According to a recent report in Bloomberg, super-rich families and family offices are increasingly including sustainability and ethics in their investment charters. Assets managed under the broad definition of sustainability reached 27 billion euro at the start of 2018 – a 30% increase from 2016.
In Australia, the Liberman family is one of the wealthiest family offices with a net wealth of approximately 1.5 billion euro. The family’s wealth is derived from the late Jack Liberman who invested significantly in retail and property assets.
In an interview with the Australian Financial Review, Berry Liberman (the grand-daughter of Jack Liberman) discussed their approach to investing “I think money can be a great enabler…money need not dictate to us the world we should live in. Rather, we can use money to create a world we want”.
For the Liberman’s and other wealthy families around the world, there is a new paradigm to investing - equity, sustainability and positive impact drive decision making and analysis.
Berry and her husband have established a Certified B Corporation “Small Giants” to invest with a ‘deeply passionate and innovative ethos’ in a diverse agenda including partnerships with start-up social enterprises and large-scale social and environmental projects. A recent investment includes ‘Tom Organic’ – a Melbourne-based business that makes women’s sanitary products from natural fibres.
The use of Certified B Corporations is also expanding rapidly. The accreditation is managed by B Lab which is a global non-profit organization and companies must receive a minimum score for social and environmental performance. In June 2019 there were over 2,750 certified B Corporations across 64 countries.
So, what exactly is sustainable investing? The generally definition is an investment strategy that considers traditional financial analysis together with three other factors – environment, society and governance. This is referred to ESG investing.
A report by UBS/Campden in 2018 found that 34% of family offices were involved in some sustainable investing, so there is still a long way to go. And plenty of opportunity for asset managers with strong ESG focus to convince family offices of the merits of their narrative and business.
Another Australian wealthy investor, Danny Almagor, explained the sustainable investment philosophy driving many family offices to the Australian Financial Review: “identify investment opportunities that offer commercial returns whilst creating a positive social and environmental impact to improve the world in which we live”.
And it is not just in Australia - the trend is global.
In the Netherlands, Wijnand Pon, co-founder of Dutch conglomerate Pon Holdings BV, has established a foundation to invest in large-scale and long-term land restoration projects.
The foundation is called Commonland and has an ambitious mission to transform degraded landscapes into thriving ecosystems and communities. What is interesting is the strategic business case the foundation is adopting to help fight climate change.
Land degradation is one of the world’s great problems with about 25% of total land area in a degraded state. When land is degraded, soil carbon and nitrous oxide is released into the atmosphere. This makes land degradation one of the largest contributors to climate change.
Scientists have predicted that up to 24 billion tons of fertile soil was being lost each year due to unsustainable agricultural practices. If this trend continues 95% of the Earths land areas could become degraded by 2050
Commonland is dedicated to working with global partners to transform 100 million hectares of degraded land into thriving ecosystems and communities by 2040. It will do this through a unique blend of profit and purpose that may well become a model for other family offices and high net worth individuals.
In July 2018, Commonland became a foundation shareholder of the world’s only publicly listed regenerative agriculture companies – Wide Open Agriculture Limited. This business was established in Australia to transform degraded land, restore biodiversity and create a strong, sustainable business.
Wide Open Agriculture limited offers a glimpse into how profit plus purpose vehicles will be structured in the coming years. A listed enterprise, with a sustainable, vertically integrated business model and a goal to deliver positive measurable impact on the ecosystem and environment. A large family office is already on the register as one of the founding shareholders. It is already delivering strong cash flow and making a positive social and environmental impact.
Many high net wealth individuals and family offices are also looking to start-up accelerators to drive sustainable business and create positive impact. Mike Cannon-Brooks is a co-founder of tech software giant Atlassian and has a net worth around AUD $13 billion. Cannon-Brooks is a passionate advocate for investing in climate-change start-ups saying recently “humanity faces a climate change emergency – it’s a crisis that demands leadership and action”. He wants to drive change rapidly and the start-up accelerator model offers the ability to mix founders and investors to achieve massive scale to bring about positive sustainable impact.
In the United States, ESG investing amongst the super wealthy is growing exponentially. The Bill and Melinda Gates Foundation is at the forefront of driving change through innovative co-operation agreements with business. Gates has teamed with Harvard physicist David Keith to create a business that could decarbonise the global economy by extracting carbon using giant fans then using the gas to make clean, carbon-neutral synthetic gas and petrol to power ships, trucks and planes.
The message is clear – ESG investing is now mainstream. The super-rich and family offices are not content to passively sit by and invest or donate in the hope change eventuates. They want to be part of the solution and derive financial benefits from creative, innovative, sustainably driven investing.