The Next Generation of Investors Sees Wealth Differently
The next generation of investors are not just building or inheriting wealth. They’re rethinking old standards that prioritize the bottom line over society and sustainability, and they’re pushing the global investment community to join them. Financial institutions can either add to the momentum or be left behind.
Ronny Beck, Head of Investment at Hinduja Bank, shares his insights on how this generational shift is already changing the industry.
How are investment and private banking changing?
In the past, private banks offered investment services that focused on capital preservation. The performance of those investments was of secondary consideration. Now, what is changing is the focus on performance, which reflects this new type of investor—the younger generation is taking over. There is a lot of wealth being transferred from Baby Boomers to these younger investors, who are growing up with different priorities. They are more sensitive to the problems and phenomena in the world. A lot of them are also entrepreneurs.
Some of the entrepreneurs we work with are building conglomerates with private companies, so they understand the risks in a portfolio. Some will continue to have a nest egg because they are taking enough risks to develop their companies. Entrepreneurs from developing countries especially are working in relatively unpredictable country structures and political systems, so they may be looking for safer, more mundane investments instead of the high-octane stuff. And as a private bank, we need to understand and align these interests with what we’re offering.
How do you build a portfolio around your values? Where do you start?
This new generation of investors has consideration for the environment, for the climate, the circular economy, food waste — all these kinds of things. This is also what we see in the market: asset managers and banks have been taking values and impact into consideration for quite some time, but it is clearly becoming a mainstream household investment approach.
There’s a lot of talk about this type of investing, but when you scratch beneath the surface it feels a bit shallow. That’s where we as a bank can make a difference: we want to differentiate ourselves from the relatively cheap talk and demonstrate that what we’re offering clients is having an impact on the world.
Where do you see opportunities for impact emerging?
It’s easier to do this in private markets. The companies you’re investing in are smaller, you have more direct contact with the company management, and you can engage more on values with them than public companies. And then the management of the Boeings and Shells of this world start to think about how they can contribute to that flow because if they don’t, their stock price will suffer.
We’re in a world with different speeds at which countries develop. The West is a slow-growth, saturated market environment, but there are areas growing at a high rate and demographic changes in support of growth. Then you look at Asia and Africa, which have developing countries producing wealthy entrepreneurs almost hour-for-hour.
What is the biggest challenge for clients who want to make impact investments?
Right now there’s no broadly accepted measurement framework. We already have a huge test with the U.N. Sustainable Development Goals — some of them are fuzzy, or difficult to implement, so we need to focus on a number where they can show measurable results.
Why Urban Farming Does Not Need an IPO to Grow — Yet
Innovation in food production is vital, as experts predict needing 50% increase to feed the world’s population by 2050. Food and agriculture startups raised $20 billion in 2019, a 250% increase over the last five years — and that was before COVID-19 increased demand for locally sourced food, especially in cities, and reduced the number of workers available to harvest farm crops.VIEW ARTICLE
Pandemic-Fueled Digitization Creates New Cybersecurity Risks—and an Opportunity for Infosec Firms
The cybersecurity industry is experiencing record growth thanks to the host of needs and concerns raised by the sudden work-from-home transition during the coronavirus lockdowns and quarantines; 40% of companies named IT security as their top post-COVID priority. Before the pandemic, the market was already worth over $115 billion; now, it is projected to nearly double by 2021.VIEW ARTICLE
These Groups Are Trying to Make Investing More Sustainable, and It’s Not Going to Be Easy
A growing number of investors want to put their money behind enterprises that have measurable, positive impact on the environment, workers, women’s rights, and other issues. The problem? There is no standard way to measure and report the impact of an enterprise.VIEW ARTICLE