From ESG to Impact: understanding the types of responsible investing for UHNWs

How can family wealth be invested for create positive impact? Exploring three types of responsible investments which are significant in driving positive change for UHNW's.

Responsible and sustainable investing has gained significant traction among ultra-high net worth individuals (UHNWs) as they increasingly seek to use their wealth for positive outcomes. UHNW’s are constantly asked exactly how they want to spend their money – whether that’s from their family office advisers or members of their own families. This trend is driven by a growing sense of responsibility and a desire to address pressing societal challenges such as climate change, health inequality, poverty, and access to vital services like healthcare and education.

According to the most recent Investing for Global Impact: A Power for Good report from Barclays Private Bank, over three quarters of private wealth holders (77%) engage in impact investing to make the world a better place. They feel they have a sense of responsibility. The report also revealed that 36% of the wealthy wanted to demonstrate that family wealth can be invested for positive outcomes, a 13% rise compared to 2021’s results.

Understanding the types of responsible investing

To comprehend the growing trend of socially responsible investing among UHNWs, it is essential to understand the different types of responsible investing and how they contribute to positive outcomes:

  1. Environmental, Social, and Governance (ESG) Investing:

 

ESG is a framework used to assess a company’s performance and behaviour in three key areas: environmental, social, and governance practices. These factors are evaluated alongside traditional financial metrics to gauge a company’s sustainability and overall impact and measure a company’s risk outside of a financial accounting framework.

ESG investing involves considering how a company manages its environmental impact (e.g., carbon emissions, resource usage), its social impact (e.g., employee relations, community involvement), and its governance practices (e.g., board structure, executive compensation). Investors who follow ESG principles may select or avoid investments based on a company’s ESG performance.

  1. Socially Responsible Investing (SRI):

 

Socially Responsible Investing (SRI) takes the ESG approach one step further by incorporating specific ethical criteria into investment decisions. Investors in SRI funds or strategies seek to align their portfolios with their personal values and social objectives. This may involve excluding investments in certain industries or companies that are considered harmful or unethical. For instance, an SRI investor may avoid companies involved in tobacco, alcohol, firearms, or those with poor labour practices. This practice is known as ‘exclusion and screening divestment’. SRI investors may actively seek out company’s, called positive reinvestment, that demonstrate a strong commitment to social responsibility as a means of furthering the impact of their investments.

  1. Impact Investing:

 

Impact Investing focuses on generating measurable, positive social or environmental outcomes alongside financial returns. The primary goal of impact investing is to support businesses or organisations that are working towards specific social or environmental objectives. These objectives could include funding renewable energy projects, supporting education initiatives, improving access to clean water, or addressing poverty and inequality. Impact investors actively seek out opportunities that can make a difference in the world while also generating financial gains.

The power of impact investing:

The desire for socially-responsible investing is driven by a growing awareness of pressing societal challenges and a willingness to contribute to positive change. The pandemic, in particular, has played a role in raising awareness and igniting a desire to tackle issues like climate change, health inequality, poverty, and other key issues addressed within the UN Sustainable Development Goals.

Sally Tennant, Founder of Acorn Capital Advisers, says: “We are seeing more individuals and families embracing the idea of creating meaningful impact through their investments, with many philanthropic foundations shifting their investment focus from exclusionary practices to actively seeking out opportunities to create positive societal changes”.

The younger generation, in particular, is leading this movement, seeking to be part of something bigger than themselves and embracing innovative approaches to philanthropy and impact investing. This collective desire to work towards shared goals is a powerful tool for change.

Impact investing, offers a powerful way for UHNWs to align their wealth with their values and actively support projects that promote positive societal and environmental change, alongside achieving financial goals. As this trend continues to grow, more and more UHNWs are recognising the potential of impact investing to create a lasting legacy for future generations.

About the author:

Matthew Millard-Beer is CEO & Founder, based in Itriom’s London Office.

About Itriom

Itriom is the global impact platform helping leading families shape a better world. Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter. Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in leadership, geostrategy, and sustainability benefit clients by developing strategies to engage and support the next generation in building a lasting legacy of which families can be proud. 

About Itriom's Leadership Practice

Itriom’s leadership and resilience practice instils all-encompassing leadership in support of principals of leading families and the next generation preparing for family succession, transition and evolution. 

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Alizah Beg

ESG Consultant

Alizah is an ESG Consultant and researcher. She supports Itriom developing sustainability related products and services, helping our clients identify potential opportunities for creating positive environmental, social and sustainable impact.

Georgina Murrin

ESG Analyst

Georgie is an ESG Analyst and researcher. She researches trends, develops insights and reports, and writes insight articles on sustainability and ESG related topics to ensure Itriom’s clients are up to date on the latest policy, progress and initiatives to inform the platform and help our clients maximise their positive impact.

Tim Boughton

Senior Partner
Practice Leader – Leadership & Resilience

Renowned family office thought leader, Tim works with UHNW families to ensure they are fully equipped to deliver their legacies inter-generationally and effectively.

Dr. Herb Castillo

Associate Partner
Practice Leader – Sustainability

Dr. Herb creates methodologies and frameworks for managing, measuring and assessing sustainability performance. His work identifies where maximum impact can be made.

Simon Hulland-Lucas

Senior Partner
Practice Leader – Geostrategy

Simon harnesses research, liaison and networks globally to identify opportunities for Itriom, building the knowledge needed to deliver intergeneration legacies for UHNW families.

Matthew Millard-Beer

Managing Partner
Practice Leader – Strategy

Matthew is Founder & CEO of Itriom, providing solutions and a global platform for Ultra High Net Worth Principals and their families to engage in unifying purpose, enduring legacy, and sustainable impact.