Hartford Business Journal

14 Hartford Business Journal • June 13, 2016 www.HartfordBusiness.com from page 1 Young millionaires seek 'social-impact' investments By Patrick Gillespie CNNMoney M illennials are changing the investing agenda. They don't just want to grow their money: Many Millennials want to achieve social and environmental goals through their investments. It's called "impact investing" and it's not just a buzz word. "Impact investing is hitting the main- stream," says Jackie VanderBrug, invest- ment strategist at U.S. Trust, a division of Bank of America. "We're hitting a tip- ping point." VanderBrug knows. She and her team at U.S. Trust recently surveyed 684 individuals with investable assets worth $3 million or more. Among the millionaires, dozens were Millennials between the ages of 18 and 35. The overwhelming majority of Millen- nials surveyed — 93 percent — believe that a company's social and environmen- tal impact is key to their investing deci- sions. That's up from 74 percent two years ago, according to the U.S. Trust study. In some ways, it's not new. Students have long protested at universities to end investments in coal or against govern- ments like South Africa during the apart- heid era. Last year, Columbia University and the University of Southern Califor- nia both dumped their investments in prison stocks after student protests. But instead of divesting, new inves- tors want to see companies make an impact in a positive way. Their older peers also agree. This year, 51 percent of Baby Boomer inves- tors believe impact investing is key to where they park their cash, up from 46 percent. All age groups have increased their preference for impact investing over the past two years. Former Vice President Al Gore is one impact investor. His investing firm, Generation, manages $12 billion. "Sustainability values should be completely integrated in the investing process," Gore said in November at the Dealbook Conference. competing with Oregon (which is considered the hub of benefit corps), I think, is a great sign that Connecticut is on its way to becoming a hub of social entrepreneurship." Oregon, with a population 12 percent greater than Connecticut's, implemented its benefit corporation law Jan. 1, 2014, and it had 63 benefit corporations after 17 months versus 61 for Connecticut, according to a report done for reSET by Matthew C. McGrath and Chadia Parnell of Central Connecticut State Univer- sity's business school. Oregon, though, also allowed benefit LLCs at the same time, and the state had 340 of them at 17 months, the research showed. Woulfe said Portland, Ore., has established itself as a progressive hub of social con- sciousness and environmentalism. Connecticut does not allow benefit LLCs, but Woulfe wants to change that next legisla- tive session, which he thinks could provide a major boost to the state's efforts to grow such companies. Draft legislation is already written and Secretary of the State Denise Merrill has expressed support for the concept. Benefit LCCs provide the tax and ease- of-use benefit of the LLC and the marketing, accountability and transparency benefits of the benefit corporation, Woulfe said. Maryland is the only other state allowing benefit LLCs, according to the research by McGrath and Parnell. To sweeten Connecticut's attraction as a hub for such companies, reSET would also like to see benefit corporations and benefit LLCs qualify for the angel investor tax credit to incen- tivize the flow of capital to them, Woulfe said. "Hopefully that would drive more capital to these types of businesses, but also make the young people that are graduating from our colleges and universities think twice about going to Massachusetts or New York to start their mission-driven business and stay here in Connecticut," he said. More colleges and universities are start- ing to talk about social entrepreneurship, so entrepreneurs are learning about this con- cept and using it more, he said. If Connecticut were to have benefit cor- porations and LLCs that enable people to include social entrepreneurship as part of their mission and provide an incentive to invest in such businesses, it would have all the ingredients for a thriving sector, he said. LLCs gain in popularity Benefit corporations are for-profit busi- nesses and subject to the same tax treatment and organizational structure as other for- profit companies, but their business purpose includes making a profit and pursuing some benefit to society. Corporations, however, are not formed near- ly as much anymore as LLCs, which are a much more flexible form of business corporation. Murtha Cullina lawyer and partner David Menard, who practices business law and regularly assists benefit corporations, said that roughly 80 percent of companies formed today are LLCs. Allowing benefit LLCs is key to growing the sector, he said. Providing a tax credit also would be a "huge" difference-maker for Con- necticut, he added, noting the benefit corpo- ration law has proved its worth. Referring to some who might have ques- tioned the