ESG Investing  

How ESG can help succession planning

How ESG can help succession planning

A common interest in environmental, social and governance investing can help advisers connect with the younger generations.

Research from Barclays Private Bank showed that although the ‘millennial’ generation was the driving force behind the shifting of family assets towards sustainable investments, all generations thought responsible investing was important.

The bank polled 400 high net worth families in Q2 of this year and found while 70 per cent of older, wealthy generations said the millennial group was leading the family towards more sustainable investing, four in five of all generations indicated that responsible investing was important to them.

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A similar amount (80 per cent) had already changed their investments to reflect their interest in social and environmental assets.

For those not already invested, some 22 per cent among the older generations said they wanted to find out more about sustainable options while 19 per cent were interested specifically in impact investing.

Barclays suggested the overall interest in sustainable investing could provide a “common ground” between the generations, and help with succession planning.

Damian Payiatakis, head of sustainable and impact investing at Barclays Private Bank, said: “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 a family around shared values and supporting intergenerational wealth transfer.”

Advisers have long been urged to connect with the younger generations in a family in order to retain them as clients when the assets are inherited, with estimates that 300,000 people are set to see a windfall of £327bn in the UK over the next ten years.

The research suggests sustainable investing could provide the basis for better relationships, as members said different risk appetites, life values and educational backgrounds affected the direction HNW families collectively took on investments.

Different risk appetites was the main sticking point, with 61 per cent of family members saying they had conflicting views, while the impact of social media (47 per cent) and differing education backgrounds (40) also created a chasm between the generations.

Alan Chan, director at IFS Wealth and Pensions, said advisers needed to cater for this in order to “protect their business”, as many advisers had an ageing client bank.

He added: “Advisers need to gain the trust of the younger generation too, or else they’ll go to someone else who does understand their needs.”

For Sian MacInnes, adviser at Philip James Financial Services, ethical investing was already the ‘go to’ option for clients unless they specifically wanted to “opt out”.

She added: “I find that most of my clients are receptive and yes, the younger ones are always ready to embrace new ideas but many of those nearing retirement are thinking of their children's future and do take ethical investing very seriously. 

“When you explain that ethical investing is not necessarily in very small companies but large companies with names they recognise it becomes easier for the older generation to understand and be enthused.”