John D. Rockefeller retired in 1897, at 56 years old, having accumulated more private wealth than anyone in the history of capitalism. His retirement from for-profit enterprise made way for an equally vigorous career as a philanthropist. As a devout Baptist, he believed that it was his duty to continue working, but now instead of trying to make profit, he sought enterprises that would allow him to give his money away. What we might refer to as “The Rockefeller Model,” divides one’s career into two distinct halves: a career of wealth accumulation and a career of charitable activity. More contemporary philanthropic standards, like The Giving Pledge, and the rise of large foundations sponsored by family wealth, exist within, and expand upon the Rockefeller model.

While that model will continues to this day, with Bill Gates as the obvious modern day analog to John D Rockefeller, a new paradigm is emerging, with a set of practices that are reconfiguring how people think about business, capitalism, wealth accumulation, philanthropy, ethics, investments, returns, and value. Terms like “conscious capitalism,” “double bottom line,” “impact investing,” “environmental, social, & governance investing (ESG),” “sustainability,” “mutual aid,” “shareholder vs stakeholder outcomes” are introducing a new lexicon into the world of philanthropy and investing. The result is that the bright line between for-profit business and mission-driven philanthropy is becoming murkier and murkier every day.

In a generous reading of the situation, entrepreneurs and analysts are asking good-faith questions about the relative efficiency of capital. They ask, is it possible to structure a for-profit business in a way that would relieve the pressure for philanthropic activity altogether? Would that not be a more efficient use of traditional corporate capitalism? In a less generous reading, these activities greenwash (sometimes dubious) investments with marketing designed to pull at the heartstrings and make it appear a little more tolerable to allocate good money into questionable deals[1].

While it’s useful to keep the good faith and bad faith renditions of these arguments in mind, the primary purpose of this whitepaper is focused on understanding the landscape of impact investments, and defining what is often a vague and ill-defined nomenclature, in order to help family office investment teams navigate these murky waters. In the face of a rapidly changing environment, it’s all the more important to understand the ground you’re standing on. In the context of impact investing, that means being able to make distinctions between the major trends in impact investing in order to develop your own methodology for incorporating these ideas into your diligence process. It’s also important to maintain a bright line distinction between for-profit and not-for-profit activity. While the landscape around for-profit business is evolving, that is no excuse to simply collapse mission driven goals together with for-profit activity. At their root, these designations are important tools in your total balance-sheet, especially as you’re looking to optimize tax efficiency.