Tim Freundlich, ImpactAssets

​Tim Freundlich is a pioneer in impact investing. He started at Calvert Investments before working on social venture capital and microfinance. Freundlich founded Bethesda, Maryland-based ImpactAssets in 2010 to provide 100% impact-investing services.

How did you know ImpactAssets would be a success when impact investing was still very much in its infancy?

We were getting lots of families coming in saying, “I want to do impact investing, but they [financial institutions] won’t let me, or they don’t know what I’m talking about.” The hypothesis, which has been proven, is that leading-edge impact investing fits everywhere well but is very, very well-suited to donor-advised funds. So we created a system so that people could get the tax break setting up their family philanthropy account and then take advantage of aligning not just with impact investing but with things they were passionate about, whether it’s affordable housing or education for women and girls in sub-Saharan Africa.

Who is your average client?

Most of our assets are from family offices. Others are recently minted billionaires who may not have a family office. We also work with large tech companies and with very modest folks across the country, too. Account sizes range from $25,000 to over $100 million, and we have zero minimums on parts of our platform. We’re dealing with schoolteachers up to millionaires and billionaires.

How does it work?

It works similarly to a private foundation but with a much better tax treatment because it’s within a 501(c)(3) public charity. People make the donation to fund the account. If it’s an appreciating security, public or private, they get the full, fair market value today. That can be very advantageous. For example, if you’re a founder and you started with shares that constituted zero — let’s say you get an IPO and sell the business for $200 million — you get the full today value of those zero-cost-basis shares. Whereas, if you give them to a private foundation, you get zero.

That’s an extreme case, but it’s a real thing. Lots of founders with low- or no-cost-basis standard stock really prefer donor-advised funds for that reason, and that’s a huge driver for our clients. You get fair market value for the tax deduction. We then create highly customized, evolving strategies deeply integrating your values and passion in the investment of that endowment capital. Then you plan how you want to make grants with your time horizons and liquidity. We make grants that align with your philanthropy. The idea is that investments return and become liquid, making it a perpetual, virtuous engine that evolves.

We create several diversified pools that may have some public ESG portfolio components, private debt and private equity, venture capital, all with impact. We organize those around themes like climate solutions, gender equity or racial justice. We also have liquidity pools like a community investment strategy that is private debt.

What were some of your best investments?

We invested in Beyond Meat before the IPO. We were in Sweet Green and made multiples of dollars from that IPO. We have clients like Seth Goldman, the founder of Honest Tea, which he sold to Coca-Cola. He does below-market, concessionary, impact-first investing alongside Beyond Meat. These two kinds of investments can exist together.

How do you see impact investing evolving?

We as a society, and especially the next generation, are really understanding that this climate crisis is real. There’s enough of a societal shift going on around climate, social causes and a real zeitgeist, especially for the next generation of these families, to pursue alignment and significant change. I think it’s accelerating.

Interview conducted by Amy Guttman