11/10/23

SUSTAINABLE FINANCE: ESG investments rise steeply among HNWs

As published on: spearswms.com, Wednesday 11 September, 2023.

The TMF Group’s Global Business Complexity Index suggested HNWs were embracing ESG investing, and were looking for safe havens to avoid geopolitical challenges.

Interest in ESG investments is soaring among family offices and private clients, a new report suggests.

The TMF Group this week published its annual Global Business Complexity Index, which looked at investment trends in the private wealth and family office (‘PWFO’) space, as well as the impact of geopolitical challenges and regulation on private clients in different jurisdictions.

One of the key findings of the 2023 report is the increasing emphasis placed by private clients and family offices on responsible investing. To obtain the data, the TMF Group asked its network of PWFO experts in 78 jurisdictions how clients’ investments have changed in the past year.

The firm’s private wealth experts said the number of wealthy clients and family offices investing in an environmentally-friendly way rose by 71 per cent in 2023.

Meanwhile, 70 per cent of private wealth clients increased their ESG investing in companies or funds which are ‘governed responsibly’.

However, a relatively modest 54 per cent had reportedly increased investments which improved social outcomes.

‘We have noticed that private wealth clients are increasingly focusing on more responsible management of their wealth,’ Tim Houghton, TMF Group’s head of private wealth and family office services, told Spear’s. Houghton was appointed to the role at the beginning of October after serving as the firm’s market head for the Channel Islands.

‘This may be influenced by changing views of the next generation in addition to families re-evaluating their approach post-pandemic.’

Away from ESG investing, researchers at the TMF Group also asked private wealth and family office experts whether they are optimistic about business and political conditions in their jurisdictions.

Almost two-thirds (65 per cent) said their jurisdiction would be more appealing to operate in over the next five years, higher than last year’s reading of 61 per cent. However this still represents a drop from 2020 when nearly three-quarters (74 per cent) of respondents said they were feeling bullish about their future prospects.

While there is more optimism around greater geopolitical (70 per cent) and economic stability (71 per cent) across all jurisdictions, sentiment in all categories was more gloomy than in 2020.

‘The report highlights the importance of political, geopolitical and social stability. Our data shows that confidence has been somewhat shaken given that,’ Houghton said.

‘This seems to suggest that optimism is declining and that businesses are taking a more cautious approach to investment particularly when dealing across borders.’

Meanwhile, the firm’s PWFO experts in more than half (56 per cent) of jurisdictions predict an increase in HNWs choosing to invest their wealth there because of wider geopolitical instability.

The report also considers the challenges faced by private wealth clients as a result of sanctions imposed on Russian businesses in response to the invasion of Ukraine.

Intensifying sanctions, as well as a concerted global fight against organised crime and terrorism, have led to the majority of clients in different jurisdictions reporting that the regulatory environment is tightening. Only 13 per cent of respondents said they are not expecting a tightening of compliance measures in their respective locations.

Tags

ESG Sustainable Finance HNWIs