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By Hilary Schmidt, International Banker
With investors having increasingly prioritised environmental, social and governance (ESG) factors in recent years when devising their investment goals, the world has witnessed an explosion in demand for sustainable wealth-management strategies. And while the second presidential term of Donald Trump in the United States does little to advance the ESG movement, the preference for sustainability in wealth management remains undeterred amongst affluent investors in 2025. As such, wealth managers across the world are only too happy to continue integrating ESG considerations into their investment products and services.
Indeed, along with digital innovation, the sustainability pillar is seriously disrupting the wealth-management landscape, as sustainable-investment options become more popular among high-net-worth individuals (HNWIs) and wealthy families. The goals of such affluent investors today include not only allocating their wealth to traditional, albeit worthwhile, philanthropic causes but also investing in projects and organisations that can deliver sustained, positive change for the world.
Through sustainability-based approaches to wealth management, such as impact investing, therefore, investors can align their values with their wealth. This ensures they are having positive impacts on the world whilst earning sound returns comparable to those generated by traditional investments—all while ensuring they are building lasting, meaningful legacies. As such, while philanthropy usually involves a fairly narrow set of capital-based solutions to solve complex systemic issues, many HNW individuals and families are turning to sustainable and impact investing to create new wealth opportunities that combine financial gains with positive societal benefits.
This strategy reflects a more all-encompassing approach to investing that considers the impacts of investment decisions on the health of the planet and society, in addition to potential financial gains. “Increasingly, families are thinking more holistically about their wealth. In turn, they’re looking to use all the available tools to achieve their impact goals—hence connecting their giving and investing,” according to Juliet Agnew, head of philanthropy at Barclays Private Bank.
Climate change, for instance, is inescapable even for high-net-worth individuals, according to Yinka Faleti, a partner at Ascend Venture Capital, who observed that its effects are forcing both short- and long-term decisions on HNWIs and their family offices. “In the short term, the phenomenon is changing the calculus of where HNWIs choose to live, travel, and do business. In the long term, it is making them question what the world will look like for their children, grandchildren, and society as a whole,” Faleti acknowledged in a March 2024 piece he wrote for financial education site CFA Institute. “Socially responsible and sustainable impact investing give[s] HNWIs tools to protect their short- and long-term interests—and to potentially reap financial rewards along the way.”
It should come as no surprise, then, that wealthy investors are demonstrating a keener interest in sustainable-investment solutions. “Demand for sustainable investing is high and growing—especially among younger generations,” according to Boston Consulting Group (BCG), citing a 2022 survey carried out by Stanford University Research that found that investors under 41 years of age wanted wealth managers to adopt active stances on climate change and diversity and believed that investment advisors should take client views on environmental and social topics into account when making portfolio suggestions.
According to the survey, around one-third of US Millennial and Generation Z investors said they were willing to sacrifice more than 10 percent of their wealth if it brought about environmental improvements. And approximately 85 percent of the same demographic said they wanted fund managers to support environmental causes even if this lowered the values of their investments.
According to Capgemini Research Institute’s “World Wealth Report 2024”, moreover, the percentage of HNWIs who were likely to request an ESG score—that is, accurate data about the environmental footprints of ESG portfolios—while investing in sustainable products increased to 68 percent last year, up from the 63 percent recorded in the report’s 2023 edition.
“Wealth management firms are responding to HNWI interests. As part of our relationship manager survey, 50 percent of participants said clients are again curious about ESG-linked assets and their impact on society,” the report also revealed. “Further, 64 percent of wealth management executives said their firms held ESG-linked assets. Even as interest in ESG-linked assets surges, investments in these assets have yet to rebound. Our 2024 executive survey found that 36 percent said their firms do not currently hold ESG-linked assets.”
