GLOBAL issues such as climate change and biodiversity loss present challenges, but they also create opportunities in sustainable and socially responsible investing – especially among ultra-high-net-worth individuals (UHNWIs) and families.
A study led by Oxford Economics and Arup, an engineering and sustainability consultancy, estimated that new green industries could be worth US$10.3 trillion to the global economy by 2050. This is equivalent to 5.2 per cent of global gross domestic product per year.
For many UHNWIs and affluent families, engaging in sustainable investing not only helps generate positive impact, but can also be a good diversification for their wealth portfolios.
Moreover, sustainable investing goes beyond just environmental factors. It can also address corporate governance and social aspects, such as business ethics, labour and human rights, as well as supply-chain-related issues.
In addition, sustainable investing can be a way to bring family members across generations together for a common purpose. Building a purpose and vision is often seen as a means to strengthen the family legacy.
This vision and purpose can help to engage different generations of family members. Younger members of affluent families have been seen spearheading such initiatives, given their awareness and interest in leveraging their wealth to tackle pertinent global challenges.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sustainable investing: A force for change
For UHNWIs and families, the ability to preserve wealth successfully depends on their willingness to articulate and implement their long-term wealth and legacy goals with their wealth planners. Often, these long-term goals look beyond returns generation.
UHNWIs and families are increasingly aligning their wealth management and planning objectives with sustainable investing strategies, as they seek to find a more meaningful purpose for their wealth and explore how they can create lasting impacts in their communities and, by extension, the society at large.
There is clearly a growing demand: Standard Chartered’s 2023 sustainability report revealed that investors are expressing high interest in areas such as renewable energy, biodiversity, food systems and infrastructure, among others.
There is a suite of sustainable solutions from green deposits and mortgages to sustainability-linked bonds, funds and structured products that can meet these interests.
Investing in sustainable options isn’t just a trend or a box to check, but is instead part of a paradigm shift in the wealth management sphere that can help UHNWIs and their families safeguard and enhance wealth over the long term.
By integrating environmental, social and governance considerations in their wealth portfolios, affluent clients can not only mitigate risks associated with such issues, but also capitalise on emerging opportunities in sectors driving positive change.
Embracing sustainable investment strategies not only secures wealth for future generations, but also positions affluent investors as leaders in driving transformative change towards a more sustainable and equitable future for all.
Growth of strategic philanthropy
While philanthropy has always been a focus of affluent families around the world and continues as such, it has taken on a much more professional structure over the past few years.
This has been catalysed primarily by rapid economic growth and the emergence of a new generation of wealthy and conscious donors.
Having a philanthropic agenda is also another way to develop a family’s legacy, beyond business and wealth.
Strategic philanthropy planning is about investing wealth in a considered way, so that UHNWIs and their families can meaningfully give back to society. It’s about aligning to their values, passions and legacies, as well as creating enduring societal impact, as opposed to sporadic donations to charities.
Professional philanthropy through foundations and non-profit organisations allows for an organised way to donate.
It offers evaluation of the causes families may want to invest in, strategies and structures of budgets, as well as accountability through measurable impact. It also promises longevity of giving, as it segregates wealth meant for philanthropic efforts from family inheritance.
By institutionalising their donations, wealthy families can ensure that the causes they want to support continue to be fulfilled into their future generations.
Interlacing sustainable investing and strategic philanthropy with wealth planning is not only about making a meaningful impact in communities – it can also help UHNWIs chart a longevity plan for their business, wealth and, ultimately, their legacy.
At the end of the day, it is about finding a sustainable investment and philanthropy approach that best matches a family’s values.
The writer is global head of wealth planning and family advisory at Standard Chartered Bank
Keyword added to your list