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Sustainable investing can help bridge the generation gap

Families don't always agree on how wealth should be invested, but the generations are united in the belief that wealth should drive positive change in the world and society.

That's according to a new report from Barclays Private Bank, which says that sustainable investing is something that can bring the generations together when it comes to succession planning.

The study highlights the different risk appetites across generations -- with older wealth owners wanting to preserve wealth and young inheritors focused on growing it. This can lead to a sense of mistrust and conflict during the wealth transfer process.

In fact, the research found that two thirds of wealth owners (67%) are cautious about relinquishing control of their wealth to the next generation. The most common concerns include differences in attitudes, risk appetite and educational background.

Meanwhile, Millennials and Generation Z are the most likely to invest sustainably. Over a third (37%) have already made sustainable investments, and nearly half (45%) are considering it.

These generations are putting pressure on their families to take sustainability into account when it comes to their business interests.

"Younger generations tend to manage wealth with a much more explicit emphasis on bringing their values into the investment process. They want their financial assets to reflect their values and beliefs," explained Effie Datson, global head of Family Office at Barclays Private Bank. "Sustainability is much more important to them. It resonates at a much deeper level as they want to make a better world for themselves and future generations."

Every generation has a sense of responsibility to use their wealth appropriately and give back to the causes that matter to them the most, but among the older generation (38%) this has traditionally been conducted through philanthropy or charity rather than their investments.

Sustainable investing can act as a 'bridge' to help align family values and bring multiple generations closer together through a shared motivation to do good, the bank said.

"A shared sense of purpose can drive a common investment outlook as well as a collective view of the family's reputation and legacy," added Damian Payiatakis, head of Sustainable and Impact Investing at Barclays Private Bank. "Discussions of what family members want to invest into, or not, define investment preferences that express the shared family values. This communication between generations alleviates trust issues or conflicts that often arise during the wealth transfer process."

The bank went on to quote a client who has structured his family investment company to focus on sustainable and social outcome-based investing:

"To have a centre ground that blends investing with social outcomes -- which is exactly what the world of sustainable investing does -- means there is a touchpoint and point of interest for everybody involved in the transition process. I feel much better that the portfolio our money is invested in can stand up to any scrutiny because it is invested sustainably."

At Fidelius, our specialist advisers can help with all aspects of investment management. We understand that there is no one size fits all -- everyone has a different approach.

Contact us today to find out what we can do for you.

Posted on November 30th 2020

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