13/10/20

SUSTAINABLE FINANCE: Private wealth impact investing set to almost double in 5 years, according to Barclays study.

As published on internationalinvestment.net, Monday 12 October, 2020.

The average portfolio allocation in leading private wealth holders and family offices investing in ESG funds is set to almost double, increasing from 20% in 2019 to 35% by 2025, according to research published by Campden Wealth, Global Impact Solutions Today (GIST) and Barclays Private Bank today.

Data for Investing for Global Impact: A Power for Good, now in its seventh year, was collected from over 300 respondents from 41 countries, with an average net worth of $876m and cumulative net worth estimated at $264bn.

The proportion of wealthy investors allocating more than 20% of their portfolio to impact investing is expected to increase from 27% to 39% as soon as next year, and a quarter (27%) are predicting to allocate more than 50% within five years from now. As such, the average portfolio allocation to impact investing amongst these investors is expected to increase from 20% in 2019 to 35% by 2025.

Driving this uplift is the belief of 38% that they have a responsibility to make the world a better place. 24% believe this approach will lead to better returns and risk profiles, and 26% are looking to show that family wealth can create positive outcomes around the world.

While 53% of these wealthy investors say Europe is leading the world in carbon neutral initiatives, 86% want governments to do more. Yet at the same time 81% recognise the role of private capital in addressing climate change. With this in mind, 39% would like to know the carbon footprint of their portfolio to inform their investing.

Covid-19 has made individuals increasingly aware of the world around them, with 69% of respondents saying that it has affected their views of investing and the economy. Nearly half (49%) believe that investing will not return to normal, even after the crisis subsides, and 22% think that the impact investing market is about to take off.

66% say that they are likely to broaden their risk assessment to include more ESG factors, while 64% insist that the crisis will force a deeper reconsideration of shareholder capitalism, and 69% agree that how companies behave during the crisis will determine their investment attractiveness afterwards.

Healthcare ranked the second most popular impact sector, and a notable 84 per cent say that they plan to increase their investment to healthcare over the coming year, a proportion that outstrips all others.

Rebecca Gooch, director of research at Campden Wealth: "Globally, over $30trn 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."

Gamil de Chadarevian, Founder of GIST, said: "There has never been a better time to fast-track investment for sustainable progress and smart innovation to generate profound impact for people and planet."

Damian Payiatakis, head of Sustainable and Impact Investing, Barclays Private Bank, said: "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."