The 2022 STEP Global Congress, held in London earlier this month, served its 400+ delegates with fascinating insights on the latest trends in private wealth management; the overarching revelation being that environmental, social and governance (ESG) criteria underpin the majority.
Whether it was the value of human capital in family governance, or the fact that an initiative exists to bring billionaires together to solve the big environmental issues of our time, ESG was the recurring theme.
ESG is now non-negotiable
Gone is the perennial debate about the perceived cost of ESG. This dial has turned a full 180 degrees, with ESG now firmly embedded as part of mainstream thinking. The real dilemma is how to manage the inherent risk of failing to put ESG front and centre.
Sessions that reinforced this type of thinking included ‘Reinventing philanthropy for greater environmental impact’. The contention of the presenting panellists was that, without private capital and collaboration between the world’s wealthiest families over the next two to five years, it might be impossible to curb the negative impact of the human species. The concept championed by the panellists was that if ultra-high-net-worth (UHNW) families could pool resources they might otherwise individually donate for philanthropic purposes, a co-ordinated and cost efficient approach to pulling the planet back from the brink of mortal danger was feasible.
This puts professional trustees and wealth management professionals in a pivotal position regarding the wellbeing of the planet and, indeed, the future of life on Earth, as it would be for them to work with families and family offices to help them embrace the concept and start working with their contemporaries to find common purpose and practical solutions for some of the world’s woes.
Essentially the idea would be to re-forest on a mass scale, thus rebalancing the environment, resetting the carbon clock and reviving habitats for endangered species. This is not a new concept. What is new is the hope that the world’s financial elite can implement an action plan of sufficient magnitude to achieve success.
Supporting the objectives of Gen Z
ESG is of course high on the agenda for Generation Z. Enlightened families working across multiple generations to determine and articulate shared purpose will be under pressure from younger family members to grow family businesses sustainably and to consider environmental and societal issues integral to their supply chains.
Where elders are forward thinking and allow themselves to be influenced by youthful ideology, children and grandchildren can help steer them towards informed decisions with the objective of applying an element of their wealth for the greater good, via donation or evolution of their business model, even where younger family members are not the power-holders.
Family business as a common denominator
The idea that families with shared vision stay together and live harmoniously may seem utopian, but it was explored in a some depth in a session entitled ‘The importance of family business from the rising generation’s perspective’.
The particularly inspiring aspect of this presentation was that the panel was made up of third- and seventh-generation family members of large family businesses, who attested to the merits of bringing extended family members into the fold. In their view, welcoming additional family members for their individuality and for what they can bring to the table – be it emotional or experiential rather than first-hand business acumen – makes them feel valued and included, which avoids any awkwardness around their potential remoteness from the family’s ongoing prosperity just because they do not work in the family business.
This environment of inclusion tends to flourish where families have carefully planned and professionally administered structures in place, driven largely by the ability of professional trustees to listen, balance and equitably moderate the competing needs and passions of extended families.
The modern trusted advisor team
As families have become more significantly wealthy and the legal/fiscal landscape has become more complex, a more sophisticated and expert approach has emerged, building upon the historic situation where family solicitors, accountants or investment managers become a founder’s trusted advisor.
Progressive trustees now frequently find themselves assuming the role of impartial project managers. Project managers who recognise and respect the perspectives brought by individual family members and the value of working with traditional family advisors, but who are also adept at bringing specialist advisors on board to assist with complex matters such as cross-border transactions and changes in circumstance. All while making sure that everyone works as a team to the best effect and without overstepping the confines of their area of specialism.
If you’d like to discuss any of these key themes in more depth, or find out about IQ-EQ’s capabilities in delivering bespoke, ESG-focused solutions to UHNW families and family offices across the globe, please don’t hesitate to get in touch.