Climate change is inescapable even for top net price individuals (HNWIs). Its impact is forcing HNWIs and their family offices to make each short- and long-term decisions. In the short term, the phenomenon is changing how HNWIs decide to live, travel and do business. In the long run, they ask themselves what the world will seem like for his or her children, grandchildren and society as a complete.
Socially responsible and sustainable Impact investing gives HNWIs tools to guard their short- and long-term interests – and potentially reap financial advantages in the method.
How climate change affects HNWIs
Florida and California are two states which have long been popular with HNWIs. But climate change could change that. Under the constant threat of storms and hurricanes, Florida is facing an exodus of insurance firms. Farmers Insurance, Bankers Insurance and AIG subsidiary Lexington InsuranceAmong other things, the state not offers home contents insurance.
California suffers from an identical dilemma. After the devastating wildfire seasons of the late 2010s and early 2020s, the state has recently persevered atmospheric rivers and megastorms. Hurricane Hilary brought a 12 months’s price of rain in a single day to some parts of the state, causing damage across the countryRange between $7 billion and $9 billion. Stung by repeated losses, Insurers proceed to boost premiums or withdraw from the state entirely.
HNWIs may give you the chance to soak up higher premiums with ease, however the wholesale lack of coverage is a unique issue entirely. Will they continue to be in these states and risk significant financial losses or relocate entirely? Leaving may solve the immediate problem, but the identical existential query stays: What sort of world do they leave to their heirs?
This is where socially responsible investing may help close the gap between success and good.
Sustainable impact investing: More than do-gooderism
Socially responsible and sustainable impact investing just isn’t only a type of money-losing altruism. HNWIs and family offices – like all investors – expect profits financial returns from their investments. While sustainable corporations have motivations that transcend the underside line, they will need to have a business model with a sustainable bottom line in the event that they are to be attractive to investors in the long run.
The growing influence of such investment strategies shows their feasibility. They have achieved some key milestones including:
1. Buy-in from global players
Socially responsible investing is increasing worldwide. Saudi Arabia’s sovereign wealth fund, the Public Investing Fund (PIF), has announced its goal of achieving net-zero emissions by 2050. Governments support impact investing.
2. More capital and customers
Environmental, social and governance (ESG) reporting is becoming increasingly vital to investors’ buying and selling decisions. Almost half (48%) have expressed interest in sustainable investing and 68% say they’d be willing to pay more for sustainable products.
From a private perspective, investing in corporations that mitigate climate change can’t only protect the physical assets that HNWIs have, but in addition help preserve those assets for his or her heirs. Climate change will not be solved of their lifetimes – or in the following generations – but an increasing number of consumers, investors, lenders and governments consider that focusing their resources on combating climate change can bring each financial and practical advantages.
There is not any substitute planet to construct on or spend money on, and HNWIs are starting to align their capital allocation with this sentiment.
Photo credit: ©Getty Images / Kofi Oliver
