Top 25 Family Offices That Invest and Social Impact
An interview with Dr. Johannes Knorz, CEO/CIO of Germany based family office 4L Vision and Peter Brock, family office advisor, in Opalesque's HORIZONS: FAMILY OFFICE & INVESTOR MAGAZINE (https://www.opalesque.com/archive-horizons.html):
Dr. Johannes Knorz: We started as a normal family part investing in various asset classes. We then moved into "light-green" investments and ESG integration where we and so realized that ESG is actually only half way. In the ESG investment paradigm, sustainability is like a side effect: You don't want to do any harm, but the business itself is not necessarily focused on bear upon, whereas an impact investor also wants that the business itself is trying to make the world a little fleck better ecologically, socially or from a governance point of view. At the moment, we are doing more and more pure or deep impact investments and aim to accomplish 100% bear upon investments in all asset classes. This is our approach.
We are also agile on the chief market in direct investments, actually financing companies and businesses, both start-ups and afterwards phase. While information technology'south quite piece of cake or possible to buy shares in listed companies in all industrial sectors, regions and currencies to build an touch on portfolio, y'all are then, however, actually just swapping your money on the secondary market place, and that does not actually create impact. In our view, the real touch is if you invest fresh money into an impact venture as a direct investment. This additionality and intentionality of specifically targeted touch investments are a cardinal principle for us and other 100% affect investors.
Peter Brock: As you lot can imagine, a transition to 100% impact is a process over time. As a first pace the 4L Vision family role has decided to develop a portfolio of listed stocks from the MSCI World Alphabetize that have been specifically selected to exist highly impactful based on their own inquiry, while also doing direct investment in private disinterestedness and startups.
Dr. Johannes Knorz: Right at present, we accept near 25% of our assets in seventeen straight shareholdings in companies. Here we take a European focus. Some other roughly 25% is in private debt, 25% in real manor and the remaining 25% in listed stocks. In real manor we also follow touch on investing principles, focusing both on light-green buildings that are mainly used for socially responsible applications.
Matthias Knab: Is there a big momentum towards impact in Europe?
Peter Brock: Johannes and I actually met at the foundation workshop of the German language Federal Initiative for Affect Investing (Bundesinitiative Impact Investing) which is currently being ready upward in Germany to organize and grow the community of impact investors. Nosotros accept worked together on diverse projects since so. Deutschland is probably lagging backside the Anglo-American earth, but this is partly due to our unlike and very well establish social welfare system. Currently, all the same, there is a very skilful momentum in the High german market overall and the impact investing ecosystem is slowly improving. Nosotros are also working on offering impact informational services combined with the specific equity portfolio approach based on 4L Vision'south screening process to other investors and family offices that desire to go the same route.
Matthias Knab: Y'all said you want to go 100% bear upon investing in all nugget classes. When you exercise your new nugget allocation, exercise you take a target return and how exercise you lot select your investments?
Dr. Johannes Knorz: The benchmarking is pretty straightforward. There are a lot of publications and discussions about benchmarking and performance measurement in impact investing, but 4L Vision really proceed this uncomplicated. Equally a long term investor nosotros are following the principle that truly sustainable business concern models will also produce higher financial returns over fourth dimension. Then the benchmarks are the respective standard stock market benchmarks.
Peter Brock: The family office has developed its own analytical stock picking process to choose impactful companies over and above normal ESG criteria. The basis is an analysis of cardinal company data, in combination with micro and macro economic data and chart analysis. On summit of that their own impact selection process starts with a negative and positive screening along the 17 SDGs (sustainable evolution goals by the United nations) supported by Ökom Research, Sustainalytics or other tools. A sustainability commission then selects the electric current stock allocation on a 4 calendar week rolling ground.
Dr. Johannes Knorz: Actually, the bear upon portfolio performed much improve than the benchmark in 2019 – nosotros were up 16% in the equity portfolio.
Matthias Knab: What is your selection procedure on the affect projects or venture uppercase side?
Dr. Johannes Knorz: Basically it's a bargain-by-deal determination. Information technology's solely due diligence to expect at the business concern model, it's supporting sure bear on entrepreneurs, and it's deciding what kind of theme, what bear on do we want to achieve along the lines of the SDGs, the United Nations' Sustainable Development Goals. For instance, 4L Vision is invested in a company that does sustainable insulation piece of work for housing. Conspicuously, impactful corporate ventures and 4L Vision definitely want to support those. Then, for u.s. it is a normal direct investing due diligence procedure. And I would say - in my history as a corporate financier – information technology is traditional entrepreneurial venture capital investing - but with a very, very clear bear upon focus.
Nosotros are also investing in a company for cancer medication. Another example is the food company Veganz, a very well-known case in Frg, several impact investors have invested here.
Veganz is developing quite well, we invested there in a very early stage. That ?s quite a typical example for our direct investment, which is of course a scrap risky sometimes. At the moment, it's just our money so we are complimentary to accept a chip of a higher entrepreneurial risk.