Published in November, meanwhile, Deutsche Bank Wealth Management’s fourth annual survey of ESG investing, which was conducted over two months between April 30 and June 30 of last year, explored attitudes to ESG, the management of ESG in portfolios and expectations for the sustainable transition. The survey generated more than 1,300 responses from the wealth manager’s private bank and wealth-management clients, predominantly in its leading European markets of Germany, Belgium, Italy and Spain, revealing that there was a “clear intention” to boost the shares of sustainable investments in portfolios, with more than half of respondents planning to increase their ESG allocations in the next five years.
“While environmental factors remain a focus for investors, the survey shows increasing attention to social and governance aspects,” the report stated. “Investors are often pursuing multiple goals such as creating a fairer society and enhancing governance. This multifaceted approach supports the case for a balanced assessment of all three ESG pillars.”
That said, the surveyed investors clearly believed they lacked the requisite ESG investment knowledge and skills, with only 3 percent of respondents classifying themselves as advanced ESG investors and just 15 percent believing they had a good knowledge of the subject. A large diversity in ESG preferences was also demonstrated in the survey, with 47 percent confirming that they didn’t have just one specific ESG portfolio objective. Furthermore, 28 percent of respondents wanted to use ESG as an additional factor to financial indicators when considering an investment, while only 7 percent sought to invest their portfolios entirely according to sustainability considerations.
Concerns over the risk-and-return aspect of ESG remained widespread, with investors also sharing doubts about the short-term performances of ESG investments. “These results show that ESG investment remains appealing and reminds us that environmental considerations will be accompanied by social and governance objectives too,” Markus Müller, chief investment officer of sustainability and global head of the Chief Investment Office of Deutsche Bank Private Bank, said of the results. “There is some uncertainty about what ESG really means for portfolios in terms of performance, risk and investment vehicles, but these results show investors are already investing in the sustainable transition.”
A sound, experienced wealth manager can provide the necessary resources and understanding of sustainable investing to protect assets and leave enduring impacts on the world. According to Boston Consulting Group, such wealth managers must identify, develop and commercialise products that are compatible with or actively promote environmental themes while also ensuring that they have the potential to generate a level of return commensurate with traditional investments.
“To be successful in this initiative, players need to be proactive in their approach to managing an ever-evolving regulatory environment, shifting client demands, a scarcity of data-driven metrics, and a rapidly growing need for sufficient internal expertise to knowledgably and professionally advise clients on sustainability,” the consulting firm’s May 2023 report, “Navigating the Sustainability Challenge in Wealth Management”, observed. “Amid much uncertainty, one certainty remains: wealth managers that make understanding and activating sustainable investing a top priority—and that offer a truly personalized customer experience—will put themselves in position to capture a once-in-a-generation opportunity.”
One such wealth manager is Morgan Stanley. In 2012, the US financial-services giant became one of the first major financial institutions to launch a wealth-management platform dedicated to sustainable and impact investing, allowing the firm to pursue scalable sustainable and impact-investment solutions for its clients.
“For over a decade, Morgan Stanley Wealth Management’s Investing with Impact Platform (IIP) has provided clients with innovative products and solutions tailored to their unique values, circumstances and goals,” the firm’s “ESG Report” published in September 2024 stated. “Now with nearly $77 billion in client assets, the IIP allows our Wealth Management clients to align portfolios of any size and level of complexity with their unique sustainability preferences.” That $77 billion in client assets, moreover, was invested across 360-plus financial products covering a diverse range of asset classes, including off-the-shelf and custom equity solutions, ETFs (exchange-traded funds), mutual funds, separately managed accounts, alternative investments and green, blue, social and sustainability-linked bonds.
“These offerings span a variety of sustainability themes such as climate action, gender lens, racial equity, faith-based approaches and more,” the report also noted, adding that the IIP includes Morgan Stanley Portfolio Solutions, which captures the firm’s proprietary approach to asset allocation, manager selection, portfolio construction and risk management in a single, unified managed account. “As the sustainable investing field expands, we continue to onboard solutions across asset classes and impact themes, with a focus on impact alternatives and products from diverse-owned managers.”
