Why Family Offices are the Catalyst that ESG Investing Needs

The following is a guest post by Jolyne Caruso-FitzGerald, Divisional Vice Chairman for Ultra High Net Worth at UBS Global Wealth Management.

Last fall, I got a call from a legendary agricultural family with a big idea: they wanted to use their capital as a catalyst and join forces with other like-minded families and start a fund to invest in companies that are upending the world’s food systems to be more climate conscious and equitable. They had the passion, sector expertise and capital to establish the fund, but wanted to vet the strategy and fund structure and work with a firm that could connect them with equally impact-driven families in galvanizing the future of sustainable food systems. Since working with them, that fund is now launched and working toward a first close in less than 12 months.

A field and silo in Kentucky - Joshua Michaels for Unsplash

This is just one of countless clients who’ve come to me at UBS with a vision and capital these past 18 months. Amid an unimaginable global crisis, they’ve all had two things in common: they were families, and they were determined to deploy their resources to positively impact the world.

It’s indisputable that governments alone cannot ensure a more sustainable future for people everywhere. To meet the rapid pace and sprawling scale of change required to set the world on a better path, private capital is required. That means—more than ever—that families are in a position to drive fundamental and overdue shifts throughout society, not only in their philanthropic pursuits but in their investment portfolios.

Family offices are pushing the boundaries of how private capital is understood as a way to affect multi-generational change. The COVID-19 pandemic has accelerated this sea change, as it has many trends, including ESG investments. According to the Forum for Sustainable and Responsible Investments, total U.S. assets under management using ESG strategies grew from $12.0 trillion to $17.1 trillion between 2018 and 2020, a 42 percent increase. Based on what I’ve observed from my clients, that growth seems to have only continued in 2021.

The world needs urgent solutions to profoundly complex challenges, and family offices are emerging as an important catalyst. UBS research shows that more than 1 in 3 family offices intend to allocate most of their portfolios sustainably over the next five years.

My experience proves these numbers to be true and then some. Family offices are uniquely suited to impact investing—something I first noticed nearly two decades ago. In the early 2000s, my own priorities as an investor and advisor became more closely tied to social and environmental investments, especially in companies led by women. What stood out to me about family offices then has only multiplied in the years since.

Unlike some categories of investors, families can’t be put into a box. They’re complicated. Their strategies are fluid. Their decision-making is driven by the amalgamation of several people of varying ages and generational influences, so it’s no surprise that they are increasingly investing in private markets in ways that align with their values and vision for the world. In the past year, I’ve advised dozens of family offices at UBS who are putting their considerable capital behind vital causes and companies including: community redevelopment projects in opportunity zones, female and BIPOC-founded businesses, education and healthcare projects, and more.

Their growing sophistication, renewed ambition in the wake of COVID-19, and willingness to take risks for what they believe in have positioned family offices as an influential force in defining the next generation of impact investing. For any investor with ambitions to make the greatest impact on our planet, family offices demonstrate the power and potential that comes from a portfolio intentionally tied to social and environmental objectives.

Global ESG assets are poised to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management, according to Bloomberg. There’s no doubt in my mind that family offices will fuel that progress significantly. In fact, I came to UBS because I saw that families’ demand for impact investing had outgrown what I could achieve at my smaller firm. I started my role here just six months before the pandemic upended the world, and during this time—when the need for innovative, sustainably minded solutions has never been more apparent—the positive impact we’ve seen from family offices has been nothing short of extraordinary.

Jolyne Caruso-FitzGerald is Divisional Vice Chairman, Ultra High Net Worth, Global Wealth Management for UBS. She oversees the Family Office Consultant business which consists of the firm’s top wealth advisors who serve our largest, most sophisticated clients. With a long track record of working with wealthy families across generations, Jolyne’s role is to help expand the firm’s efforts to develop and deepen new and existing UHNW client relationships around the globe.

This commentary is for informational and educational purposes only and should not be relied upon as investment advice or the basis for making any investment decisions.

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