When it comes to ESG investing, families have often been first out of the gate, but finished stone-cold last when it comes to telling of their work in this field to the outside world.
In our latest poll, we found that three-quarters of the public would think positively about a wealthy individual or family if they were investing their wealth responsibly and sustainably.
To many, these results will not be shocking, nor surprising, yet when it comes to managing their reputation, so many families are staring into an open goal, too afraid to kick the ball into the back of the net. In a world where public opinion towards private wealth is increasingly unstable and volatile – something I wrote about for Family Capital in June – why aren’t those with wealth preparing to communicate this positive impact to the outside world?
What does the public think?
We have never all been so aware of the importance of socially and environmentally responsible business. The public has been sensitive to ESG-related issues for some time, however over the last five years, there have been a few seminal moments that have heavily shaped public opinion – from the impact Sir David Attenborough had on how we think about plastic waste through to the rise of Extinction Rebellion across the world that shone the global spotlight on climate change.
These moments have created a cumulative effect in creating more public awareness and mindfulness of these important issues, and it has become a modern-day yardstick to how the public view – positively or negatively – businesses, organisations, government bodies, and many more alike.
The public is by and large less tolerant of those businesses engaged in anti-ESG related practices and they are not afraid to wield their purchasing power in effecting how businesses operate.
This is now trickling down to well-known wealthy and successful families, as there has been a continued uptick in demand for information and transparency for those that hold private wealth.
Responsibility of wealth
ESG aside, more than ever before, the public and the media want to know how UHNWIs are deploying and using their wealth. Are they using their wealth in a positive or negative way? How are they contributing to society and the economy? Are they investing responsibly?
They want to know whether wealthy individuals are using their wealth in a responsible way – and they’re more likely to think positively about that individual if they are – by creating jobs, through philanthropy, the amount of tax paid, and now ESG investing.
On investing, the bar for how families are judged on the investments they make has never been higher, and this brand-new poll shows this. The public, the media, business partners, and other stakeholders will likely judge – either good or bad – well-known families by what they invest in.
The COVID-19 pandemic has highlighted the importance of the ‘S’ and ‘G’ too, in terms of how companies respond to the economic challenges of the pandemic and how they treat their employees.
Those who are seen to be profiting from non-ESG investments – particularly from those controversial industries such as oil, fossil fuels or arms – or even in businesses that have fair and equal governance structures – are likely to be exposed to more negative press attention and public opinion.
Those who are passionate about investing in ESG companies and funds are likely to be more well-received by the public and stakeholders – if their work in this area is communicated effectively.
Opportunities vs risks
For many years, wealthy families have steered clear of those controversial industries in favour for ESG investments, not to avoid reputational pitfalls, but genuinely because they are passionate about ESG.
This is a trend that will continue as first-generation families begin to hand over the reins to the next generation, who are typically more attuned and aware of these issues.
Not only do they care deeply about these issues, but ESG stocks continue to perform well under pressure. HSBC found that ESG-graded stocks have outperformed by 3.7 per cent in the three months following 10 December last year.
However, families have been resistant in communicating the work they do in this all-important space – either because they don’t see the value in doing so or because they are more than happy for their work to continue in the background, without claiming any credit for it.
Families are now subject to more exposure than ever before – and this poses a series of reputational risks. Families need to be attuned to these risks, of course, and with the growth of online and social media, those risks are coming from more and more directions, but they need to think more positively and proactively about communicating their impact in the increasingly important world of ESG.
I hope this new poll marks a turning point for how families think about external communications on how they approach ESG, because there’s a real opportunity to satisfy that need for information and impact with work and projects that the family's reputation will benefit from, even if that is often an after-thought.
Of course, the catch-22 is that families' reputations only benefit when their work in this space is honest, altruistic and genuine – rather than done as a cynical tactic for trying to artificially gain a positive reputation or even repair a negative reputation.
Families are leading from the front on ESG – it’s time for them to let more people know about it.