It’s no secret that a massive transfer of wealth is underway in America. Cerulli Associates estimates that over the next 25 years, nearly 45 million U.S. households will pass on a total of $68.4 trillion in wealth to their heirs.

As this shift accelerates, it will become clear that future generations have perspectives that will spur them to have different investment priorities than their parents. A recent BlackRock study, in fact, found that 67% of millennials crave investments that reflect their social and environmental values.

The way different generations view climate change offers additional clues to how younger investors could invest in the future. Among 18-34 year-olds, 51% say that climate change will pose a serious threat in their lifetime, according to recently compiled data. Among those 55 and over, that number fell to 29%.

Single- and multifamily offices should, therefore, take heed: Unless you begin to embrace vehicles that align with the priorities of the next generation of clients, you will risk losing the opportunity to work with them. 

The Current State Of Play

A UBS report found that 34% of single- and multifamily offices already dabble in sustainable investment funds or strategies, which are broadly defined as allocating capital based on a companies’ environmental, social and governance (ESG) practices. Sometimes this means excluding ‘dirty’ investments from a set of holdings, while other times it means actively investing in companies that seek to make a positive ESG impact. 

Either way, family offices are well suited to leverage these sorts of investments because, as the name suggests, their client base is made up of only a handful of high-net-worth families. That means there is more freedom – and in some cases, urgency – to build customized portfolios.

At the same time, many family offices have been slow to warm up to sustainable investment strategies. This is due to a variety of reasons, including inertia, lack of awareness, performance concerns and fears that they won’t have the intended impact. 

Inertia And Lack of Awareness

According to the UBS report cited above, 39% of family offices say they haven’t used sustainable investments because clients have expressed satisfaction with their current investment approach. Further, about one in six say they’ve discussed these options with clients but that none align with the issues they care about most. A similar number of family offices say they have avoided sustainable or impact investments altogether because they don’t know enough to feel comfortable offering them.

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