The total size of what is called impact investing has been pegged at $715 billion and this approach has grown significantly in recent years. The study examines the reasons why HNW individuals, family offices and other entities are putting more money to work this way.
High net worth individuals, families, family offices, and foundations plan to boost allocations to impact investing to 35 per cent by 2025 from 20 per cent in 2019, a study shows.
A quarter (27 per cent) of all investors expect to move to more than 50 per cent invested for impact within five years and 87 per cent of investors say climate change influences their investment choices, while over half (52 per cent) view climate change as the greatest threat to the world. The findings come from a survey by Barclays Private Bank and Campden Wealth and Global Impact Solutions, a platform and network group.
The study, called Investing for Global Impact: A Power for Good, now in its seventh year, was conducted from more than 300 respondents from 41 countries, with an average net worth of $876 million and cumulative net worth estimated at $264 billion. Additionally, case studies with prominent investors and philanthropists also featured in the report.
“Investors are being challenged to safely pilot their family’s lives and their portfolios through the disruptions of 2020, and it means they are having more discussions about the future - how their family’s wealth can reflect more of their values and the role they want to play in society,” Damian Payiatakis, head of sustainable and impact investing, Barclays Private Bank, said.
Impact investing relates to how money is put to work to achieve a particular outcome, such as cutting criminals’ reoffending rates, improving child literacy, or clearing up pollution. Such investing is also designed to produce a monetary return. An estimated $715 billion globally is covered by inpact investing (source: Global Impact Investing Network, 11 June 2020). This way of spending money can overlap with more traditional forms of philanthropy. It is also sometimes conflated with environmental, social and governance (ESG)-driven investing, where investment returns are the main focus, but where non-financial tests also apply.
The proportion of the wealthy investors allocating more than 20 per cent of their portfolio to impact investing is expected to increase from 27 per cent to 39 per cent as soon as next year, and a quarter (27 per cent) are predicting to allocate more than 50 per cent within five years from now.
A quarter (24 per cent) of respondents to the survey think this approach will lead to superior returns and risk profiles, and 26 per cent want to show that family wealth can create positive outcomes around the world.
The study also found that COVID-19 made people more aware of global issues; some 69 per cent of them said the virus affected how they think of investment and the economy.