I’ve long recommended using appreciated securities (held more than a year) to fund your charitable giving . . . and funds like Fidelity’s Charitable Gift Fund to make it really easy. But wait: here’s one that gives you the option of investing your principal in socially-impactful start-ups, hoping to do even more good: good with the money you give away, as before; but now, also, good with the principal of your donor-advised fund while it grows.
Since earning an M.B.A. at Yale in 1995, Seth Goldman has been on the prowl for socially useful and novel business opportunities. He was a vice president at the Calvert Group, the do-gooder mutual fund family, before founding Bethesda, Md. based Honest Tea in 1998 with his former Yale professor Barry Nalebuff.
While he’s still CEO of Honest Tea, the 49-year-old Goldman sold the last 60% of the organic tea company to Coca-Cola in 2011, and before he did he put $1.5 million worth of its shares into a donor-advised fund at ImpactAssets Giving Fund. By donating stock before the sale, he was able to claim an immediate tax deduction for its full market value without ever recognizing a taxable gain. Using a donor-advised fund also allows him to dribble out grants to specific operating charities over time. His biggest so far: $250,000 to Yale to send M.B.A. students to the Net Impact conference, which Goldman says inspired his own mission-driven career.
Unlike more conventional donor-advised funds, ImpactAssets permits Goldman to remain hands on, entrepreneurial and socially conscious when investing his charitable kitty, and he has put half into private equity deals he finds himself. His biggest win so far was a $100,000 investment in Happy Baby, an organic baby food company, which was sold to Danone in 2013, with his charitable fund receiving $180,000, an 80% return in two years.
Currently he has the charity fund invested in Beyond Meat, a plant-based-protein maker; Sweetgreen, an organic-greens restaurant; and CSA Medical, which uses a flash-freezing system to destroy cancers and other unwanted tissues. He says he hears about such startups “organically”–through word of mouth–and looks for leaders who are both “fired up” about a new product and cost-conscious. Technically, Goldman can only recommend investments to Impact Assets’ board, which vets them. But once a Goldman find is approved, other donors’ funds may be able to invest, too, as they were with Beyond Meat.
Goldman has the other half of his charity pot in Calvert mutual funds and seed ventures identified by ImpactAssets, including Eco Fuels Kenya (organic fertilizers and biofuel), Waste Capital Partners (urban sanitation) and Sevamob (agricultural information and health services). “My appetite for risk with this portfolio is a little higher than it is for my personal one,” Goldman explains. “If we lose money on it, we’re still supporting a good cause. Even if it’s not as high a return, the positive impact is there.”
Want to follow Goldman’s giving lead? First, maximize your charitable tax break by contributing your most highly appreciated shares to a donor-advised fund, he says. Then, to increase the impact of your charitable dollars, use that fund to hold the sort of mission-driven, but risky, investments you shouldn’t be putting in your family’s retirement or college fund. If you don’t have Goldman’s contacts, a good way to find such investments is through a boutique donor-advised fund such as ImpactAssets Giving Fund or the Tides Foundation.
So step one is for Borealis one day to come to fruition, giving us all a huge long-term capital gain (does 15 years qualify as long-term?) . . . step two is giving some of those at-long-last greatly appreciated securities to one of these funds (and taking a nice tax deduction) . . . step three is to find amazing start-ups to fund. Needless to say, step one is by no means assured; though I like to think we are inching ever closer. (Seth Goldman’s Honest Tea, which I backed very modestly at an early stage in January, 1999, completed its sale to Coke in 2011. These things often take time to brew even without the need for FAA certification.)