Impact investing is one of the hottest topics in finance, and doing “good” while achieving healthy returns is at the top of most family offices’ agendas. Research shows that two-thirds of European family offices are now engaged in ‘sustainable investing’, up from only a third five years ago. Family offices are investing an average of 36% of their portfolio in sustainable investments, with plans to increase that allocation over the next five years.
But, despite its popularity, impact investing, also known as sustainable investing, or ESG, has come into its share of criticism in recent years. Defining what constitutes ‘doing good’ is notoriously difficult, as is measuring how far you have succeeded. This has led to widespread criticism around how much impact specially designed investment funds are really having. Reports of greenwashing are now commonplace in financial media.
For investors, including family offices, it’s easy to tie yourself in knots trying to define your impact or ESG strategy. But, if you’re already investing in venture capital, there is a strong argument that you’re already doing it. While VC might not immediately spring to mind when you think of impact, by supporting entrepreneurs tackling some of the world’s most pressing problems, VC is the original impact investing; VC investments are inherently impactful. So, family offices should consider this when planning their own impact strategies.