Navigating ESG Requirements as a Family Office
As the global demand for ESG continues to grow, HFM caught up with Mandar Naik, Managing Partner at Finaegis Wealth, a Wealth Management firm based in India, to discuss how they have navigated ESG requirements as a family office.
What has driven the demand for ESG within family offices and what key strategies have been put in place to meet these demands?
Giving back to society has always been a large part of Indian culture. The balance and awareness between economic impact and ESG is driving change towards ESG allocations. Responsible business practices have been a part of the industry as a strategic view for a very long time. Historical returns have always shown ESG, as we would like to call it today, has given significantly higher shareholder returns.
Globally, family offices are connecting more often to share thoughts and ESG has been at the forefront. It has led to family offices from emerging markets embracing the change and nurturing this mindset. ESG driven organisations are beating benchmark returns and balancing impact. It is creating a profitable generational transitional value system and a win-win.
Were there any key challenges faced by your firm when integrating ESG both into the business and into your investment portfolios, and what would your advice be to firms that are facing similar challenges?
The ability to create a process around ESG as a mindset, and having a long-term view on returns and intangible benefits, is the primary challenge. Data analytics can quantify the intangible benefits for future generations and present them as tangible figures. A combination of both is the solution to the challenges we face today.
Democratisation of ESG opportunities and communication at a fundamental government policy level across the demographics of age and income will make the conversation more mainstream. The advice is to keep sharing information and engaging all stakeholders to increase familiarity and thence allocation.
How can digitalisation help drive ESG forward?
Digitisation drives engagement in mass, maintains accountability via blockchain, distributes benefits or subsidies and provides very quick execution capabilities. Like any other asset class, ESG can take the benefits this technology has to offer to become more transparent and grow. It is important to humanise the engagement as digitisation is a means to an end, and the causes ESG fights for are more esoteric and behavioural. ESG should be human first, supplemented by digitisation.
What makes impact investment particularly attractive to family offices?
A family office is designed with generational values at the core. It is an amphitheatre where everyone has a seat and a say. The multigenerational legacy and the new age passions are all part of the impact investing domain. Impact investment allocations offer well being and a higher sense of purpose, accompanied by fantastic risk reward in which makes it very attractive in today’s world.
How can family offices embrace ESG and generate positive cash-flows?
Start the culture of embracing principles of ESG at home first. Application of economic principles and extrapolating the same thoughts around ESG companies will make a great use case about the sustainability and the cash flow positive nature of ESG. It should be an all-encompassing family discussion first.
Allocate and measure impact across ESG investments in risk reward, both tangibly and intangibly, slowly but surely. Let it be a part of the broader objectives where the value system and cause along with the IPS drives ESG allocations.
What would your recommendations be to other family offices that are looking to embrace ESG into their business?
The advantages of embracing ESG today will offer a J curve benefit as these policies and companies will give extraordinary returns once it starts to become an everyday part of life.
To learn more about navigating ESG requirements, join HFM at the Barbican Centre in London on 1st December for the launch of our first HFM European ESG Summit.
The HFM European ESG Summit will bring together over 100 CEO, COOs and senior investment relation professionals from across Europe, to discuss best practice surrounding ESG implementation across both investment portfolios and the core business. Our esteemed faculty will address a range of hot topics including how to demonstrate a commitment to ESG, reducing carbon footprint, the sustainable finance taxonomy, diversity and inclusion and more, to provide delegates with relevant and actionable insights.