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b&b81 Is there such a thing as socially conscious investing?

Mark Zuckerberg and Priscilla Chan made headlines recently when they announced they were going to move 99% of their wealth into an LLC over their lifetimes. Tons of news reports claimed they were doing it for the tax breaks, questioned their motives, and were generally suspicious of the move.

In reality, Zuckerberg and Chan haven’t said much about it except they chose not to set up a foundation (which means no tax breaks) so they could have the flexibility to give to charities but also do impact investing.

So… what is impact investing? Also called socially conscious or socially responsible investing, it’s a recently trending type of investment that brings together the notion of “doing good” while also making a profit.

We talk about how you can get involved as an investor, where to get started, and what to think about when you’re ready to start investing and want to be more involved, engaged, and accountable in the process.

Episode Highlights:

If you buy a stock and sell it within a year, you actually only have to pay ordinary income tax on it…if you held that stock for more than a year it counts as long term capital gains which means that that fifty dollars that you made actually gets taxed at a special capital gains tax rate which is between 0% and 20%, depending on your tax bracket, so if you make I think it’s either under 10,000 or 25,000 in income, you don’t have to pay capital gains tax at all.

Mark Zuckerberg is not starting a foundation like Bill and Melinda Gates. He is putting money into an LLC that has no tax deduction or no tax benefits at all at this moment in time. When the LLC decides what to do with the money, then there will be tax implications there.

[LLCs] have a board, they have limited liability. It doesn’t affect their personal finances anymore by doing this…It’s why businesses start LLCs, to have that layer of protection between their personal assets and these business assets over here.

The mission of this LLC…is that they wanna focus on personalized learning, curing diseases, and connecting people and building strong communities.

An estate planning strategy that a lot of wealthy people use with LLC…usually when you have more than 10 million dollars, you consider putting your money into what’s called a family LLC, and the reason you do that is basically because you break up your wealth into separate parts which means that in the IRS eyes they are worth less than if they were together in a whole.

Also it’s what’s called freezing their estate. So, because they’ve taken the money out of their estate, all of the stock and all of the assets that have gone up in that time are no longer on their personal balance sheet. It’s in the LLC’s balance sheet, and the LLC is not a person who dies…so the LLC’s never gonna pay estate taxes.

Socially conscious investing….Impact investing, is like we are going to put a name to this thing, probably the thing that you’re talking about in your feelings, we’re gonna put a name to it and say hey, you can do good and still make money.

What is exciting people about what Mark Zuckerberg and Priscilla Chan are doing is that they could be setting a precedent for this idea of investing that includes accountability and transparency and being engaged in the companies that you’re investing in….investing can look like this instead.

The socially conscious and the impact part is also ‘I’m engaged, I”m accountable, I’m transparent.” Not just an investment that you’re making, but you as an investor are all of those things.

There are four characteristics of impact investing according to this company called the GINN, the global impact investing network…intentionality, investments with return expectations, a range of return expectations and asset classes, and impact measurement.