World’s rich set to invest 75% more into social funds

This is clear evidence that the wealthy are becoming greener investors as they hunt superior returns.

Wealthy families plan to almost double the amount of money they allocate to socially responsible investments over the next five years, in a strong indication of where they see the source of future returns.

High net wealth individuals, foundations and other groups – with an average net worth of $876 million – already invest on average 20% of their portfolios in so-called impact funds, which provide capital to address social and environmental issues.

By 2025 they plan to increase this to more than a third (35%), according to new research by Barclays Private Bank.

More than a quarter (27%) of wealthy investors expect to go even further. They plan to move in excess of half their portfolios into impact investing over the next five year, the Barclays research shows.

By next year, 40% of the world’s rich plan to have more than a fifth of their investments in sustainable projects.

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Dr Rebecca Gooch, director of research at Campden Wealth, said: “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. 

“For many, responsible investing is not only the ethical thing to do, but it is simply good business practice.”

Impact investors put money into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact, alongside a financial return.

More than $30 trillion was invested sustainably in 2018, according to the Global Sustainable Investment Alliance (GSIA).

While this can include a wide range of projects, a clear focus for investors emerged from the Barclays research.

Almost all (nine in 10) said climate change influences their investment choices, while over half (52%) view climate change as the greatest threat to the world.

The recent pandemic is spurring many investors to reconsider how they can use their wealth to reshape the work in more positive ways.

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Seven in 10 respondents said Covid-19 has affected their views of investing and the economy. Two-thirds said the health crisis is likely to broaden their risk assessment to include more environmental, social and governance (ESG) factors. Driving this uplift is the belief of two-in-five respondents that they have a responsibility to make the world a better place.

A quarter believe this approach will lead to better returns and risk profiles, and 26% are looking to show that family wealth can create positive outcomes around the world.

Gamil de Chadarevian, founder of Global Impact Solutions Today, said: “There has never been a better time to fast-track investment for sustainable progress and smart innovation to generate profound impact for people and planet.”