Together with another entrepreneurial family we are currently planning to set upwardly an touch on multi family office with the intention to assist other families in setting up and executing their impact investment strategies. In that case, surely, we volition only enter into direct investments and venture capital investing, if they expressly desire this and if it fits their risk appetite.
Peter Brock: You asked about the momentum in Germany – for at present, 4L Vision is i of some 20 or so unmarried-family offices hither that seriously arroyo impact investing. But, as Johannes explained, having gone through various iterations of specialization in ESG and impact, the aim is to assist making this arroyo more common by building upward a multi- family role which invites other families, other family unit offices and boosted individual capital letter to the impact investing market and share those investment deals, exist they direct, liquid or illiquid.
Matthias Knab: For a lot of impact investors, the impact measurement is quite important as well. That may be easier in some industries or in some companies and more than of a challenge in others. How exercise you get well-nigh that?
Peter Brock: We are very closely following the market place for touch on measurement, but as of at present, there is still no standardized measurement process for impact investments, so impact is often measured and monitored on a case-by-case basis in relatively elementary terms. 4L Vision has a articulate view what touch on they want to reach, and so they will analyze and control each specific company'south impact appropriately: How much CO2 was saved? How many patients survived because of our medical innovations, etc. But increasingly there will be more providers with various impact measurement tools, so the solution offering volition develop very quickly now.
Matthias Knab: Y'all mentioned the United nations Social Development Goals, and indeed, many affect investors use them as guidelines or a compass for their bear on investments. Practice y'all focus on a certain SDGs or across the board?
Dr. Johannes Knorz: That's a adept question. At the moment, we do not select or limit our investments through a focus on specific SDGs. Instead, we are rather looking if the specific offers or impact investment opportunities that are presented to u.s. are actually deep impact from our indicate of view or not. We as well make a stardom if the company is really an affect company – are they really committed to solving a primal social, governance or ecological problem? – or is it only an ESG oriented visitor? We will then also wait if there is a realistic chance to get a sure fiscal render, and so information technology has to be a good investment for economic reasons too.
Matthias Knab: You said y'all met at the German Federal Initiative for Impact Investing. Can you give united states an update on the electric current state and momentum in touch investing in Germany and Europe?
Dr. Johannes Knorz: I think we are at the beginning, simply impact in Germany and Europe is on a growth trajectory, in that location is a clear tendency and it will become more relevant over time. However, we likewise believe that, at the moment, most of the offerings of investment products are non really bear upon, they are peradventure ESG, or sometimes in the worst case just greenwashing.
Peter Brock: That's correct. Everybody says they now do bear upon, but if you await closely, the offering is ofttimes not existent impact, which makes it hard to find investment opportunities that comply with our strict criteria.
Dr. Johannes Knorz: Correct. Some investment funds for example may still invest in mining and such things. Impact has become the next big thing, so it is en faddy and chic, but to our minds, the real and deep bear on investment arroyo is still at the very beginning if you like to execute it seriously.
Peter Brock: We accept already organized some family office roundtables under the umbrella of the German "Bundesinitiative" where we have been proven that there is a huge interest past family offices in Germany to attend and to learn more about real impact investing. Organisations like the impact investment network Toniic are also increasingly looking towards Europe and Germany to further expand their networks.
Matthias Knab: In this switch now to 100% affect, do you lot have any recommendations for family offices that are considering doing the same, no matter where they are based?
Dr. Johannes Knorz: It's a journey for entrepreneurial families to start from their family unit values to their physical investment principles. Information technology certainly is helpful to discover and team up with other similar minded investors that are aligned with the same involvement, or groups and platforms similar Toniic. The market is non totally prepare yet and the banks are reluctant to integrate impact investing in their production offering.
But there are players like us and a few others, very often NextGens, that push the matter. We are actually hopeful that this will succeed fifty-fifty in the short term, at least the mid-term, and that much more majuscule will be allocated to bear on investment. Afterward all sustainable impact investments really produce a higher return over the long term than traditional investments. That's how it should be and that can exist proven in some markets already.
Dr. Johannes Knorz, LL.G. (Sydney) CEO/CIO of Germany based family unit office 4L Vision GmbH. He has been working as a legal consultant in all areas of corporate finance and M&A for more than twenty years. 4L Vision is highly committed to bear on investing; not only as an investor itself in all asset classes, but too on an intermediary level such every bit the German language Federal Initiative for Touch on Investing (Bundesinitivative Bear on Investing) and the international impact investment network Toniic. Currently, 4L Vision is most to establish a Multi Family Office together with other families.
Peter Brock was Executive Director and Leader Family Office Services in Europe at EY (Ernst & Young). Since 2018 he is active every bit a self- employed family officer / strategic adviser and investment committee Chairman, tasked with setting-up and managing a family part and the family governance for entrepreneurial families. He is one of the founders of the "Bundesinitiative Touch on Investing".
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Source: https://www.linkedin.com/pulse/case-study-family-office-going-100-impact-matthias-knab
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