Next Gen involvement in impact investing prepares them for future family responsibility
More than half (53%) of global wealth holders believe impact investing forges a bridge between the older and younger generations, according to Investing For Global Impact: A Power For Good, a new report from Campden Wealth on behalf of Global Impact Solutions Today (GIST) and Barclays Private Bank.
“Market indicators suggest that sustainable investing is here to stay,” says Dr. Rebecca Gooch, Campden Wealth’s senior director of research. “The landscape has grown rapidly in recent years and this approach to investing is now permeating our larger business and investment culture. Previously, it was the next generation that was galvanising efforts in this arena. Now, younger and older generations are working together on initiatives to improve the planet socially and environmentally.”
Additionally, as interest in impact investing grows, 80% of those surveyed believe the appeal lies in doing well and doing good, as investors report they do not have to give up returns to invest sustainably.
“Investors today believe that private capital is essential for addressing some of the world’s largest challenges, such as climate change,” says Dr. Gooch. “While the sustainable investing landscape is still in its youth, it has now matured enough to become part of common-day investment discussions.
“Here, we have seen that even so-called ‘Traditional investors’ are now incorporating ESG factors into their investment decisions, as they understand that doing so simply makes good business sense.”
Now in its ninth year, the report highlights that sustainable investing is now a permanent feature of the investment landscape offering attractive commercial opportunities for those active in the space.
Many investors are realising that you don’t have to compromise on returns in order to invest for a positive impact.
“Sustainable investors are rapidly allocating more year-on-year as they plan to increase their portfolio share of sustainable investments to 50% over the next five years. While Next Gens were originally the galvanising force behind sustainable investing, it is now becoming a prominent theme among the current generation,” says Dr. Gooch. “This is being aided by the fact that we are in a major generational transition and many Next Gens have now taken control of the family wealth.
“Furthermore, many investors are realising that you don’t have to compromise on returns in order to invest for a positive impact, and this is spurring others to follow the burgeoning trend,” says Dr. Gooch. “For example, many of the wealth holders we surveyed believe that transitioning to net-zero emissions is the greatest commercial opportunity of our age, and so they want to strike while the iron is hot, so to speak.”
The report also found that 72% of traditional investors now incorporate environmental social and governance (ESG) factors into their investment processes, a rise from 60% in 2021. Families, it seems, are increasingly garnering financial rewards alongside societal benefit for investing sustainably.
“Traditional investors are being swayed towards ESG-based investing because they want to invest in well-run businesses, and they realise that those which integrate ESG factors into their operations can simply be better run,” says Dr. Gooch. “In turn, it’s simply seen as good business practice. With that said, investors also hear the alarm bells which have been rung worldwide regarding climate change, and so they understand that it’s a major challenge that needs to be addressed. In turn, the incentives to consider ESG factors are both economic and impact related.”
The report also emphasises the power of philanthropy in unifying families, as 83% of those surveyed believe that involving the next generation in philanthropy will prepare them to take on greater family responsibility.
“Philanthropic engagement often creates a space where family members can learn from one another, while doing something that is emotionally rewarding,” says Dr Gooch. “The next generation can learn from the current generation about things like giving, investing and family values, while the current generation can teach the next generation about areas like sustainable investing and the need to combat climate change.”
Click below to find out more about the 2022 Investing For Global Impact: A Power For Good report.
