New research from Barclays Private Bank on the intergenerational transfer of wealth shows that Environmental, Social and Governance (ESG) investing has been brought into wealthy families’ consideration by the younger generations. This has led to increasing family allocations to sustainable assets and is acting as a common ground for the different generations in financial planning, despite competing priorities and different views towards risk.
The survey found that:
- Seven in ten among older wealthy generations say the millennial generation is leading their family towards more sustainable investing
- Four in five of all generations of high net worth family members indicate that responsible investing is important to them
- Four in five wealthy families have already changed their investments to express more of their beliefs in social and environmental responsibility
- Whilst outlook on responsible investing is shared, three in five say that different appetites for risk between generations have influenced financial and wealth transfer planning
Barclays Private Bank’s Smarter Succession: The Challenges and Opportunities of Intergenerational Wealth Transfer research, undertaken by global intelligence business Savanta, identified that two thirds (68%) of older high net worth (HNW) individuals say that their children have been leading the family on sustainable and responsible investment matters.
As a result, sustainable investing is now resonating with more HNW individuals of all ages and generations, uniting families around shared goals of investment responsibly and making financial returns. One in ten (11%) of all generations say that having a positive environmental impact is a top personal aim, and over a third (37%) strongly agree that responsible investing is now important to them, demonstrating the potential of ESG issues to align with overall wealth objectives across generations and bring families together around securing their financial future.
Furthermore, for around four in five of each of the studied age groups, investing responsibly is important to them to some extent, with 81% of under forty year-olds, 77% of forty one to sixty year-olds and 86% of over 60 year-olds agreeing.
Changing attitudes have led to a substantial shift in the way HNW families are investing, with almost four in five (78%) expressing their views on social and environmental responsibility in their investments.
This shift is highest in the UK (83%) and the Middle East (82%). India is lower in comparison, but still with 62% investing with social and environmental considerations, this indicates that there is a significant international movement towards a more sustainable investment approach.
For those who aren’t already investing this way, 22% of the elder generations would like to find out more about their sustainable investment options, and 19% are interested in understanding more about investing specifically for positive social and environmental impact, suggesting that the trend is likely to continue to grow.
78% of HNW families are expressing their views on social and environmental responsibility in their investments
Sustainable investing may provide a place for common ground between the generations, where issues such as risk appetite continue to bring conflicting views from different generations. 61% of family members cite different risk appetites between the generations as affecting the direction they collectively take on investments.
High net worth families say that broadly different life values (575), the impact of social media (47 %) and differing educational backgrounds (40%) are also areas that are contributing to different outlooks and priorities between the generations, and in turn affect financial and succession planning.
Half of this millennial generation say that these factors contribute to them feeling that their overall financial aims and objectives are not understood by the rest of the family.
Philanthropy is another area where the younger generations are taking a role in using family wealth to positively affect the world, but in contrast to sustainable investing, charitable giving tends to be led by the older generation, showing that each age group is finding different ways to give back to society.
Over sixties more commonly say that philanthropy is their passion (38%) than the under forties (20%), but in the majority of families (74%), the older generation hands responsibility for managing philanthropic activity to their children.
Damian Payiatakis, Head of Sustainable and Impact Investing, Barclays Private Bank comments: “Our research shows how the younger generations, who have been engaged longer with sustainable investing, are providing a vocal impetus within their families to shift the perspectives of older generations. As well, most of the narrative around sustainable investing focuses on the benefits for your portfolio alongside people and planet. Now, we can see its potential benefits for aligning your family around shared values and supporting intergenerational wealth transfer.
“With the heads of the families thinking about succession planning and investing beyond their personal lifespan, our conversations has extended to include how sustainable investing can secure their children’s future, their readiness to inherit family wealth, and a common ground for family discussions around wealth.”