Family offices are uniquely positioned to lead the charge into impact investing, writes Kieron Boyle
In research from Cazenove Capital in 2021, nearly half of its private wealth clients stated that environmental and social issues were equally important as financial returns
The purpose of money has never just been money. It is rather the world it creates — now, around us, and for future generations.
Over the past years, it has become easier to be even more intentional about that future and knowledgeable about the impact of our investment choices on others. And as both a cause and consequence of that change, a significant majority of adults (more than four out of five of us) express a desire for our investments to generate not only financial returns but also contribute to a greater good.
Family offices – vehicles set up to manage family wealth – are uniquely positioned to lead this charge. They are unconstrained by obligations that can inhibit other institutional investors and can act at pace on the social and environmental issues nearly all of us care about. Their influence is significant — the global wealth managed by families amounts to over $10 trillion (that's $1 a second for the next 3,000 centuries). And it is only set to grow.
The world is going through a great wealth transfer, where substantial assets are being transferred from one generation to the next. In the UK alone, the Financial Times estimates that around $6 trillion will pass between generations in the next 30 years.
In this context, there is an urgent focus on what choices families will make with their wealth. Can values drive value? Can extreme wealth play a role in addressing inequality? What contribution will these pools of private capital make towards public goods, in both climate and nature?
An increasing number of family offices are engaging with these questions. In research from Cazenove Capital in 2021, nearly half of its private wealth clients stated that environmental and social issues were equally important as financial returns.
Some of this is what you might call "impact by design" — new family offices that see great value in businesses that are fit for the century ahead of us. For example, the sustainable venture capital firm Vala Capital has operated under a 'planet-fit' commitment since it was founded by a first-generation wealth creator and tech entrepreneur. Their outlook is that all capital needs to focus on sustainability as an enhanced investment strategy that will deliver both impact and good financial returns.
Ceniarth, set up by Diane Isenberg, focuses on improving livelihoods in marginalised and vulnerable communities globally. 40% of the $500 million portfolio is now in impact-first investments, and deals totalling $30-35 million a year address themes such as financial inclusion, financing small and medium-sized businesses, community development and agriculture.
Meanwhile, other family offices are "shifting to impact" and embarking on a new chapter for managing multi-generational family wealth.
For example, PFC is a family office founded by a branch of the Marzotto Family, which has been at the heart of Italy's textile industry since the 1800s. Over the past years they have focused on aligning their philanthropic activity and their investment strategies, using shareholder engagement to influence corporate behaviours, and helping other family offices begin their own journey towards more sustainable portfolios.
The point being that, if we are to transform capital markets at the pace required, these pools of wealth look to be one of the best places to start. Where family offices lead, other investors can follow — the $10 trillion of family wealth showcasing new paths for the over $90 trillion of institutional capital available globally.
And that scale of leverage? About the most important legacy there is.
Kieron Boyle is the CEO of the Impact Investing Institute, an independent non-profit set up to connect capital to impact. The Institute acts as a bridge between new economic ideas and mainstream capital markets.
This is part of a series of monthly columns Boyle writes for Environmental Finance.
See the others here:
