According to legend, The Rockefeller Foundation coined the term ‘impact investing’ in 2007, putting a name to investments made with the intention of generating both financial return and social/environmental impact. Has the concept reached maturity nearly a decade later?
Family offices around the world are far more active in impact investing than originally thought, with almost two-thirds (61%) now active in the area or likely to be in the near future, according to the Global Family Office Report 2016.
In a sign of its growing maturity, the wider social considerations of impact investing have even seeped into the traditional investment practices of family offices—two of the single family offices profiled in the report even said social or environmental considerations are now factored into all investment decisions.
Millennials—those born between 1980 and 2000—are reportedly a key catalyst in the move towards impact investing, yet office executives have wised up to the benefits of socially responsible investing with nearly half (47%) responding that it is a more efficient way of achieving impact than philanthropy.
According to the report, supporting charitable causes continues to be a priority for many family offices. The average level of philanthropic giving by office respondents in 2016 sits at 2.5% of their assets under management—equivalent to almost $19 million.
One-third of participants were likely to increase their philanthropic allocations, while another two-thirds said their allocations would likely remain the same. Education was identified as the biggest beneficiary of family office philanthropy this year.
The 61% of family offices now active or likely to be active in impact investing highlights a new challenge for the notoriously discreet wealth sub-sector: establishing a new methodology for the way that investments are made and monitored.
Source: Finnigan, Michael, CampdenFO, Issue 28, January 16, 2017; http://www.campdenfb.com/article/global-family-office-report-2016-key-findings-impact-investing