In a rapidly changing world with uncertainties, people are striving for the security of their properties. New challenges and opportunities are likely to emphasize sustainability and impact investing more. Family offices, private wealth management advisory firms serving ultra-high-net-worth individuals, are now on the rise. However, as more and more wealthy individuals seek to align their investments with their values along with long-term profit, what role can family offices play to be the future of sustainable investing?
A UNIQUE SERVICE
The global family offices market reached about USD 87.18 billion in 2022 and is anticipated to reach USD 133.60 billion by 2028. The service is a total solution to managing the financial and investment needs of an affluent individual or family, from finance to philanthropy. Mostly, the clients for this business model are those with a net worth of $250 million.
INVESTING FOR THE FUTURE
Families are seeking out investments that not only earn positive returns but also benefit society. A recent report found that 42% of family offices in Asia-Pacific are now engaged in sustainable investing. This shows that managing assets to be more secure and sustainable by engaging in businesses that enhance sustainability is a promising option. Hence, as investment advisors, family offices are expected to play a role in suggesting using capital to finance a greener future, such as investing in funds or companies that focus on building green infrastructure to combat climate change—or they could explore the potential of impact investments to support and restore ecosystems with companies committed to sustainable business practices such as regenerative agriculture, responsible water conservation and protecting biodiversity. Apart from that, as technology will be the enabler of a future greener society, investing in artificial intelligence and digital transformation is also becoming a trend for family offices.
FAMILY OFFICE AS A LEVER TO CLOSING THE FUNDING GAP
While most family offices have included sustainability in their investment portfolio, a few have progressed to the point of making it their primary focus. Closing the funding gap is considered one of the most challenging things in making green infrastructure and other technology supporting the transformation to sustainability viable; family offices fund can help to catalyze private capital by utilizing blended finance structures that reduce deal risk. As a result, the rise of the sustainability-focused family office has occurred in recent years. For example, Hong Kong-based Tsangs Group claims to seek positive impact investments that reflect its values of innovation, sustainability, and togetherness. Maitri Asset Management (Maitri), based in Singapore, is guided by a robust set of values and responsible investing principles emphasizing sustainable values. It employs a two-tier proprietary approach that includes a negative screen and a sustainability-integration investment framework.
For today's investors, investing in green businesses and technology is not only the proper thing to do for society but also the primary way to invest in the future. Family offices are well-positioned to meet this demand and are expected to be a driving force in closing the funding gap. However, there is still a need for other firms and partnerships to contribute collectively to this trend in order to complete the funding gap and achieve sustainability.
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