Socially Acceptable
How to weave Social Investment into your Investment Plan
By Andrea Solana
www.masecoprivatewealth.com/the39steps

It is becoming increasingly common for individuals to look for ways to invest in a manner that is consistent with specific principles and values. Individual investors often express concern about how their investment decisions affect the world they are creating for future generations. And, there are more and more investments emerging that are designed to put money to work in social purpose businesses to create sustainable social change, as well as provide the potential for a financial return. Changes both from within the charity sector and from donors have pushed philanthropic organizations to be more commercial in their approach. At the same time, business models are developing that align business strategy to remedy environmental and social challenges.

It may be possible for investors to magnify impact by creating access to investment products designed to blend the desire for impact, with financial return. However it is important to evaluate social impact investments as carefully as any other investment opportunity and aim to achieve impact alongside asset allocation, diversification, fiduciary duty and a clear investing charging structure.

A social impact investment enables an investor to use their available capital to achieve defined social outcomes whilst aiming to preserve capital and potentially produce a return. In contrast to a donation, a social impact investment aims to create a return on the investment to the investor at usually a given point in time.

Social impact investments harness the power of capitalism to develop accountability and business approach for organizations that would have traditionally delivered charitable services. Capitalism is an efficient way to allocate resources and wealth. Sustainable capitalism is investing for blended value and can be used as a framework that looks to maximise total value creation potential and performance of organizations whether non-profit, for-profit or hybrid. It applies to the entire investment value chain from entrepreneurial ventures to social activists and policy makers.

It is investing in private companies that can have a positive social impact. Social impact investing provides the opportunity to support community economic development, revitalization, growth, and sustainability. Typical investment areas include:

• Microfinance or financial inclusion

• Social housing

• Job creation and retention

• International development projects

• Environmental energy or waste reduction projects

• Sustainable agriculture

There are several ways to invest. There are private equity and debt fund of funds available in both the US and the UK. Additionally, in the UK there are tax-efficient Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) structures available to suitable investors. For US investors it is important to ensure that the investments are made through direct investment and avoid being caught under the PFIC rules. Specific tax advice should be sought.

Returns vary from investment to investment and past performance is no guide to future returns. All social impact investments are not created equal and should match the investment policy statement mandate and objectives. Typically the investment returns vary widely and may tie up invested capital for an extended period of time.

As an American living in the UK, almost nothing related to your financial affairs is easy. The consequences of seemingly simple decisions – such as how to pay for a new home or purchase a mutual fund - may create unnecessary tax charges and complexities. There are a number of key milestones that occur, from the time you arrive in the UK to the time you potentially approach and eventually reach retirement. Many of these changes will impact the appropriate wealth management strategies for American expats. Understanding how rules will change for you over time will allow you to plan ahead and make prudent financial decisions. If you would like a full copy of MASECO’s ‘39 Steps to Smart Living in the UK’, visit, www.masecoprivatewealth.com/the39steps or contact enquiries@masecopw.com. MASECO LLP trading as MASECO Private Wealth is authorised and regulated by the Financial Conduct Authority, the Financial Conduct Authority does not regulate tax advice. MASECO Private Wealth is not a tax specialist. We strongly recommend that every client seeks their own tax advice prior to acting on any of the strategies described in this article.

>> MORE EXPAT ADVICE