Family offices: Bridging ESG and asset management

Given their size and structure, family offices (FOs) move at a quicker pace without being saddled with rigid protocols

The 2019 Global Family Office Report prepared by UBS and Campden Research notes that more than 25% of family foundations are actively engaged in impact investing. Our experience in recent years echoes this finding. ESG - the acronym for environmental, social, and governance - has become an increasingly significant investment focus for the family foundations and philanthropic trusts of our Asian clients.

Despite being smaller than global institutional funds, FOs have more than sufficient clout to make a difference in the private funding space. Instead of being solely driven by key performance indicators, many FOs operate based on philanthropic values shared by the family, which are increasingly coming to the fore and evolving into investment themes.

While there is no standard blueprint for impact investing, guidelines offered by the 2014 World Economic Forum (WEF) report, Impact Investing: A Primer for Family Offices, are highly informative:

1. Vision Casting: Determining the family’s core values, long-term goals and legacy so that investment strategies are aligned and articulated clearly.
2. Developing appropriate guidelines: There is no “one-size-fits-all” formula to adopt ESG strategies. FOs have to develop a strategy that aligns with their investment philosophy and philanthropic vision.
3. Re-thinking and Upskilling: FOs need to acknowledge that impact investing requires a cultural transformation and mindset shift across the entire organisation. Rehiring, enlisting the support of external advisors and forming a sustainability committee will help FOs develop investment processes that integrate ESG considerations.
4. Impact Assessment: Defining “success” has long been a challenge faced by impact investors as returns go beyond financial performance. FOs can work with knowledge partners and expert advisers to avoid ambiguities and potential disagreements here.

The Asian Venture Philanthropy Network (AVPN) published The Guide to Effective Impact Assessment in May 2016, which explores key elements of impact assessment, as well as viable frameworks and templates. Key takeaways from the guide include:

• Identifying recipients of and motivation for the impact assessment reports.
• State clearly the social goals to be impacted, obtain data from all relevant stakeholders and ensure outcomes are measurable.
• A business’s stage of development will inform the robustness of data collection. Paper data collection will give way to digital means of data collection.
• The data collected needs to be interpreted appropriately.
• Templates for both standardised and customised indicators in due diligence, performance management and risk management are available.
• Ensure that the results of your impact assessment comply with reporting guidelines and are presented in the most suitable format for the audience.

Where ESG is incorporated, FOs should evaluate their portfolio regularly and adjust their investment goals and strategies where necessary.

FOs can play a catalytic role in demonstrating to the world where the bridge between philanthropy and asset management lies. Perhaps a pot of gold awaits all who cross that bridge.

Daniel Yong

Daniel Yong is a Partner in the Corporate team at Withers KhattarWong. He specialises in investment funds and cross-border private equity and M&A transactions. Daniel represents private fund managers, sovereign wealth funds, family offices and corporate clients specialising in the real estate, venture capital, financial services and energy industries. He routinely advises on regulatory and licensing issues affecting fund managers and capital markets intermediaries in Singapore and manages complex fund formation and cross-border investment mandates in the Asia-Pacific region.

Roy Ang

Roy Ang is the Head of Business Development and Marketing (APAC) at Withers KhattarWong. He is in-charge of co-developing and implementing business strategies with the Firm’s partners and manages Asia Pacific-focused marketing initiatives such as pitch production, digital campaigns, press relations, events and market research. In 2017, he was named by the Singapore Business Review as one of Singapore’s 10 "Most Notable Chief Marketing Officers Aged 40 and Under", and was the only law firm marketing professional on the list