Indian family offices are increasingly engaging in impact investing, allocating a portion of their investible assets towards initiatives that generate positive social outcomes while also yielding financial returns. This shift from traditional philanthropy reflects a broader trend where family offices seek to blend financial gains with societal benefits, marking a significant change from solely focusing on stock market investment.
Expanding impact investing beyond traditional sectors
Family offices are now targeting impact investments in areas where they already possess significant expertise. For example, a family-owned textiles business has invested in preserving traditional block printing techniques in a village at risk of losing this heritage craft. Similarly, a family office involved in the jewellery sector has supported artisans in a village renowned for its unique jewellery designs. These investments not only help preserve cultural practices but also enhance the sustainability of these traditional industries.
Global context and family office involvement
Globally, impact investing has become a significant component of investment portfolios, particularly in developed economies. According to a PwC report, impact investing amounts to $715 billion worldwide, with family offices contributing about four percent to this figure. Unlike traditional philanthropy, which focuses solely on giving, impact investing aims to address pressing issues while providing financial returns.
Falguni Shah, Partner and Leader - Entrepreneurial & Private Business at PwC India, notes that family offices are now investing in ventures directly related to their interests, such as climate change or education.
Differentiating impact investing from CSR
Experts differentiate between impact investing and corporate social responsibility (CSR). Adrija Agarwal, founder of Sattva Ventures, explains that CSR efforts are typically about creating social impact without financial returns, such as building school infrastructure in Bengaluru. In contrast, impact investing seeks both societal benefits and financial gains.
For instance, Sattva Ventures' investment in women entrepreneurs aims to generate returns while addressing the disparity in venture capital funding for women, which is notably low in India.
The role of younger generations in driving impact investing
The increasing involvement of younger generations in family offices is driving the growth of impact investing. Rohit Sarin, co-founder of Client Associates, observes that younger family members are more inclined towards achieving positive social and environmental outcomes alongside financial returns.
This generational shift is evident in the growing interest in sectors such as electric vehicles (EVs), solar energy, green hydrogen, and water purification. These sectors receive considerable attention from family offices aiming to make a significant impact.
Formalising impact investment management
Many Indian family offices are in the process of formalising their impact investment management teams. Vikaas Sachdeva, managing director of Sundaram Alternate Assets, notes that while impact investing has not yet been fully prioritised, there is a growing acceptance among domestic family offices. As these offices establish dedicated structures and teams, a substantial increase in impact-focused investments is anticipated.
Community engagement and symbiotic relationships
Indian corporations have historically fostered symbiotic relationships with local communities surrounding their manufacturing facilities. Ashutosh Bishnoi of Multi Act Family Office highlights that these companies have developed strong ties with their communities to garner local support, particularly in areas reliant on natural resources and local workforce. This approach reflects a broader trend of integrating community engagement with business operations.
As Indian family offices continue to refine their impact investing strategies, they are likely to play an increasingly prominent role in shaping both the social and financial landscapes, moving beyond traditional stock market investment approaches.
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