Paolo Fresia is a father, a husband and a steward of wealth. He and his relatives inherited hundreds of millions of dollars from a food and beverage business owned by his family for four generations. Watching how other relatives managed their wealth, Paolo was adamant that his share would not be squandered when it could be put to use for the good of people and the planet.
A great wealth transfer is underway, with fortunes passing from Baby Boomers to Gen Xers and Millennials. Paolo is part of this cohort of heirs — a generation that increasingly prioritizes social impact and aligns their investments with their values, and that does so with great thought and care.
While many investors and philanthropists are driven to make a difference, they often feel overwhelmed and unsure where to start. That is something we have seen firsthand in our decades of training wealth holders. It was the inspiration for our latest research, “The Investor’s Guide to Goals-based Investing and Philanthropy.”
Drawing on years of work with investors and philanthropists, combined with research on goal-setting, behavioral economics and effective philanthropy, we examined how to set clear goals and avoid the trap of unclear goals that lead to fragmented decisions and disappointing results.
Getting started
Our mission is to make “goals-based investing” (with real-world outcomes) manageable. A simple four-part cycle can get any wealth holder started:
- Identify your goals. Every investor has a multitude of goals, constraints and opportunities. Bring structure to this complexity: Understand that each goal acts as a unique lens through which you evaluate opportunities. Ask yourself: Is your goal an end in itself or a means to a larger end? Is it essential or aspirational? Your goals should evolve based on learning, experience and a changing world.
- Plan your approach. The clarity that comes from identifying your goals helps you ensure coherence in your decision-making, so you don’t leave value on the table. You can support this coherence by creating focused structures with dedicated allocations of capital toward specific priorities.
- Implement your plan. If you are inspired by your local community, for example, this could look like a local mental health initiative. Not all parts of a portfolio may contribute equally toward your impact goals. Therefore, each asset class and strategy should be assessed individually in the context of how it contributes to the overall financial and impact goals of the portfolio. Wealth holders should define how much control they want over their investments and how tailored their portfolio should be. They should also identify the right service providers for implementation.
- Learn and evolve. Deep, ongoing learning is what ultimately unlocks advanced strategies, allowing you to create a deeper impact while ensuring your goals evolve as you engage with the world.
How much is enough?
Another question facing Paolo and his peers is how much to save for himself and his family, how much to invest, and how much to give away.
The Enough Project has worked with dozens of wealth holders to help answer this question. Most people with significant wealth have never been asked to confront how much is really enough — at least not in a way that felt safe to answer. Answering this question involves a structured process of working out how much you actually need for your desired lifestyle and loved ones.
By replacing the drive for endless accumulation with a concrete number, you can gain financial clarity and a genuine sense of security. Additionally, by refusing to define yourself by what you have or what you do, you can better focus on balancing your own needs with serving the world.
A framework for decisionmaking
However, the difficult work of thinking through trade-offs cannot be ignored. Paolo, for instance, employs his own impact valuation method to maintain clear competition for capital within his portfolio. He uses both quantitative and qualitative criteria to assess his options, enabling him to make coherent trade-offs.
For example, he can directly compare a grant to a climate charity with a loan to a regenerative agriculture project and an equity investment in a green-tech company. This structured approach ensures every dollar is allocated in a way that best serves his impact goals. Investors don’t have to be scientific about this, but they should be careful in thinking clearly about the coherence in their capital allocation decisions.
Even for a foundation devoted to a single impact goal, there is a fundamental trade-off to manage: creating impact now (through grantmaking) versus generating financial returns to support greater impact in the future. For a foundation devoted to a core set of impact goals, there are opportunities to use charitable dollars to drive impact today, while allocating investment capital to support impact in the future.
Setting benchmarks
Pivotal, a group of social impact organizations founded by Melinda French Gates, sets a useful example. The foundation deems an investment worth its “risk share” if its expected impact is at least as significant as what the foundation could achieve by deploying that same capital elsewhere. In practice, this means Pivotal doesn’t just benchmark investments against others in the same asset class, but against its best alternative use of capital altogether, asking “How does this investment compare not just to its asset class, but to the best grant we could make?”
Identifying benchmarks keeps you on track. To get started, choose one impact goal and select two “benchmarks” to evaluate opportunities against: a high-return benchmark and a high-impact benchmark. These should be examples you’re familiar with or willing to learn more about. Ideally, they should be investments you can actually make, so the comparison is a practical exercise.
Staying flexible
Plan for evolution as you go. Make sure to set a learning goal for yourself, and refine goals and structures based on what you have learned. Ask questions like: “Is my current approach sufficient, or do I need to explore a more advanced strategy to achieve my goals?” Share your ideas with a trusted peer and invite them to challenge one of your core assumptions. You could also consider joining a pod, a peer support group focused on impact goals initiated by wealth holders themselves, or a mentorship exchange focused on shared learning.
When Paolo Fresia assumed responsibilities for managing his family’s wealth, it was initially an unwelcome development because it was a reminder of the trauma of losing his mother and grandmother. Today, that work has become something else entirely. His story is a reminder that the most effective impact investors aren’t always those with a specialized edge or a clear mandate from the start. Sometimes they’re people who find their purpose through the work itself.
Falko Paetzold is the founder of CSP and Managing Director of the CCSP at University of St.Gallen (HSG). Vera Michalchik is the director of philanthropy research and education at the Effective Philanthropy Learning Initiative and a senior research scholar at Stanford PACS.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
