Impact investing to almost double in HNW portfolios by 2025

Wealthy investors feel a responsibility to play a part in addressing climate change risk

Impact investing to almost double in HNW portfolios by 2025
Steve Randall

Some of the wealthiest investors have signalled their intentions to boost the share of their portfolio that is allocated to impact investing.

With almost nine in ten saying that climate change influences their investment choices, a survey of high net worth individuals (HNWIs), families, family offices, and foundations revealed that they plan to increase their allocation to impact investing from 20% of their portfolios in 2019 to 35% by 2025.

The research, from Campden Wealth, Global Impact Solutions Today (GIST), and Barclays Private Bank, also found that almost 4 in 10 wealthy investors plans to increase their impact investing to more than 20% as soon as next year; 27% expect their allocation to be more than half of their portfolio within 5 years.

“Globally, over $30 trillion is now being invested sustainably and this trend towards responsible investment is catching on rapidly within the private wealth community,” said Dr. Rebecca Gooch, Director of Research at Campden Wealth. “A notable proportion of wealth holders are now engaged and there are expectations, particularly since COVID-19, for a considerable hike in their investment over the coming years.”

Almost four in ten respondents are driven by a desire to make the world a better place with 26% wishing to show how family wealth can generate positive outcomes in the world, and 24% citing better returns and risk profiles.

The poll was carried out among over 300 respondents from 41 countries, with an average net worth of $876 million and cumulative net worth estimated at $264 billion. 

“Wealth holders see the challenging state of the world, and the risks and vulnerabilities both individuals and businesses face due to COVID-19 and climate change, and they want to act,” added Gooch. “Here is where smart investment and deep pockets can make a real difference in impact and ESG investment. For many, responsible investing is not only the ethical thing to do, but it is simply good business practice.”

How COVID changed priorities

The pandemic has, of course, had a major impact on the priorities of wealthy investors.

Seven in ten respondents said that it has affected their views of investing and the economy and almost half believe that investing will not return to ‘normal’, even after the crisis subsides. Impact investing is expected to be a key part of this change.

Two-thirds say that they are likely to broaden their risk assessment to include more ESG factors, while 64% insist that the crisis will force a deeper reconsideration of shareholder capitalism, and 69% agree that how companies behave during the crisis will determine their investment attractiveness afterwards.

“Families are considering the impact of their capital and then increasingly taking action, by allocating more towards solving our urgent global societal and environmental issues,” said Damian Payiatakis, head of Sustainable and Impact Investing, Barclays Private Bank. “We see that investors wanting to make this shift are looking for guidance to navigate the rapidly evolving field and to access high-quality opportunities that can deliver financially and with positive outcomes.”

Healthcare ranked the second most popular impact sector, and a notable 84 per cent say that they plan to increase their investment to healthcare over the coming year, a proportion that outstrips all others.