Family offices have a history of putting their money towards causes that they care about, usually via philanthropic activities managed through a separate arm to their for-profit investments. But as a new generation of family members takes the reins of these investing and giving activities, the boundaries between positive impact and venture capital returns are gradually merging.
ESG (environmental, social, governance), or impact, investing is a huge trend across the asset management sector, with firms competing to show how they can combine doing good with delivering outsized returns. And family offices have been following suit, with research by UBS showing that almost two thirds (62%) of families regard sustainable investing as important for their legacies and three quarters (73%) are already investing at least some assets sustainably.
But despite the positive sentiment behind impact investing, it has hit a wave of controversy in recent years and might not be the ‘silver bullet’ that it initially seems. A lack of standards and a desire by many firms to cash in mean the sector is increasingly facing charges of ‘greenwashing’ and, at its most extreme, of inadvertently funnelling funds away from initiatives that really make a difference. This is the argument made by the former sustainable investing chief at Blackrock, Tariq Fancy, who recently called ESG investing a “dangerous placebo”.