Case study
Paolo Fresia: A holistic approach to investing and impact
Impact investor Paolo Fresia reflects on the journey that led him to combine his investment portfolio with his aspirations for doing good.
It was summer 2016. My mother had recently passed away and I wanted nothing more than to be a responsible steward of the capital she left me.
After years of hiding from my inherited wealth, I hired a team of financial advisers. They showed me a list of the United Nations’ Sustainable Development Goals and asked where I’d like to focus my investments.
I thought: “Who cares what I want when it could be completely different from what the world actually needs?”, and “How did I come to inherit such large sums when many have so little? Is it possible to use my resources to shift the system and reduce inequality?”
‘Not as impactful as I’d hoped’
Next, the advisers produced a chart showing available impact investment opportunities. Back then, this was microfinance, a scattering of healthcare, education and environmental themes. I initially decided to go with the most investable opportunities.
However, this approach to investing was not as impactful as I’d hoped. Being mainly confined to public markets did not allow for additional and/or flexible capital to truly tackle the world’s largest problems.
Everything changed two years later when I did some serious financial planning. My new adviser asked me to imagine that I live to be 100 and to plot my projected expenses until then, and derived an asset allocation that would ensure I meet those cashflow needs.
With the knowledge that my family’s financial needs were now covered, I gained the confidence to take greater risk across my excess assets, which allowed me to maximise my impact across both my investments and my philanthropy. This meant shifting to a much higher percentage of longer-term, illiquid investments, rigorously vetted for their potential to maximise social and environmental impact.
Identifying core themes
I decided on three core themes for my investments and three for my philanthropy. These were not solely based on my preferences or passions, but also considered which issues tend to be the most underfunded or severe, and where capital can be most effective to provide solutions.
For investments, these themes were sustainable supply chains, climate change and gender. And for my philanthropy, I chose saving lives in the poorest countries, grassroots social movements in Europe, and LGBTQI+ activism in the Global South.
The final piece of the puzzle was to combine financial planning with the themes that I had prioritised. This way, I could actually invest for impact, rather than simply ‘do impact investing’.
An optimal rate for giving
I worked with another financial planning expert to define an optimal rate for my giving, which is 3% of my total wealth per year.
Investing for impact often means challenging the preconception that a portfolio should grow in size, above all other priorities. Having defined how much is ‘enough’ for myself and my family, I’m perfectly happy to spend down my excess wealth gradually, if that means having greater impact.
Answering to future generations
I visualise myself in 15 years, when my children are part of a generation defined by the climate and other emergencies. I imagine them asking “Papà, how did you try to prevent these?” By bringing my philanthropy and investments together and rigorously prioritising to maximise impact, I’ll have a better explanation than “I did my best”.
Future generations will not care that we had good intentions. They’ll judge us by our actions.