In looking to get a better understanding of how family offices are interacting and dealing with SRI issues, later this year Eurosif is to publish the 2010 Family Office Study. Eurosif has partnered with the Global Partnership Family Offices on this initiative and it is the intention of the groups to conduct a survey to gauge interest from family offices.
The study is to be a follow-on from Eurosif’s “European SRI Study 2008.” Based on a survey of asset managers and self-managed asset owners, we found that total SRI assets under management (AuMs) had reached €2.7 trillion as of December 31, 2007 and represent as much as 18% of the asset management industry in Europe. This corresponds to a remarkable growth of 102% since December 31, 2005.
The European sustainable/green investment market’s growth is driven by:
\- An increasing demand from institutional investors, for which responsible investment becomes a matter of risk management; A further mainstreaming of ESG considerations into traditional
\- financial services;
\- External pressure from NGOs and media;
\- A growing interest from
\- individuals, particularly wealthy individuals/family offices.
Today the role of family offices is increasingly becoming significant in the SRI field as they seek to tap into microfinance, thematic investing and other means to engage on sustainability issues while seeking healthy financial returns.
There are two drivers in the intersection of family offices and sustainable investing which will result in a shaping and growing of the overall sustainable/green investment market in the coming years:
1\. The amount of wealth available for investing by this group remains substantial and is projected to expand further;
2\. The demand for ‘sustainability criteria’ as an offering for the family office segment is growing largely due to a generational shift in thinking about capital growth and preservation as well as financial out-performance prospects.
The Eurosif survey showed the market is in an early, high growth phase. In spite of the recent market turmoil, 87% of respondents thought interest for sustainable investments would grow in the next three years. More importantly, 75% of surveyed family offices think that sustainable investment will increase in the generational transfer of their family’s wealth.
Eurosif estimated that sustainable investments represented approximately 8% of European Family offices’ portfolios as of January 2008 and predicted that by 2012 the share would have increased to 12%, surpassing the €1 trillion mark.
The sustainable investment strategy most often employed among family offices is thematic investment, with clean energy and water as their preferred sustainable themes. Perhaps not surprisingly, family offices often rely on a close circle of other families within their network to find the right sustainable investment opportunities that respond to their specific needs. This is partly due to a lack of appropriate product offerings but also, equally, due to a wariness of wealth manager motives. In order to service this market effectively, it requires wealth managers to gain a comprehensive understanding of family offices’ goals – both financial and sustainable.
Another interesting finding from the research is that once families begin to invest in sustainability offerings, ‘toe dipping’, they often move up the curve to dedicate significant portions of their portfolios to the field. For example, approximately 27% of those surveyed view sustainable investing as a significant part of their overall portfolio:
[table]
Share of HNWIs’ portfolio invested in sustainable products
The 2008 study was so popular that Eurosif has agreed to conduct a follow up -this year to gauge how the market has changed. Some of the suggestions for further study from the first report will be analysed, include:
• A clear understanding of family office investors’ motives around sustainable/green investment, in order to develop or find the proper financial products that share and reflect their concerns.
• Examples of market rate performance to convince family offices that sustainable investments can perform as well as other traditional investments.
• Improved information and education on sustainable investments for family offices.
EUROSIF, the European Sustainable Investment Forum, is the pan-European network whose mission is to address sustainability through the financial markets. Eurosif works as a partnership of the national Sustainable Investment Forums (SIFs) within the EU and with the support and involvement of Member Affiliates. Recognised as the premier European forum for sustainable investment, Eurosif’s Member Affiliates are drawn from leading pension funds, asset managers, NGO’s, trade unions, academic institutes and research providers, together representing assets totalling over €600bn. The key benefits that Eurosif affiliate members receive include EU interfacing, SRI information and European wide initiatives that integrate Environmental, Social and Governance (ESG) issues into the financial services sector. For the full list of Eurosif Member Affiliates, please see [www.eurosif.org](http://www.eurosif.org).
