In yet another sign of the growing interest in impact investing, the Forum for Sustainable and Responsible Investment (US SIF) has just released a guide for family offices on impact investing.
The report “captures the ‘buzz’ about investing for impact among family offices, which is definitely on an upswing, thanks in part to the interest of millennial generation members,” said Lisa Woll, CEO of the US SIF and US SIF Foundation, in a statement.
The growing availability of impact investment options and increasing evidence that such investments can achieve comparable or better results than conventional investments also underlie the growing interest in sustainable and responsible investing, according to the US SIF report.
The foundation says there is no definitive data on how many family offices practice sustainable and responsible investing, also known as ESG investing (for environment, social and governance) or just impact investing, but suggests the potential market is huge.
Its biennial survey of social investing trends heard from just a small sample of family offices, which indicated that just $1.5 billion of their assets take into account ESG factors. That’s a tiny portion of the estimated $1.7 trillion in assets under management of some 3,000 family offices in the U.S.
Given the potential for much more ESG investing among family offices, the Forum for Sustainable and Responsible Investment included several recommendations and resources in its report:
— Appoint a “champion” within the family who is interested in exploring socially focused investments and can encourage other family members to discuss their investment goals and values, including specific social, environmental and/or corporate governance issues of concern.
Specialist consultants can help family members articulate impact goals and achieve consensus when there are disagreements or discord about how to move forward. Additional outside experts can also help to stimulate and resolve debate.
— Review studies that compare the financial performance of sustainable investment to traditional investment funds. This is especially important because the investment goals of most family offices are to preserve wealth and meet cash flow needs. US SIF provides a list of such studies at http://www.ussif.org/performance.
— Educate family members, investment staffers and advisors about sustainable investing through online and live courses, networks and conferences. The US SIF Foundation has its own Center for Sustainable Investment Education accessible at www.ussif.org/education and its new guide includes an appendix of related resources and reports. — Enlist the help of financial advisors or consultants with expertise in sustainable and responsible investing options and strategies. The forum has a directory of financial services (add Link) which includes links to consulting firms as well as financial planners, advisors and brokers. It also has a link to separate account managers in sustainable and responsible investing
— Consider one or some of these Investment strategies, included in the World Economic Forum’s Primer on Impact Investing for Family Offices:
- Gradually overlay impact investing strategies across every asset class in a portfolio
- Test the waters with a smaller portion of the portfolio as a one-off investment through a family foundation or donor-advised fund, or a carve-out of the broader portfolio
- Commit a portion of the portfolio to impact-focused companies or funds
- Seed an investment vehicle for impact investing by backing an existing manager with an established track record or establishing a new investment team for that purpose.
“Our guide highlights a number of family offices that have made the commitment to utilize their investment assets for positive social and environmental impact,” says Woll. “We hope that the recommendations and resources provided in this report will motivate many more family offices to follow their example.”
— Related on ThinkAdvisor:
- Retirement Plans Will Be ‘Next Evolution’ in ESG Investing
- DOL Clears Way for Impact Investing in Retirement Plans
- Morningstar to Launch ESG Scores for Mutual Funds & ETFs
- The Growing Influence of Impact Investing
- Why Advisors Ignore ESG Investing at Their Peril
- Sustainable Investing: No Longer a Backwater