), which was another provision of the Tax Cut and Jobs Act of 2017 (TCJA 2017) legislation. The third event was my take-away from a recent meeting I had with a representative of a well-known Wall Street firm that was touting an opportunity zone mutual fund, with its inherent tax advantages, that the firm was going to introduce shortly.

In reflecting on these three confluent events, it is quite evident that much is needed to integrate social impact investing and opportunity zones as tools for community development philanthropy. But before I share the needs of what must happen, let’s look at what social impact investing is, what opportunity zones are, and the tax advantages they provide in a very generic way. I hope to provide some clarity around social impact investing—what it is and what is happening nationally—as well as opportunity zones—what they are, where they fit in the scheme of giving from an individual's perspective, and what we need to do to bring it all together for maximum impact.

Let's start first with understanding social impact investing. In its most basic form, social impact investing is investing for both a social return—a benefit to society—as well as a financial return. More specifically, impact investing refers to investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Impact investments provide capital to address social and/or environmental issues.

An opportunity zone is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as opportunity zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the US treasury. This delegation of authority has been granted to the Internal Revenue Service. Opportunity zones are economic development tools that are designed to spur economic development and create jobs in distressed communities. They stimulate economic development by providing tax benefits to investors. First, investors can defer taxes on capital gains invested in a qualified opportunity fund. Qualified opportunity funds are an investment vehicle that is set up either as a partnership or corporation for investing in eligible properties that are located in qualified opportunity zones. Each state has identified opportunity zones that meet the IRS criteria. For example, in Alabama there are 136 designated opportunity zones with at least one in each county. This all brings me to the point of reflection on what is needed to bring social impact investing, opportunity zones, and other philanthropic leading-edge tools to the forefront so they may transform our communities in the overall theme of community development philanthropy.

The first thing that is needed is education—both donor education and institutional education. The philanthropic sector is changing rapidly and for the most part most donors and local community stakeholders are not aware of the benefits. The second thing that is needed is leadership. What we mean by leadership is not leadership from the top down. It’s leadership at the local community level. And we’re not talking about just one or the other, we’re talking about all the stakeholders in a collaborative partnering for the overall betterment of the community. The third thing that is needed is time. Time is needed to educate. Time is needed for all local community stakeholders to realize that through collaboration and partnering and learning about new tools, they can apply these new philanthropic assets to better their hometowns. But change is hard and often slow. People are comfortable in their own routine. It takes time for people to change. It takes time for people to collaborate and innovate. All of these elements are needed to create a more prosperous and vibrant community.

Yes, the philanthropic tools available continue to change and become increasingly more complex. The individual giver can be overwhelmed with the complexities and the choices at hand. Professional advisors, just like individual stakeholders in the local community, are trying to better their community. But they typically operate in silos—whether those silos be accounting, estate tax law, investment management, or insurance. In addition, there is an emotional component that is often not addressed by professional advisors such as these. This reinforces the proposal outlined in the blog The Emergence of the Philanthropy Coach. What is needed is a philanthropy coach. The philanthropy coach can see the big picture, can reconcile the giving heart with the thinking head, and can provide a philanthropic roadmap for those that have more complex situations and have a giving heart that want to give back to their community.

We, at Aspire to Give, will continue to provide you—the individual donor—with the knowledge to awaken your giving heart, motivation to give more freely of yourself and your giving wheelhouse, and to make a difference in what is really important to you. Hopefully realizing your potential as a giving heart and equipping you with the knowledge to take action will all bring meaning to your life while improving the lives of others. Understanding what you are doing and what you can do to make a difference is half the battle.

So, stay tuned! Let’s do some good!

Greg

Coming Next:The Philanthropic Talk... A Conversation Worth Having

 

©2019 Aspire to Give®. All Rights Reserved. Greg Doepke is a Chartered Advisor in Philanthropy® and a Certified Financial Planner®. Greg serves on the Board of Directors for the International Association for Advisors in Philanthropy and as the Philanthropist in Residence at Auburn University’s Cary Center for the Advancement of Philanthropy and Nonprofit Studies. As the founder of Aspire to Give® Greg educates and equips individuals, families, business owners, and foundations with both traditional and leading-edge philanthropic tools and techniques for smart, meaningful, and impactful giving. You can contact Greg at This email address is being protected from spambots. You need JavaScript enabled to view it.

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If you are interested in learning more about Aspire to Give®'s pursuit to advance philanthropy through donor-focused education, social innovation, collaboration, and advocacy, please reach out to Greg Doepke: Greg@AspiretoGive.com

The thoughts and opinions expressed in this blog are not representative of the views of ACG Advisory Services, Inc. or the Actuarial Consulting Group, Inc. of Midlothian, Virginia. Each client and prospective client agrees, as a condition of precedent to his/her/its access to Aspire to Give®’s website to release and hold harmless ACG Advisory Services, Inc. and Actuarial Consulting Group, Inc., their officers, directors, owners, employees, and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized advice from Aspire to Give® or Gregory W. Doepke.