Sustainable investments by HNWIs predicted to exceed $1.4 trillion by 2012. High-net-worth individuals in Europe are warming up to "green" or "sustainable" investing, according to a Paris-based outfit called the European Sustainable Investment Forum (Eurosif).

Sustainable investments accounted for about 8% of European high-net-worth portfolios at the end of 2007 -- but by 2012 they're supposed to make up 12% of their financial holdings for a total value of more than $1.4 trillion, says a Eurosif study sponsored by Basel, Switzerland-based Bank Sarasin and the consultancy KPMG International.

"The results of the study clearly show that wealthy investors are at the heart of sustainable investment," says Andreas Knoerzer, head of Sarasin's sustainable-investment business."Investment strategies of high-net-worth individuals are not part of the problem, but creating paths towards the solution."

Drivers

The main thing driving the well-to-do European's rising affection for putting money into products and processes that purport to be beneficial to the natural environment is their transition from "only doing" philanthropy to making "greenness" a criteria for investment -- at least in a small portion of their overall holdings.

The sustainable-investing movement is also helped along by a rise personal-wealth creation and, coupled with out-performance prospects, a generational shift in thinking about capital growth and preservation, according to Eurosif.

Tom Brown, head of KPMG's European investment-management practice, sees the high-net-worth individuals the world over taking to sustainable investing, not just Europeans. And that, he adds, "is likely to provide a significant source of private-sector capital to complement public-sector funding of sustainability focused industries, products, services and business practices."

With the market is in an early high-growth phase, 72% of the high-net-worth individuals who responded to the Eurosif survey saw an increase in interest in sustainable investing in the last 12 months and thought continued interest likely through the next three years. Three quarters of the family offices surveyed said that sustainable investment will increase with the generational transfer of their family's wealth.

About a third of the sustainable-investment products owned by affluent investors in Europe are custom-tailored by managers, says Eurosif's executive director Matt Christensen. This makes serving high-net-worth individuals an opportunity "for product innovation that could eventually prove useful for other investor segments such as institutional investors," he adds. -FWR

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