Giving Compass' Take:
- Rob Kaplan, writing for Forbes, explains how family offices and private investors are poised for greater impact investing because of their access to flexible capital.
- Kaplan argues that these types of investors will lay the foundation for institutional capital to follow. What are the barriers for institutions to participate in sustainable investing?
- Read more about impact investing here.
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Plentiful. Flexible. The power and desire to move first. Of all investor groups, family offices and private individual investors, particularly ultra-high net worth (UHNW) are the ones driving impact investing forward and getting behind the innovative strategies we need to solve our biggest environmental and social challenges. Over the past couple of years, we have seen numerous surveys, such as the GIIN’s 2020 report, showing that nearly every investor of this type has already or is considering a shift toward sustainable investments of some kind. In this column I explore why private investors and family offices have quickly moved to the front-lines of impact investing, allocating their capital to an array of solutions that provide a range of financial returns and impact outcomes – and all of which are laying the groundwork for institutional capital to follow. I’ll also share some first-hand anecdotes from my experience interacting with individuals and family offices as part of my day job.
You can chalk up part of the reason for this trend to the simple laws of supply and demand. Right now impact investing options, particularly in the private markets (think venture capital and private equity) match up nicely with these investors’ preferences. As evidenced by the growing ranks of fascinating collaboratives like AVPN, Toniic, CREO, and Gratitude Railroad, there’s a group of UHNW and family offices – not just here in Asia but around the world – that are trying to put more money to work to create more impact, but they simply can’t find the opportunities via the conventional wealth managers and services or local communities.
Private capital is also more flexible. Family offices and UHNW investors are often more comfortable making long-term investments – even with investments that may lock their capital up for decades. Which makes sense as they are more focused on wealth preservation than outsized returns. Their capital is more flexible in that they don’t have an annual giving obligation like philanthropies and there’s no institutional-style decision-making body with strict fiduciary criteria or looming perceptions of career risk, no theme or topic area off limits.
Read the full article about family investments by Rob Kaplan at Forbes.