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ANALYSIS

Private capital ‘essential to address climate change’

DUBAI, September 15, 2021

The majority (86 per cent) of global private wealth holders, family offices and foundations see investing their private capital as essential to address climate change, alongside action from government, charities and corporations, a report said.

The 2021 edition of “Investing for Global Impact: A Power for Good” produced by Campden Wealth on behalf of Global Impact Solutions Today (GIST) and Barclays Private Bank, provides unique insight into the attitudes and actions of the world’s wealthiest individuals, families, family offices, and their foundations when it comes to generating positive impact with their capital.

The majority (80 per cent) of wealth holders said climate change is a relevant factor in the decisions they make for their investment portfolio, with 67 per cent saying they would like their family portfolio to meet the requirements of the 2oC scenario of the Paris Agreement.

Despite recognising the action required, there is some concern around the public and private sector’s ability to solve climate issues. Eight in 10 (79 per cent) agree that governments’ pandemic stimulus packages should prioritise green investment and the transition to a low carbon economy. Only 50 per cent believe that it is possible to keep global average temperature increase below 2oC.

At the same time, they would like to see governments and wealthier nations doing more. Nine in 10 (89 per cent) believe that governments should do more to meet the Paris Agreement, and61 per cent have expressed a concern that this year’s United Nations Climate Change Conference (COP26) won’t make sufficient progress to fully address climate change.

Similarly, 71 per cent believe that developed countries, in particular, should be increasing their financial commitment to developing countries and to the solutions to avoid climate change.

Transition to net zero presents huge opportunities to invest for change

Seventy per cent of respondents agree that the transition to net zero has become “the greatest commercial opportunity of our age” as it represents a chance to benefit from the companies and innovations addressing climate change. Thirty per cent of global wealth holders are targeting investments that directly support a transition to a low carbon economy, and 24 per cent are seeking to avoid any companies that they assess as major contributors to the issue of climate change.

Almost six in 10 (59per cent) allocate capital directly to companies, projects, and real assets, while 41 per cent of portfolios invest via an indirect strategy created and run by asset managers and other intermediaries.

Growth in sustainable investing as well as fears of greenwashed assets

Sustainable investing is expected to continue expanding within portfolios. This year’s report reveals almost two thirds of respondents (63 per cent) agree that Covid-19 has made impact investing more appealing. Furthermore, for those already active in sustainable investing, they expect it will account for, on average, 47 per cent of their portfolios by 2022 and 54 per cent by 2027.

Even the respondents who self-identified as only traditional investors have started to adopt the responsible investing practice of using ESG. In fact, nearly half (48 per cent) of these “traditional” investors say that their portfolios now incorporate ESG considerations.

As private wealth holders make these portfolio transitions, 76 per cent are concerned about making an investment that has been greenwashed. Respondents say they would be most reassured by: robust measurement and reporting (59 per cent), trust in the leadership of the invested company or investment (55 per cent), or a track record of past impact delivery from the company or fund (45 per cent).

Respondents still see room for improvement in terms of accessing high-quality impact investment opportunities and information. The two gaps most frequently highlighted by respondents in finding available impact investing vehicles are lack of a strong financial record (97per cent) and lack of a strong impact track record (95 percent).

Dr Rebecca Gooch, Senior Director of Research at Campden Wealth, said: “Sustainable investing is gaining steam among ultra-high net worth investors, and COVID-19 has only acted as an accelerate to that. While many want to use their wealth to combat the climate crisis, they also recognise that the rapidly expanding ‘green industry’ is an incredible investment opportunity.

“Sustainable investment returns are now successfully competing against those of traditional investments, and evidence of their effectiveness at tackling global challenges is becoming increasingly hard-hitting. In turn, a growing number of private investors are opting in. Given that single family offices alone manage more than $6 trillion in assets worldwide, this is helping to propel the industry forward at a time when sustainable solutions are needed most.”

Gamil de Chadarevian, Founder, Global Impact Solutions Today (GIST), said: “It is only through positive, collective action today that we can save our planet and civilisation tomorrow. To generate the required sustainable, transformational, and inclusive paradigm shift, we need a holistic vision and a systemic strategy. Our current social, health and environmental problems can only be mended with dynamic actions and tangible goals.

“To regenerate our environment, economy and democracy, good intentions alone will not suffice. Prominent families, like those who contributed to the research, have a combination of expertise and capital to play a leading role for the future of our planet.”

Damian Payiatakis, Head of Sustainable and Impact Investing, Barclays Private Bank, said: “Climate change is the next, and larger, systemic challenge we have to face globally. It is encouraging that leading global wealth holders are seeking to play a role in this fight. From our conversations, I hear them express both a responsibility and an opportunity to use their capital at this pivotal point.

“While we see heightened awareness, action does not always immediately follow. Moreover, navigating the rapidly growing green investment market is increasingly difficult. So we’re having to work more to help individuals and family offices articulate the impact they want to make; and then find high-quality investments that will actually contribute to the solutions to counter climate change as well as target the returns they want.” – TradeArabia News Service




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