Families of wealth in Asia are increasingly looking to impact investing rather philanthropy to achieve social and environmental good, according to a new report released this week.
Over the next three years families anticipate allocating 44% of their “doing good capital” to impact investing, compared with 33% today.
Asian Philanthropy: An Evolving Landscape is the third in a series, produced by Credit Suisse in partnership with Campden Research, which have examined generational wealth in the region.
The bulk of participants surveyed had personal wealth of more than $50 million, coming from family businesses with average revenues above $900 million.
Almost 60% of families surveyed thought that impact investing was a more efficient use of funds than philanthropy in order to achieve social good, while families were evenly divided on whether impact investing was riskier than philanthropy.
A Singaporean wealth holder quoted anonymously in the report said they were looking to increase allocations to impact investing: “I’m an angel investor as well in some of our businesses, and some of them really do have a social mission. I’ve spoken at an impact investing conference as well as getting more linked into the impact investing community.”
Sixty eight per cent of survey respondents considered impact investing an asset class, a finding the report attributed to the fact a considerable number of impact assets are in private equity and venture capital.
“In reality, this investment approach spans across various asset classes from cash to fixed income, funds, public equities, real estate and other real assets,” the report stated.
The debate whether impact investing should be an asset class or investment approach was addressed by the G8 Social Impact Investment Taskforce in its recommendations published last year, stating that it should be an approach across asset classes. However, the report added that while the investment approach is still in its infancy many investors may choose to treat it as an asset class – which may be what the report’s findings are reflecting.
Measuring social impact was the most significant barrier preventing UHNW families becoming involved in the space, with 45% listing this as a challenge, followed by lack of qualified advice (40%), lack of track record of successful investments (35%) and lack of social enterprises and social market infrastructure (35%).
The social and environmental performance of impact investing was analysed in a report released by New Philanthropy Capital last week, which created a framework for analyzing the impact portfolio of the K L Felicitas Foundation, run by impact investing pioneers Charly and Lisa Kleissner.
Another study, released by Cambridge Associates and the Global Impact Investing Network in July, examined the financial performance of impact investments across venture capital and private equity funds. It found the average internal rate of return for impact investment funds (IRR) was 6.9%, versus 8.1% for non-impact counterparts, but performance varied across funds.
Delivering social impact was the primary driver for philanthropists and impact investors in Asia, with 95% stating this was their main objective, followed by sustainability (75%) and positive environmental impact (65%).
When it came to outcomes, philanthropists and impact investors were most satisfied with the feel-good factor they got from their doing good, followed by positive social impact.
They were least satisfied with their financial return (although this was only an objective for 15% of respondents) and also achieving environmental impact, which was an objective for 65% of participants.
The report stated that the disappointment philanthropists felt about their ability to achieve environmental impact should be an area of concern for donors and the recipients of this giving. The report speculated that the severity and scale of environmental issues could be a contributing factor to this.
Other generational wealth issues examined in the Credit Suisse/Campden Research series include family reputation and business mentorship.