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Climate change, Covid and ESG factors boost impact investing

Climate change, Covid and ESG factors boost impact investing

By Cassandra Tanti - October 13, 2020

A new report has revealed that HNWIs, families, family offices, and foundations plan to increase their allocation to impact investing from 20% of their portfolios in 2019 to 35% by 2025.

The research report launched by Campden Wealth, Global Impact Solutions Today (GIST), and Barclays Private Bank documents the growth in leading private wealth holders and family offices investing for positive social and environment impact, with the average portfolio allocation set to almost double in the next five years.

“There has never been a better time to fast-track investment for sustainable progress and smart innovation to generate profound impact for people and planet,” said Gamil de Chadarevian, Founder, Global Impact Solutions Today (GIST). “We launched the report to catalyse and accelerate this transformation by serving as the leading knowledge platform to broaden understanding, identify trends, and provide a ‘peer-to-peer’ benchmark for investors in the field.”

‘Investing for global impact: A power for good’, now in its seventh year, provides unique insight into the attitudes and actions of a sample of the world’s wealthiest individuals, families, family offices, and their foundations when it comes to generating positive impact with their capital. As a leading global benchmark for those interested in impact investing and philanthropy, data for this study was collected from over 300 respondents from 41 countries, with an average net worth of $876 million and cumulative net worth estimated at $264 billion. Additionally, case studies with prominent investors and philanthropists also feature in the report.

Boost in impact investing

The proportion of the wealthy investors allocating more than 20% of their portfolio to impact investing is expected to increase from 27% to 39% as soon as next year, and a quarter (27%) are predicting to allocate more than 50% within five years from now. As such, the average portfolio allocation to impact investing amongst these investors is expected to increase from 20% in 2019 to 35% by 2025.

Driving this uplift is the belief of two-in-five respondents (38%) that they have a responsibility to make the world a better place. A quarter (24%) believe that this approach will lead to better returns and risk profiles, and 26% are looking to show that family wealth can create positive outcomes around the world.

Climate change considered greatest threat to the world 

The majority of investors (82%) feel a responsibility to support global social and environmental initiatives. Specifically, just over half (52%) believe that the long-term impacts of climate change pose the greatest threat to the world, and roughly four-in-five (83%) are already concerned with the effects of climate change seen globally. These concerns mean that nine-in-10 (87%) say that climate change plays a part in their investment choices.

While just over half (53%) of these wealthy investors say Europe is leading the world in carbon neutral initiatives, 86% want governments to do more, but at the same time, four-in-five (81%) recognise the role of private capital in addressing climate change.

With this in mind, two-in-five (39%) would like to know the carbon footprint of their portfolio to inform their investing, while roughly one-in-five (19%) already have this information.

Of those who do know their carbon footprint data, 13% consider it as they make further investments and 9% use it to actively reduce it towards a target, showing that more information around carbon emissions helps create greater positive impact.

Covid-19 a ‘wake-up call’

Covid-19 has made individuals increasingly aware of the world around them, with seven-in-10 (69%) respondents saying that it has affected their views of investing and the economy. Nearly half (49%) believe that investing will not return to ‘normal’, even after the crisis subsides, and one-in-five (22%) think that the impact investing market is about to ‘take off’.

“Globally, over $30 trillion is now being invested sustainably and this trend towards responsible investment is catching on rapidly within the private wealth community,” said Dr. Rebecca Gooch, Director of Research at Campden Wealth. “A notable proportion of wealth holders are now engaged and there are expectations, particularly since Covid-19, for a considerable hike in their investment over the coming years.”

In a sign that the implications for impact investing will be long lasting, two-thirds (66%) say that they are likely to broaden their risk assessment to include more ESG factors, while 64% insist that the crisis will force a deeper reconsideration of shareholder capitalism, and 69% agree that how companies behave during the crisis will determine their investment attractiveness afterwards.

Healthcare ranked the second most popular impact sector, and a notable 84% say that they plan to increase their investment to healthcare over the coming year, a proportion that outstrips all others.

“Investors are being challenged to safely pilot their family’s lives and their portfolios through the disruptions of 2020, and it means they are having more discussions about the future – how their family’s wealth can reflect more of their values and the role they want to play in society,” said Damian Payiatakis, Head of Sustainable and Impact Investing, Barclays Private Bank. “Families are considering the impact of their capital and then increasingly taking action, by allocating more towards solving our urgent global societal and environmental issues. We see that investors wanting to make this shift are looking for guidance to navigate the rapidly evolving field and to access high-quality opportunities that can deliver financially and with positive outcomes.”

 

 

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