In the story about dealing with human-caused climate change, the importance private capital - as opposed to public equities - is well understood by family offices, a report finds.
A study of ultra-high net worth individuals and family offices, drawn from more than 300 responses globally, finds that the vast majority (86 per cent) see private capital as essential in tackling climate change, alongside actions from governments and companies.
The majority (80 per cent) of wealth holders said climate change is a relevant factor in the decisions they make for their investment portfolio, with 67 per cent saying they would like their family portfolio to meet the requirements of the Paris Agreement.
The report, Global Impact: A Power for Good, now in its eighth year, is issued by Barclays Private Bank and Campden Wealth. The respondents, coming from 33 countries, have an average of $833 million assets under management.
Despite recognising the action required, there is some concern over the public and private sector’s ability to solve climate issues. Eight in 10 (79 per cent) agree that governments’ pandemic stimulus packages should prioritise green investment and the transition to a low carbon economy. Only 50 per cent believe that it is possible to keep the global average temperature increase below 2C, the report said.
At the same time, they would like to see governments and wealthier nations doing more. Nine in 10 (89 per cent) believe that governments should do more to meet the Paris Agreement, and 61 per cent have expressed a concern that this year’s United Nations Climate Change Conference (COP26) will not make sufficient progress to fully address climate change. Similarly, 71 per cent believe that developed countries, in particular, should be increasing their financial commitment to developing countries and to the solutions to avoid the acceleration of climate change.
Almost six in 10 (59 per cent) allocate capital directly to companies, projects, and real assets, while 41 per cent of portfolios invest via an indirect strategy created and run by asset managers and other intermediaries.
“Climate change is the next, and larger, systemic challenge we have to face globally. It is encouraging that leading global wealth holders are seeking to play a role in this fight. From our conversations, I hear them express both a responsibility and an opportunity to use their capital at this pivotal point,” Damian Payiatakis, head of sustainable and impact investing, Barclays Private Bank, said.
“While we see heightened awareness, action does not always immediately follow. Moreover, navigating the rapidly growing green investment market is increasingly difficult. So we’re having to work more to help individuals and family offices articulate the impact they want to make; and then find high-quality investments that will actually contribute to the solutions to counter climate change as well as target the returns they want,” he added.