Next-Gen Wealthy Individuals In Asia Want To Raise Impact Investing Exposure

Tom Burroughes

16 November 2017

A survey of next generation high net worth and ultra-HNW individuals in Asia by shows they want to boost assets put to work in impact investing, although some haven’t yet pulled the trigger in actually doing so.

Almost all – 98 per cent – of the 112 respondents to the survey by the Swiss firm said they wanted to boost impact investing exposures; some 3 per cent wanted to hold all of their portfolios in this form of investment. The poll was conducted in Singapore.

Impact investing looks to be one of the most talked-about trends in the wealth management space this year. The term applies to putting money to work to generate non-financial as well as financial returns, and is distinguished from approaches where companies in areas such as tobacco, firearms, fossil fuels and use of child labour are screened out. Impact investing is seen as more “positive” than screening out undesirable assets. The area remains controversial, however. There is debate on whether impact investing will prove resilient in the event of a future recession or market reversal. Also, as more money enters the field, questions arise whether this will cause “mission drift” and move away from the core of what this approach is designed to achieve.

The Lombard Odier survey found that improved availability of good Impact Investing solutions with demonstrated performance was a major factor behind increased appetite for the approach (68 per cent), alongside rising concerns about social and environmental challenges (52 per cent).

“We have seen a shift in client interest driven in part by the next generation. During our most recent Next Generation Forum with young family business members from Asia, Impact Investing emerged as one of the most notable themes, with participants showing great willingness to gear their portfolios for impact for wide-ranging reasons largely driven by social-conscience,” Vincent Magnenat, chief executive, Asia-Pacific at Lombard, said.

The bank said the results show a trend it identified last year in a survey continued. In 2016, a study of Asian HNW individuals found that 99.1 per cent agreed that social responsibility had become important and 97.2 per cent were willing to increase their allocations to Impact Investing.

In the latest study, there appears to be a gap between what people say, and actual practice on the ground. Some 56 per cent of those surveyed were yet to make a single impact investment, and a further quarter (26 per cent) of those surveyed were unfamiliar with the basics of Impact Investing.

“While we continue to see increasing awareness around Impact Investing in the region, the market remains relatively underdeveloped compared with some parts of the world. Even among a next generation audience we continue to see HNWIs and UHNWIs in Asia take a cautious approach to increasing allocations to Impact Investing strategies. However, we do not believe it will take long for the gap to narrow in Asia with improving availability of investment instruments driving this change,” Magnenat said.

A preferred asset class for impact investment is yet to clearly emerge, with next generation respondents citing venture capital (23 per cent), tangible assets (21 per cent), listed equities (14 per cent) and bonds (13 per cent) as ways they would be interested to add impact investment into their portfolios.

The Geneva-headquartered firm said it is ranked among the world’s best asset managers by the UN PRI (A+), and has developed environmental, social and governance analysis since 1997.