Impact Drives Focus on Sustainable Finance For Family Offices
Younger generations are setting the pace for family offices and the private wealth sector to focus on green and sustainable finance.
It’s an increasing trend in the sector and We Are Guernsey’s recent Sustainability Finance Week highlighted the transition from philanthropy to sustainability.
Whilst it’s not only generational pressure and awareness that is leading to this shift, it is certainly one of the main factors.
The recently published We Are Guernsey Private Wealth Report said the conventional wisdom is that green and sustainable investing is purportedly becoming increasingly more important to owners of significant private capital, especially where family wealth is being restructured for intergenerational wealth transfer. Philanthropy and sustainability are rising up the agenda and are key concerns of the younger generation, the millennials of ultra-wealthy families.
It goes on to state that the amount of wealth to be transferred over the next couple of decades is considered substantial, and the number of 20 to 30-year-olds who will inherit wealth is significant. If this generation is going to be applying their sustainable principles to the way in which their funds are managed and structured, we should see significant flows into green funds.
Matthew Gilligan, Associate Director, Louvre, said: “We can concur with these findings. A number of our Private Wealth clients have become increasingly focused on investing sustainably and Guernsey’s prominence in the sector and the establishment of the Guernsey Green Fund have led to an increased awareness of our offering as a jurisdiction.
“Whilst there are still traditional investments being made in our family office structures, we are finding more and more conversations are happening around future investments and diversified portfolios going into sustainable funds. More often than not those conversations are starting within the family, based on the opinions of their children and grandchildren. Protecting and growing wealth for the future generations is now not enough; it also needs to be the case of doing so ethically and sustainably.”
In the current post-Covid-19 financial climate, the issue of whether the pandemic has had a positive or negative impact on the sector is also being discussed.
David Bain, Editor of Family Capital magazine, said: “Sustainability was an issue which had caught on within the family office sector before the pandemic, and the issue facing family offices was whether to invest directly or indirectly, through sustainability-focused funds.
“Sustainable and impact investing is moving out of the alternative space and becoming mainstream. There are good returns out there, and direct investing in sustainable areas is, to some extent, about long-term returns.”
Taeun Kwon, Head of Private Wealth Programmes at the University of Zurich’s Centre for Sustainable Finance and Private Wealth, said: “Family discussions around implementing sustainable investing have become challenging because the market is in turmoil, but we’ve seen interest in impact investing and how private wealth can impact society and create a better world.”
David Bain said that the opportunities which could be driven from the private wealth and family office sectors were huge.
“I don’t see the impact of single-family offices easing off. There will be a big transfer of wealth from baby boomers to millennials over the next 10-20 years and those individuals are more driven around sustainability issues,” he said.
Commenting on the contributions during Sustainable Finance Week, Dr Andy Sloan, Chair, Guernsey Green Finance, said: “We've heard that returns, direct investing and ‘it’s impact, not ESG!’ are the three factors driving family office money into green and sustainable finance.”
Guernsey continues to play its part in maximising the opportunities in Green and Sustainable Finance through the establishment of the Guernsey Green Fund and, more recently, the publication of principles for the private equity sector for green investment.
For more information on how your Family Office could benefit from Sustainable Finance options, contact Matthew Gilligan.