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Ultra-Wealthy Individuals Increasingly Investing in Impact

Impact investing is anticipated to grow in popularity among wealthy individuals who are guided by ethical principles.

A new survey of high-net-worth individuals (UHNWs) and family offices has revealed that they intend to significantly boost their investments in sustainable and ethical assets.

Research uncovers that half of the ultra wealthy who take into consideration the environmental and social effects of an investment are planning to put the majority of their investments in impact investments.

Three-quarters of wealthy impact investors have a strong longing to improve the quality of the world, according to a worldwide survey conducted by Campden Wealth. This study was done among private clients, family offices, and foundations that take part in the practice.

In the last twenty years, there has been a drastic rise in wealth management that covers a broad scope, including ethical investing which purposely omits certain organizations and sectors, such as weapons, tobacco, and gambling, and the extensively used ESG classification.

The main impetus of impact investors is to improve the planet.

The portion of investors who are motivated by impact investing is analyzed.

In order to gain insight into the objectives of UHNW impact investors and their aspirations over the next five years, Campden conducted research on behalf of GIST and Barclays Private Bank. Spears Wealth Management Services has reported on this shift in focus.

Research revealed that two-thirds of impact investors incorporate ethical investing into almost all of their investments, while the same proportion applies a responsible investing approach, taking ESG considerations into account for the majority of their portfolios.

In contrast, there are relatively few investors that prioritize positive social and environmental effects over monetary gains in their impact investments, as only a third of respondents reported that the majority of their investments follow that strategy.

What is the impetus for Ultra-High Net Worth (UHNW) individuals to make investments with a focus on social and environmental impact?

A majority (over 3/4) of impact investors expressed that a sense of obligation towards making the world a better place is the major factor that motivates them. This has seen a substantial rise since 2021, when it was at 64%.

The percentage of people who express a desire to demonstrate that family resources can be put to good use has also seen a significant rise, now standing at 36 percent - 13 percentage points higher than before.

Wealthy investors are of the opinion that their personal resources are indispensable when it comes to tackling the most serious problems the world is facing, of which climate change is one. 8 out of 10 of them believe this to be true.

According to Damian Payiatakis, the Head of Sustainable and Impact Investing at Barclays Private Bank, these wealthy individuals understand the influence their assets have on the planet, so they are keen to construct a portfolio that is both profitable and personally meaningful.

At this critical juncture, their financial contributions have become a way for them to help build a more equitable and lasting society. The task ahead is to assist additional people, households, and private investor groups in transforming their knowledge into action.

What measures can be taken to promote the growth of impact investing?

In the near future, investors are expecting to heighten the share of their portfolio devoted to impact investing. By the close of 2021, 29 percent had the bulk of their portfolio set aside for impact investing, with 19 percent having more than 80 percent devoted to it.

In five years' time, it is estimated that almost half (47%) of survey participants believe they will have most of their capital invested in impact investments, while 37% anticipate having more than four-fifths of their portfolio dedicated to this type of investment.

In 2021, the majority of impact investors reported that the financial returns met or surpassed their expectations. Moreover, the more heavily they invested, the more they were pleased. Notably, those who primarily employed impact investing saw their gains exceed anticipation by around one-third (31 per cent).

Rapid adoption of sustainable investing is occurring among wealth holders and their family offices, according to Rebecca Gooch, Senior Director of Research at Campden Wealth.

Sustainability has stimulated a surge in investment, with investors now taking advantage of the both the economic and social rewards that come with it.

In 2023, Angela Atherton, who is the head of operations and strategy at Parallele Finance, a research firm that endorses gender equality via 'gender lens investing', anticipates that there will be an increased appetite for investors.

She remarks that despite global equity market losses and resistance from some political entities, ESG investing still stayed afloat in 2022. Furthermore, regulatory inspection is bringing about more clarity in terms of investment instructions, and global ESG corporate reporting conventions are in the process of becoming unified.

Investment in ESG products is expected to increase in 2023, and investors are particularly interested in the area of diversity. Analysis has revealed this trend.


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