Values and purpose are two key elements that can help investors be better aligned to their … [+] investments.
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Just halfway into 2020, it’s abundantly clear that the global business landscape we once knew is set to become a relic of yesteryear. Economic, political, and social mindsets have shifted dramatically in a few short months and it is evident that maintaining the status quo is no longer an option. Business and the individuals who run them are having to reevaluate their priorities and devise new strategies in almost every area.
For family offices, aligning investments to a greater purpose is more relevant now than ever before. In the current tough economic times, investments requiring follow-on funding rounds need investors who are well-aligned to their investments. Aligning investments to values affords investors a longer-term view, making them a better longer-term fit, qualities that are often sorely lacking in the investment landscape.
As such, family offices should be taking an introspective look at who they are, what they value and why and deriving their investment strategies accordingly. Here’s a look at how to get started and the factors to consider when doing this.
Start with “why”
In 2019, LifeGuides CEO and Founder, Mark Donohue, pointed out that a rebirth, of sorts, was emerging as ever-larger enterprises moved toward reframing their reason for existence. This was evident in the Business Roundtable’s announcement of a new “Statement of Purpose of a Corporation,” and their leading CEO’s commitment to “leading their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and stakeholders.”
This shift has also become evident in the family office space. With the realization that every family office is unique, has come the necessity to understand the family’s motives, operational contexts and investment objectives.
Purpose-driven investment has become about far more than merely avoiding investing in stocks of companies engaged in morally questionable activities at the cost of profits. In recent years, many sustainable and impact investment opportunities have emerged, enabling investors to earn well by doing good.
Still, when considering various investment options, success comes from examining why investment is being made. Why invest in a particular way or with a specific focus? Why choose one deal over another?
The answers to these types of questions stem from the family’s values and higher purpose, which become the driving force of all actions. When the purpose is clear, investment time frames will be easier to ascertain and distractions are minimized.
Having a well thought out and defined purpose statement helps to not only provide direction for the enterprise from an operational point of view but ensures that there is also a solid frame of reference when exploring investment opportunities and finding the right fit.
Formulating a purpose statement
When crafting a purpose statement, it is essential to look beyond profit and find what really matters to the family. It helps to frame, in black and white, who the family is, what they value and how they translate this into working objectives.
Including the next-generation and future owners of the family business in this process can be highly beneficial to both the company and family. Doing so not only fosters interest and engagement early on but also helps to ensure a continuity of vision, values and purpose as succession takes place further down the road. Research shows that millennials value corporate sustainability more than previous generations, making this the perfect segue to integrate the next-generation into family office matters.
When purpose and values are clearly defined, the family can expand these into investment considerations. These can be used to determine their objectives, where they want to focus their capital and the type of investment approach they wish to take. Is there a specific environmental or social issue that is close to the family’s heart or where their expertise and experience can be leveraged to add value beyond capital if desired?
The answers can be used to not only guide what is being invested in, making identifying sustainable or impact investments that align with these values easier, but also what is being measured and reported on.
Evaluation – What is the cost of focusing on what matters?
Investing responsibly no longer means sacrificing profits or taking on additional risk. It may, however, mean having to sacrifice short-term gains for longer-term, value and positive impact. This is something that can cause a degree of conflict initially, primarily when traditional investment evaluations have been based solely on cash-flow and price and portfolio performance is judged on a quarterly or annual basis.
Moving into purpose-driven investments requires both a shift in mindset and operational processes when it comes to how investment evaluations are conducted and performance is calculated may be required. In instances where certain non-financial factors matter more to certain family members, then it’s important that these factors are highlighted as part of the family office’s regular reporting. This increased focus on non-financial factors also have the benefit of better navigating non-financial risks.
When investment decisions are reframed according to the family’s purpose and are selected according to its values and the objectives that stem from these, while still yielding returns, a committed, longer-term outlook becomes the new normal.
Often when a family and their family office have a clear purpose, this not only drives strategic, operational decisions but can also serve to inform investment decisions. Internally, everyone is on the same page about why things are done. Whether investments are executed in-house or by external consultants and asset managers, those involved are equipped to source and secure opportunities in-line with these values and objectives. This saves time and valuable resources and helps to ensure the success of investments over the long term.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
