Many high-net-worth individuals (HNWI) and wealthy families want a more value-led approach to their wealth, especially the younger generation but a range of barriers holds them back from impact investing, a report has found.
The Individual Impact Investing Commission – a six-month challenge to better understand what holds wealthy individuals and families back from impact investing – produced the report. It argues that while many HNWI and wealthy families seek a more value-led approach to their wealth, HNWI investors and some family offices do not typically have access to the same levels of resource as institutional investors or fund managers, and can be held back by a range of barriers, from under-informed advisors to a lack of impact management data.
The report identifies and focuses on five key barriers:
Lack of impact investment knowledge and expertise, marketing and promotion
The need for values-centred advice, including impact investing options
Lack of appropriate products and their availability
Limited understanding of tax reliefs and related incentives and the need for innovation
Low uptake of Impact Investment through charitable giving vehicles
It also makes several recommendations for how key players in the private wealth sector could help address these barriers. These include endorsing professional accreditation for financial advisors to ensure they are qualified to offer impact investing advice; requiring all advisors (financial, legal, tax and philanthropy) to establish their clients’ appetite for impact investment; designing new networks and events to attract investor interest; and increasing government support in the form of grants or matched funding programmes accessible for private capital.
Lyn Tomlinson, Head of Impact at Cazenove Capital, commented:
“As climate change and social inequalities threaten our way of life, public funding and charitable giving continue to fall short. But, with the rise of impact investing, the vital role of private capital has never been more apparent. It is estimated that between £2 and £11 billion of private investments could be re-directed to impact investments, if only barriers to high-net-worth impact investing were addressed.”
The Commission is hosted by the Beacon Collaborative in collaboration with Big Society Capital, and was formed as a group of 11 impact investors, fund managers, advisors, advocates and experts in the HNWI investor world. They include Sir Harvey McGrath, former Chair of Big Society Capital (Chair); and leaders from Cazenove Capital, the Impact Investing Institute, Bethnal Green Ventures, Impact Investing Institute, Bethnal Green Ventures, Tribe Impact Capital, 24Haymarket, Maurice Turnor Gardner LLP, and Bridges Evergreen.
Dame Sara Llewellin, Chief Executive Barrow Cadbury Trust, commented:
“There is a new generation of HNWIs seeking more than just profit, but to invest in benefitting people and our planet. It is vital we grow this movement, as the capital is uniquely flexible and potentially patient.”
Sarah MacFarlane, Senior Investor Relationships Manager, Big Society Capital, commented:
“We hope this report will provide an important next step towards opening up the conversation on how to navigate the impact investment market for wealth holders and advisors alike, to work together to create impact with capital.”