How to Engage Family Offices in Impact Investing

How can we further support and encourage family offices to engage in impact investing? The need for effective impact investment opportunities is growing, where women and the next generation of asset owners (NextGen) have been the strongest supporters.

Impact investing challenges the long held view that social and environmental issues should only be addressed through philanthropic donations, and that market investment should focus exclusively on generating financial returns.

With patient capital and an increasing desire to align wealth with values, family offices are particularly relevant for impact investing, says Prof. Mariana Christen Jakob, SEIF Founder and Managing Partner. Family offices can also gain many strategic benefits by engaging in impact investing, thinking about succession and legacy.

Define values and goals

Every family is different, and there is no one size fits all approach when it comes to defining values, goals and objectives. It is crucial for each family to define what impact investing means for them and what they want to achieve with their impact. As with companies, there is also a need for families to have a mission. Having a clear definition of values and goals is a prerequisite for success.

”It is important that family offices think of impact investing as something that requires reflection, figuring out what their values are, and which impact they want to have. They need to understand the market and develop pragmatic strategies. The first step is to get a consensus within the family, in terms of what the family values are, how they need to be reflected through investing and getting help in developing a strategy.” 

 

Julia Balandina Jaquier, CFA Institute

Engage NextGens

The impact dimension is becoming increasingly important for the younger generation, they understand the urgency to find business solutions aiming to reach the UN Sustainable Development Goals (SDGs) within the desired timeframe. For family offices, impact investments are an opportunity to adapt their values and engage NextGens alongside generating financial return. According to Francois Botha, it’s a win-win and something every forward-thinking family office simply cannot afford to ignore.

“…Next-Gens in our programs are more and more diligent and strategic in thinking about the various impact topics and approaches.”

 

Falko Paetzold, Center for Sustainable Finance and Private Wealth

Education and Training

The Global Impact Investing Network (GIIN) has identified education and training as one of the most pressing needs to be addressed within the impact investing community. Although we see an increased interest in impact investing many intermediaries are still not educated in the field, making it more difficult for investors (such as NextGens) to engage in impact investing. In this context, it is important both to train finance Professionals and support the development of impact driven businesses.

“[…] we clearly need increased numbers of well-informed intermediaries within the market.”

 

Falko Paetzold, Center for Sustainable Finance and Private Wealth

Make success stories visible

The SDGs open up global business opportunities of more than USD 12 trillion, according to the Business and Sustainable Development Commission. In 2019, more than 90% of respondents in the GIIN Annual Impact Investor Survey reported performance that were in line with, or exceeding, their expectations both on the financial and the impact side. Cases like Pristem, RaiseNow or MSCIs recent acquisition of former SEIF Award winner Carbon Delta already show that positive impact and financial return can go hand in hand. Impact investing does not mean that you have to give up financial return.

“New technologies are very interesting and have a big potential to become success stories, particularly when investing in early stage impact businesses”

 

Prof. Mariana Christen Jakob, SEIF Founder and Managing Partner

Interested in more inspiration and success stories? Check out the 10 finalists of the SEIF Awards Tech for Impact.

Find pioneers to share experience

Although some family offices are already deeply involved in impact investing, this is still a new and contested topic for many others. In this context, cooperation and education is key. Finding pioneers, as the family office Rancilio Cube, to lead the way and share their experience is extremely helpful, both to encourage and inspire others to change.

“[…] we see a lot of NextGens pushing impact, but also increasingly so the banks and certain progressive institutional investors.”

 

Philipp Cottier, Senior Advisor responsAbility.

So what’s next?

As generations are shifting, advisers, intermediaries and businesses need to be able to offer products appealing to NextGens. It is also important to open up for learning and sharing experiences. Family offices who are interested to learn more about impact investing could look into networks such as toniic, GIIN or get in touch with Prof. Mariana Christen Jakob to learn more about early stage impact investing opportunities.


Following our recently published whitepaper and our discussions at the
TBLI conference earlier this year, we created this blogpost to start the conversation on how to support family offices to engage in impact investing. What would you add to this list? Get in touch and let us know what you think.