need for benefit corporations, whether they do something that regular corporations can't already do, "I think the answer is yes," Menard said. "Part of it's almost a generational and philosophical divide, like, 'What's the pur- pose of a company? How does it interact with our society? Is it there just to make money, or is it there to do something more?' " Menard said. "And I think especially … the Millennial genera- tion, there is a desire to have a company not just be about making money, but about mak- ing a statement, saying something about who they are." Promoting art Megan Eza said the benefits corpora- tion law opened the door to launching a company she first envi- sioned a decade ago. She incorporated as Brandon Nicholas Eza Publishing Inc., named after her late brother, in January, but the company operates under the trade name BNE Publishing Inc. in Coventry. The company, still in its formative stages, plans to publish monthly digital and print newsletters that promote the work of 20 artists and their different art forms. Sales of the art, which BNE plans to replicate on various medi- ums, would benefit the artist, with a profit, too, for BNE that it plans to split with groups that could include area arts clubs or arts societies. Artists also would receive a commission on program sales and the programs would include advertising complementary to the artwork. Eza said BNE would give away half its profits. "We'd like to give to more than just one place" to achieve broad impact, Eza said. The idea is to give artists exposure and get their work in public hands, which benefits art- ists, helps local groups and still makes the com- pany a profit, Eza said. To make the art more available to the public, BNE, with artists' permis- sion, would replicate a painting, for example, not just on paper, but on items like mugs or T-shirts. Eza hopes to have the first art program published in about three months, pending the completion of a Kickstarter campaign to help cover initial costs. The company bought the former Pond Hill Schoolhouse, built in 1748, on Main Street in Coventry, which it plans to renovate and use to display and sell artists' work, and stage events. The parcel also includes two buildings for art- ist's studios. Marketing advantage FRESH Farm Aquaponics Inc. of South Glastonbury incorporated as an LLC in 2012, then converted to a benefit corporation when the new law took effect in Oct. 2014, as did several other companies. The state's legacy preservation provision in the law was a key factor in the conversion, said Kieran Foran, co-founder and president. The provision basically says if a com- pany is sold, "the new management struc- ture still has to maintain those core values that we set from the beginning of having a positive social, environmental and economic impact," Foran said. Being a benefit corporation has marketing benefits, too, he said. When people ask what it means to be a benefit corporation, "we go into how we're making sure our business isn't just solely profit-driven, but that it's also taking into account how it affects communities and how it affects the environment as well," he said. The company raises fish and plants together in a sustainable ecosystem. Its web- site says the company is part of a "rising tide of entrepreneurs using aquaponics and other food 4.0 smart agriculture technologies to create a world that feeds itself sustainably." FRESH Farm Aquaponics provides work- shops and lessons for schools, a couple of which use the aquaponics systems, as a way to teach STEM subjects in the classroom, Foran said. "Aquaponics lends itself very well to doing that because it's growing fish and plants together, so it has science aspects, a little bit of the engineering aspects, some math involved as well," he said. The company also works with the ARC of Meriden-Wallingford, which provides com- munity-based opportunities for people with disabilities. ARC has a FRESH Farm Aqua- ponics system it uses to help teach its clients job training and life skills, Foran said. The benefit corporation status can go a long way for companies showcasing the ben- efit they have on the community, he said. "But if you just sign up as a benefit corp. and then be quiet, then there's really no ben- efit to being that," he said. "It's all about what you make of it. I think it's a fantastic oppor- tunity for business owners in Connecticut. I'm personally excited to see how this grows and how benefit corporations become a more entrenched part and a more normal way of doing business." n Advocates want benefit LLCs James Woulfe, director of advocacy and external affairs, reSET David Menard, lawyer and partner, Murtha Cullina Continued ▶ ▶ 93 percent [of Millennials] believe that a company's social and environmental impact is key to their investing decisions. That's up from 74 percent two years ago. U.S. Trust study P H O T O | C O N T R I B U T E D FRESH Farm Aquaponics is a benefit corp. that raises fish and plants (shown above) in a sustainable ecosystem.

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