Impact investing is growing in importance among family offices, philanthropists and other private wealth holders, according to a survey by Campden Wealth, GIST Initiatives and Barclays Private Bank
Private wealth holders are increasingly building sustainable and impact investments into their portfolios, and report that impact investing is delivering solid financial returns, according to a new survey from Campden Wealth, GIST Initiatives and Barclays Private Bank.
Investing for Global Impact: a Power for Good 2022 found that, on average, 32% of the portfolios of investors surveyed were already allocated to impact investments, and that, based on their expectations, that figure would rise to 50% in the next five years. Nearly 40% of respondents expected more than 80% of their portfolios to be in impact investments by then.
Responses showed that investors were becoming more eager to generate positive outcomes through impact investing rather than simply by de-risking their portfolios using ESG considerations.
“As such, we see a stronger willingness to act around systemic issues, such as preventing a climate breakdown. The vast majority of the respondents believe that private capital will be essential to address climate change, alongside action from governments, charities, and corporations,” the report said.
The authors surveyed 149 individuals, families, family offices, and foundations on their attitudes towards and activity within sustainable impact investing and philanthropy. Family offices accounted for 58% of this total – an increase from 30% in the 2021 edition of the survey. “The increase in family offices reflects a rising interest in impact investing within the family office space,” they said.
The remainder of respondents were Individual investors and families (28%), foundations, including those of privately held corporations (9%) and charities, not-for-profits and universities (5%).
The report underlines the growing sophistication of investment strategies, with 37% of existing impact investors now active with multiple impact investments across asset classes or causes. That 21% of respondents consider impact investing to be their primary portfolio approach shows that the market is now able to cater to more advanced portfolio construction, the authors said.
Impact and returns
There is also evidence that impact investing should not be equated with low returns. Financial returns on impact investments met or exceeded expectations for 80% of respondents. Meanwhile 37% expected their impact investments to outperform traditional investments in five years, and 44% thought they would be generating the same level of returns as traditional investments.
The leading target sectors for investors are education, health and wellbeing, and climate action. Respondents saw the largest increases over coming years coming in food and agriculture, healthcare and clean water.
Greenwashing concerns now play a major role in investment decisions. Three-quarters of respondents said they were concerned about making an investment that is greenwashed. Almost half said greenwashing was the greatest challenge for impact strategies over the next five years.
One not-so-obvious factor supporting the shift towards impact investing is pressure from younger generations of philanthropically minded investors to increase the focus on sustainable investments. More than half of survey respondents thought impact investing was creating a bridge between older and younger generations. It will be this new generation that will drive future investment strategies in family offices and philanthropic organisations.