Investors hesitant to deploy green capital

Despite growing investments in environmentally-aware investments, individuals and family offices want more evidence of superior returns

High-profile climate change protests and campaigns have done little to boost much-needed investment from the private wealth sector into green and sustainable finance, a report warns.

Research from Guernsey Finance, a joint industry and government initiative that promotes the island’s financial services sector, reveals a massive 45% of private wealth and family offices have invested between nothing and 10% of their wealth in sustainable or green assets – while a third (34%) have only invested between 11% and 25%.

Only 4% of those surveyed had invested over 50% of their money into sustainable and green assets.

This is despite the private wealth sector being increasingly important in attracting capital into ESG-friendly investments to help boost the green asset market.

The research comprised responses from some 20 owners of private wealth, family offices and high net worth individuals, with a combined estimated worth of £25bn, as well as 50 service providers, earlier this year.

In addition, a quantitative survey was carried out with more than 40 family offices and corporate services providers across the financial services sector in early summer 2019.

A family office is a privately held company that handles investment management for wealthy families, generally one with over £100m in investable assets.

The survey also showed only half (51%) of the private wealth owners surveyed were considering increasing asset allocations into green and sustainable finance, with the under-40s driving most of this enthusiasm to invest.

The results seem to fly in the face of the views held by professional advisers.

According to a report by Guernsey Finance earlier this year concerning private equity and green finance, approximately three-quarters of professional advisers indicated that they or their clients had increased their exposure to green and sustainable investments over the last three years.

Although more capital is finding a home in green investments, individuals and family offices appear to be looking for greater confidence in returns and in the green credentials of their investments.

The vast majority of respondents (71%) said an enhanced prospect of improved returns would help increase their pursuit of green investment, followed by greater clarity of green credentials (58%), and better accessibility to sustainable investment products (40%).