Part one
Creating a thriving future
World Shaping Wealth: the impact of affluence on the next economy reinforces the idea that the world’s wealthiest individuals and families are ready and willing to help find solutions to the most pressing challenges that are dominating news agendas around the world.
We've seen evidence of this over the past several years, with Warren Buffett being one of the most well-known examples of an UHNW individual who feels "Society has a use for my money; I don't". These individuals are working with governments and organisations to support causes they care about including; healthcare, economic growth and climate protection.
Shaping positive change
Today’s UHNW individuals and families want to direct their wealth to positively change the world. 81% of our respondents believe that they have a responsibility to help solve global issues, including environmental challenges and public health crises. When we look at millennials alone (the youngest cohort in our study), this rises to 94%.
This suggests there is a growing social awareness and global outlook among the next generation of wealth creators.
While there are instances in recent history where philanthropy was seen as the 'moral obligation' of the wealthy, it has often been perceived as of lesser importance to growing and protecting wealth. The global UHNW community are now putting societal change at the heart of their decision making.
Rather than discrete philanthropic actions or one-off donations, UHNW individuals are considering how they can make broader, more lasting change, often by trying to positively influence policy. In our study, 62% of UHNW individuals say that they actively engage with leaders and governments on global issues, and work for positive change for society as a whole.
of our respondents believe that they have a responsibility to help solve global issues
China spotlight
Global issues are particularly high on the agenda for Chinese UHNW individuals
of Chinese UHNW individuals believe that they have a responsibility to use their wealth to help solve global issues.
of Chinese UHNW individuals say that solving real world problems is an important factor in using their wealth, compared to a global average of 64%.
In part due to the influence of their heirs, UHNW individuals now see their wealth in a twofold way: they are considering how they can preserve wealth for the next generation, but also how they can help create a healthy, sustainable world for future generations to thrive and prosper. The next generation of wealthy Asians see sustainability as a way to put their mark on the businesses they will be inheriting. They understand that this is good for the planet, but will also help attract future investment.
As advisors, we need to be able to offer broad expertise that is international in scope and holistic in approach.
Mark Chan, Managing Partner, Hong Kong
Tackling social and environmental crises
Which global issues specifically are attracting the attention of UHNW individuals? We're witnessing a shift in attitudes. While only a few short years ago, education was the favoured area to focus philanthropic activities, our study shows that the vast majority of UHNW individuals now want to channel their wealth towards combating climate change, powering technological advancement and meeting global equality objectives.
Against the backdrop of the COVID-19 pandemic, UHNW individuals are considering how their wealth can be used to deal with health emergencies and reinvigorate depleted economies. 73% of UHNW individuals want to use their wealth to help prevent a future pandemic and are willing to be actively involved in the process.
Private wealth has a critical role to play in funding medical research, helping to finance the development of vaccines and new diagnostic and testing tools. An obvious example of this is Uğur Şahin and Özlem Türeci, founders of BioNTech, the developers of the first, widely used COVID-19 vaccine.
Those UHNW individuals who are not scientists themselves have the power to engage with the pharmaceutical sector to ensure that treatments and medical devices are widely available and affordable. And we are seeing figures like Jeff Bezos helping to pioneer cellular rejuvenation with his investment into Cambridge's Altos Labs.
The wider adverse impact of the pandemic will also require significant capital for economic recovery, and 65% of our UHNW respondents believe it is important to use their wealth to finance the global recovery from the pandemic.
The life sciences research sector is continually generating innovations that have potential to be life changing for individuals, but also humankind if widespread and chronic or persistent diseases can be mitigated or eliminated. Devices, digital health products and most particularly drugs require an enormous amount of funding to get them to market. They present investors with substantial risks to their capital because the chance of failure is high. It is though a case of nothing ventured, nothing gained: those innovations will not see the light of day without investors being prepared to take those risks to enable safe and effective products to come to market, including some that will be revolutionary for individual patients and even society.
Alison Dennis, Head of Life Sciences and Healthcare, UK
The challenges facing the climate are also high on the agenda of UHNW individuals. Many are considering how they can channel their investments to help combat climate change and reach global sustainability goals. Two-thirds of UHNW individuals want to help prevent a climate emergency by investing in the transition to net zero carbon emissions1. This will likely mean directing capital towards companies with ambitious and credible decarbonisation targets and clear transition strategies, and investing in assets and companies that are actively driving decarbonisation in areas such as renewable energy, sustainable agriculture and electric vehicles.
Furthermore, the vast majority of UHNW individuals lead or are actively involved in their own businesses and are focused on ensuring their own companies are taking appropriate steps to meet sustainability and carbon neutrality standards.
Investing in the fight against climate change can involve taking risks on emerging technologies, and it is in these areas that UHNW individuals have a particularly critical role to play. Private capital can power advancements in clean technology and sustainable innovations in ways institutional investors cannot, as the risks are often high and the returns long term. 72% of intermediaries believe that private wealth will be as important as institutional wealth in providing the financing required to transition to net zero by 2050.
1 Net zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere. The term net zero is important because – for CO2 at least – this is the state at which global warming stops. The Paris Agreement underlines the need for net zero, requiring states to ‘achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century’ (Source: Net Zero Climate).
Taylor Wessing’s 2012 Private Capital and Clean Energy study explored the well-established link between the high net worth community and the clean energy sector. So unsurprisingly, this interest is not new. A recent study by Campden Wealth highlighted that impact investments met or exceeded investors' financial returns, with the overwhelming majority of the respondents in their survey believing that there is no trade off in financial performance when investing for impact.
Not only does the sector hold opportunities for attractive returns in itself but, by investing in clean energy assets or companies at an early stage, private capital investors (such as UHNW individuals) can exploit potential synergies with their existing business interests. For example, they may invest in cutting-edge technologies that can be integrated into other industrial and manufacturing companies within their business empire.
What is new is the urgency with which private capital now needs to be directed towards clean energy and other environmental endeavours. The achievement of the UN Sustainable Development Goals (SDGs) is a good example of this. Governments worldwide have been under pressure in recent years to strengthen their tax systems in order to generate the funds necessary to meet the SDGs.
The pandemic has added pressure to government reserves, with economies worldwide struggling to balance immediate calls on spending to protect livelihoods with the need to make investments in longer-term goals. In developing nations this is particularly stark; most developing economies will simply not be able to raise the funds to meet the SDGs without private investment. Private capital is urgently needed to plug the funding gap.
Thankfully the global pandemic, and the resulting economic and social disruption, does not seem to have dulled investors’ enthusiasm towards renewables. Clean energy companies have shown incredible resilience over the pandemic period, in contrast to the volatility of industries such as infrastructure and fossil fuels. In fact, 2021 saw a green energy push, with an unprecedented boom in global renewable energy capacity and investment capital flooding in, and this is only likely to accelerate as countries around the world strive for a green recovery.
Technology, like carbon capture, will be crucial to the net zero carbon transition. But investments here are uncertain and have a long horizon, so companies in this space often struggle to attract venture capital or traditional institutional money. This is where private wealth can play a really important role, providing much-needed finance to develop this technology and build a greener economy. UHNW individuals have a huge opportunity here to drive change and make a meaningful difference on these big issues.
Mark Barron, Head of Inward Investment Practice
