Private wealth clients may have been late to the sustainable investment party, but they have recently caught up with institutional investors in their level of interest and commitment to investing responsibly.
This represents a big opportunity for independent wealth managers to advise them on how to reconcile their financial objectives and their sustainability concerns, and most importantly on how they can implement this across their investment decisions.
Yet independent wealth managers often find this challenging because the industry’s sustainable investment offering (and its associated jargon) has become increasingly complex.
Even though Contrast Capital is a boutique advisory firm specialised in sustainable investment, in our work with family offices we always put aside the labels (impact, responsible, ethical, sustainable investing) and focus on the underlying concepts.
Private clients form a very heterogeneous group and their motivations and risk appetite can differ significantly.
The first step is to help them create a solid understanding of their own values – or in most cases the shared values of the various family members through facilitated workshops – and how this could translate into investment opportunities in different asset classes.
The second step is to help them understand how this can be done within the context of their long-term financial objectives, be it capital preservation or liquidity needs, and their current asset allocation.
The third step is to consider whether they tend to invest directly or through external asset managers.
These aspects are all critical determinants of their future impact investment strategy. In our experience, private wealth clients rarely want to be in a situation of sacrificing financial returns for positive impacts. The younger generation in particular tends to believe that creating economic value and societal value goes hand in hand.
They are keen to get a better picture of the environmental and social impacts of their investment, but also realise that finding the right portfolio metrics is tricky, and that the most important thing is to understand how proxy indicators can increase their confidence that they are transitioning their overall approach towards a more sustainable one.