Private Wealth — Netting Rich Returns
Sustainable investment represent 8% of high net worth individuals’ portfolios, according to the European Social Investment Forum, an investor network, in a 2008 report. By 2012, the share is expected to grow to 12%, surpassing €1tn. In total, Eurosif estimates that there is currently €2.7tn of sustainable investment in Europe, representing 17.5% of total assets under management.
Wealth managers, high net worth individuals and their representatives agree that demand for sustainable investment is rising among the very rich. In a Eurosif survey for the report, 72% of this group said they had seen an increase in sustainable investment from wealthy private clients in the year to mid-2008, and 87% expected interest in sustainable investment to grow in the next three years, despite the current financial turmoil.
Significantly, three-quarters of family offices, which manage investments and trusts for wealthy families, said demand for sustainable investment would increase in the transfer of families’ wealth to the next generation.
A younger generation of high net worth individuals is driving the growth in demand for sustainable investment, says Eurosif executive director Matt Christensen. By younger clients, he means those aged between 30 and 55, who have either made new money, or who are starting to take a greater interest in managing family trust funds. “This generation has a different set of cultural values to their parents. An interest in sustainability is one of this group’s leitmotifs,” he says.
Emma Howard-Boyd of Jupiter Asset Management says of the new generation of private clients: “They are looking at sustainability as a concern for their investment, and see green business as an area of growth.”
Returns remain the top concern for wealthy private clients, as they are for all investors. But now younger investors are finding that they can achieve this and do good, Howard-Boyd says.
Sustainable investment funds focusing on particular themes, such as clean technology or water, are by far the most popular ethical choices for high net worth individuals. “They are easier to understand, and have had great performance,” Christensen explains. More than half of private wealth clients use themed investments as a sustainable investment strategy, according to the Eurosif survey. Positive and negative screening were less popular techniques, each being used by roughly a third of respondents.
