Impact investing set to double over the next five years
Climate change affects choices of 87% high net-worth investors
High net-worth investors plan to increase their allocation to impact investing from 20% of their portfolios in 2019 to 35% by 2025, new research reveals.
The proportion of wealthy investors allocating more than 20% of their portfolio to impact investing is expected to rise from 27% to 39% in 2021, while a quarter (27%) anticipated allocating more than 50% in the next five years, according to research from Campden Wealth, Global Impact Solutions Today (GIST), and Barclays Private Bank.
The research surveyed over 300 high net-worth investors from 41 countries with an average net worth of $876m.
"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," said Rebecca Gooch, director of research at Campden Wealth.
"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. Here is where smart investment and deep pockets can make a real difference in impact and ESG investment. For many, responsible investing is not only the ethical thing to do, but it is simply good business practice."
Two-thirds of global high net-worth investors believe Covid-19 is likely to broaden their risk assessment to include more ESG factors.
Interest in ESG funds has surged during the pandemic and figures from Morningstar show that flows into sustainable funds more than doubled to $54.6 billion over the second quarter of 2020.
In a sign that sustainable investing is set to be a long lasting trend, 66% of investors said they would add an ESG component to their portfolios in response to the Covid-19 crisis.
The research also revealed that 64% of respondents 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.
This uplift is being driven by investors who believe they have a responsibility to make the world a better place (38%), while other respondents said this approach will lead to better returns and risk profiles (24%).
Meanwhile, 26% are looking to show that family wealth can create positive outcomes around the world.
Climate change threat
Eight out of ten investors said they felt a responsibility to support global social and environmental initiatives, while just over half (52%) believe that the long-term impacts of climate change pose the greatest threat to the world.
Around four-in-five (83%) are already concerned with the effects of climate change seen globally and these concerns corresponded to 87% saying climate change plays a part in their investment choices.
"Investors are being challenged to safely pilot their family's lives and their portfolios through the disruptions of 2020," said Damian Payiatakis, head of sustainable and impact investing at Barclays Private Bank.
"It means they are having more discussions about the future and 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."
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