In time, however, these dynamics will start to swing as younger family members begin to have more influence over investment decisions (while it’s also possible that we could see a shift in attitudes among many older family heads). So, while families may say they are not ready to add sustainable funds or securities to their portfolios today, the story could soon be different.
Family offices, therefore, that fail to make these investments available or, worse, are not conversant in them, could face challenges going forward.
Performance And Impact Concerns
UBS also found that about a third of family offices have concerns over whether sustainable investments have a long enough track record, while 24% worry about returns. Another 22% say they are uncertain whether sustainable investing really has the impact its proponents claim it does.
All these issues are, of course, related. Over time, these investments will build up a history, which will then shed light on not only whether they perform well, but if they do what they say they are supposed to do.
Keep in mind, though, that in 2018, 85% of sustainable investments either matched or exceeded the performance of traditional investments of the same type. Also, if clients have concerns about the efficacy of general sustainable investment funds, which are typically loaded with multiple holdings, there are ways to overcome them. One option is funds focused on a particular sustainable asset (like solar). Another is to make a more targeted investment (a wind farm).
Millennials Soon Won’t Be The ‘Next’ Generation
The day is coming when the millennial members of high-net-worth families will no longer be the “next” generation. Instead, they will be in charge, and there is a strong indication that these clients are already focusing more on sustainable investments than their parents’ generation.
Family offices should take this into account when tailoring investments and planning for their clients’ futures – and their own.
Robert Sher is co-founder of Greenbacker Capital, an investment firm focused on the sustainable infrastructure sector.