Impact Investing for the Family Office

Why and how to do it?

Is your family office doing impact investing? The answer is, in fact, yes.

Whether you want it or not, you do have an impact. Everything we do, brings an impact to the world. As family offices, we have a special impact because of the amount of wealth we manage, the freedom to decide that we have, and the patience of our capital.

Once you realize this, you want to have a say on the kind of impact you have.

A very common trait of family offices, and often the very reason of the creation of a family office, is the wish to stay in control. Nowadays, UHNW individuals and families want to be in control of :

• their wealth,
• their reputation,
• their vision,
• their legacy,
• and, yes, their impact!

Family members, especially newer generations, are now active stewards of their wealth. They want to be more intentional, and feel proud about their family’s legacy.

This mindset brings the need and the increasing interest we are seeing for impact investing in the family office space.

But what is impact investing?

I particularly like this image showing the spectrum of capital. It is easy to understand impact investing is not to be considered anymore as an asset class, or an alternative investment.

Nor does it mean sacrificing profit over positive outcomes!

Instead, we can see the possibility for an intentional family office to choose where to place their own cursor on this spectrum, and this for each asset class and every type of investment, from real estate to private equity for example.

In the specific frame of the family office, I recommend Scott Saslow’s book : « Building a sustainable family office ». Scott offers his insights on what key elements contribute to the long-term success of a family office, all the way to impact.

You can also listen to his intervention in the FOX PODCAST.

Now, how to start?

There are, as usual, tons of resources out there to get you started on impact investing, from bringing impact into an existing portfolio, to create a 100% impact family office. Here are my two favorites :

1. Impact Frontiers and their amazing online curriculum, as well as their compelling work on impact norms, are worth taking the time to dive into.
   
2. Impact Investing Institute is one of the most complete and interesting website on the subject. You will learn, have access to up-to-date data, cases studies and more. Don’t forget to download their full 56 pages book called « Family offices : A roadmap to impact »!

Here is the summary of this book to give you an idea of where to start :

1. Creating an impact framework and theory of change: Learn how an agreed impact investment approach can be formalised, structured, and documented in a way that all stakeholders can understand and buy into.

2. Developing an investment policy statement: See how the desired impact strategy can be translated into a clear, practical investment policy to guide investment professionals in the day-to-day portfolio management.

3. How to start allocating capital for impact: Look at the pros and cons of creating an impact ‘carve-out’ versus building towards an 100% impact portfolio.

4. Working with external advisers and managers: Including the questions to ask to determine a provider’s level of commitment to and experience in impact.

5. Impact measurement and management: Discover resources and good practices to help measure and manage the impact you are achieving.

6. Finding community and collaboration: Learn about the peer networks, impact organisations and family office communities to help inform, support and inspire you on your impact journey.

This book really helped us define our impact strategy through writing a Theory of Change, deciding on an Investment Policy Statement, and refining our approach.

The overall process has been already beneficial to the family, even before seeing the outcomes. It generated intense discussions within the family, and has been a true factor of integration for the nextgen, bringing a sense of inclusion into the strategic vision of the family office.

Have you already implemented impact investments in your portfolio? Is it still a work in progress? What have been your difficulties on this journey?

Tell us all, share and comment!