Rich families pour wealth into ESG investments

More family offices are poised to integrate ESG and impact as millennial heirs inherit fortunes

Sep 16, 2019 @ 5:30 pm

By Bloomberg News

Super-rich families are increasingly including sustainability and ethics in founding principles of their private investment firms, according to Fabrizio Campelli, Deutsche Bank's global head of wealth management.

"Family offices are now putting ESG in their investment charters," Mr. Campelli said, referring to environmental, social and governance matters. There are some family offices in California that can't invest less than 40% of their assets in ESG, he said.

(More: Register now for InvestmentNews' inaugural ESG & Impact Forum on Dec. 5 at the United Nations)

Demographic shifts are encouraging a surge of activity designed around investments to combat climate change, address inequality or simply to encourage companies to operate in a more sustainable fashion.

Assets managed using a broad definition of the approach reached $30.7 trillion at the start of 2018, about a third more than two years earlier, according to a report funded by a group of financial companies, including Bloomberg News parent Bloomberg LP.

[Recommended video: How the 2020 elections could impact ESG investing]

Family offices that place a premium on impact and ESG include those of film director James Cameron and his wife Suzy Amis;the Omidyar Network started by EBay founder Pierre Omidyar; Blue Haven Initiative, which is run by Liesel Pritzker and Ian Simmons; and Ceniarth, which oversees the fortune of the late Eugene Isenberg, former chairman of Nabors Industries.

More family offices are poised to integrate ESG and impact as millennial heirs inherit fortunes. Those born between the early 1980s and mid-1990s are set to take possession of as much as $30 trillion, according to research firm CB Insights.

"There's a lot more focus on this now," said Laura LaRosa, executive director of client development at Glenmede, which oversees more than $40 billion for almost 2,000 families. "People have now come to the realization that it's important to invest alongside your values."

Deutsche Bank's wealth management arm is accelerating its ESG strategy in response to client demand, adding sustainability and ethics ratings to assets and more funds focused on the area, according to a statement Monday.

Germany's largest lender is shifting resources to wealth management while slashing thousands of trading jobs worldwide.

"We're doing this because clients are asking for it," Mr. Campelli said, referring to the bank's ESG program. "You don't need to compromise the performance of investments. You're just helping to add purpose."

Some clients have been pretty vocal in their requests.

RS Group Chair Annie Chen said at a June conference in Singapore that while many banks promise to offer more deals that do good, their front-line bankers and relationship managers often failed to do so.

"I'd urge you to really step up your game besides the pronouncements that you make at the likes of the World Economic Forum, and give budget to your different branches, different regions, so that your front-line people — the wealth relationship managers — actually get educated about sustainable investing," said Ms. Chen, whose Hong Kong family office is dedicated to impact investments.

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