High net worth (HNW) individuals, families and family offices are increasingly taking into account climate change and the types of investments that have the potential to make a difference for the environment.
According to research by Barclays Private Bank, Campden Wealth and Global impact Solutions Today, HNWs intend to nearly double the asset allocation going to impact investing.
More specifically, in 2019 the average allocation was 20%, but they plan to grow their environmental investing to 35% in the next five years.
But some are already taking action as the proportion of wealthy investors and families increasing their allocation to more than 20% next year is set to grow to 39%, up from 27% currently.
Over a quarter (27%) have even pledged to increase their environmentally friendly holdings to more than 50% by 2025.
Catalyst for change
The drive to swiftly change asset allocation has three main drivers: 38% of investors believe they have a responsibility to make the world a better place; 26% want to show that family wealth can create positive change, while 24% think that this approach will lead to better returns and risk profiles.
Overall, more than eight in 10 believe they have a responsibility to support ESG initiatives.
More specifically, 83% are concerned about the current global impact of climate change, while 52% believe that the long-term effects of climate change pose the greatest threat to the world.
As a result, these concerns have fed into their investment choices and preferences.
Positive outcomes
Rebecca Gooch, director of research at Campden Wealth, said: “Globally, over $30trn (£23trn, €25trn) is now being invested sustainably and this trend towards responsible investment is catching on rapidly within the private wealth community.
“A notable proportion of wealth holders are now engaged and there are expectations, particularly since covid-19, for a considerable hike in their investment over the coming years.
“Wealth holders see the challenging state of the world, and the risks and vulnerabilities both individuals and businesses face due to covid-19 and climate change, and they want to act.
“For many, responsible investing is not only the ethical thing to do, but it is simply good business practice.”
Damian Payiatakis, head of sustainable and impact investing at Barclays Private Bank, added: “Investors are being challenged to safely pilot their family’s lives and their portfolios through the disruptions of 2020, and it means they are having more discussions about the future – how their family’s wealth can reflect more of their values and the role they want to play in society.
“Families are considering the impact of their capital and then increasingly taking action, by allocating more towards solving our urgent global societal and environmental issues.
“We see that investors wanting to make this shift are looking for guidance to navigate the rapidly evolving field and to access high-quality opportunities that can deliver financially and with positive outcomes.”
