Pioneering wealth managers, family offices and educational institutions are reassessing the purpose of investing and measuring its impact
As traditional environmental, social, governance (ESG) and impact investment frameworks are increasingly questioned, many families and practitioners are looking for a more structured approach, applying systems thinking to develop strategic, long-term blueprints.
One of the pioneers of this ambitious perspective is Dr. Falko Paetzold, managing director of the Centre for Sustainable Finance and Private Wealth (CSP) at the University of Zurich, combining sustainable funding with systematic investment.
“What we saw is that asset holders are really struggling to make more impact on their money,” explains Paetzold, who has worked with other institutions such as US Giants MIT and Stanford to develop investor education tools.
The comprehensive question is whether the investments of wealthy families actually have a major impact on society. “We have a really amazing portfolio of Impact Investments,” recalls Patzold. “But what’s really changed?”
He believes the answer can be found in understanding and engaging the system, rather than assembling a portfolio of disconnected “point solutions.”
“You literally don’t look at the forest of trees,” he says. “From an impact perspective, and from a financial risk-return perspective, it’s stupid, rather than thinking about how a system works or how it changes.”
Coherent Strategy
The approach defended by Paetzold aims to map families to systems that want to influence influence, identify leverage points and align diverse capital from venture capital and private equity to philanthropy. This has already gained traction among major family offices and foundations, he says.
“I often point to portfolios like Lucas Walton’s Ocean’s Initiative,” he says, referring to a multi-capital strategy for marine conservation of Walmart heirs. “He mapped what needs to work for a healthy ocean, and then built investment transactions, insurance products and philanthropic initiatives around that.”
The goal is to move from isolated actions to coordinated impact. This is what Petzoldo calls “a portfolio of more than the total parts.”
A characteristic of systematic investment is the identification of the “trim tab.” This is a small intervention that can catalyze major changes. “That’s the type of intervention you want to identify,” he says. “At the same time, we want to avoid deploying capital to things that are running against regulations or simply cannot survive.”
Importantly, systematic investment requires not only a more strategic lens, but also a more patient and sophisticated view of impact. “It’s very easy to measure the effects of planting trees,” says Paetzold. “It’s not much easier to measure. “I trained ten regulators and five years later a policy was enacted to protect one billion trees.”
This new outlook, centered on deeper thinking, is being developed more and more by several pioneering wealth managers, but emphasizes the importance of the next generation being prepared for a mindset shift.
Governance model
“The inadequate preparation of the next generation, the collapse of communication and trust, and the lack of a common purpose are the main reasons why many business families struggle,” explains Benjamin Vettelli, Ultra-Net Asset Personal Senior Families Advisor at LGT Private Banking in Zurich.
To avoid these pitfalls, LGT relies heavily on family governance models and shared learning. Use case studies of families with similar issues, especially when trying to engage and prepare for the next generation. “Our goal is to support families who build a strong, lasting heritage that can survive and thrive across generations,” he says.
Its legacy is increasingly measured by monetary value as well as consistency in integrity with the family’s evolving vision for a more sustainable and equitable future.
As Paetzold states, systematic investments could be “sustainable investment 4.0.”
According to LGT’s Impact Study, as individual wealth moves into younger, purpose-driven hands, advisors are increasingly helping to navigate the evolutionary evolution of not only this intergenerational assets but how those assets are deployed.
“We are pleased to announce that we are a charity advisor for LGT Private Banking,” said Geneva-based Nina Horse. “By helping you make a strategy or investment, for example, a decision as a board member or a joint decision maker.”
LGT says this is part of a broader trend to embed value in family governance structures, from charity to impact portfolio.
Theme focus
Many families now encourage them to develop their own theme focus by allocating a portion of their investment or giving them direct capital to the next generation of members. “What we’ve seen very often is connecting our families with one another, so they can draw experiences and best practices from each other,” adds Hoas.
Bridging the gap between family legacy and its rising steward personal values could be challenged, especially when questions about wealth origin intersect with broader concerns about inequality.
“I don’t like to discuss ethics given that moral and ethical values are not universal,” Hoas said. “Instead, we help us understand the complexities of the socioeconomic and political systems that our families run, and to define ourselves how we can implement our overall perspective on our wealth.”
This restructuring has led families to reassess not only their charity strategies, but also the foundations of financial success. “It’s all about finding an alignment,” Hoas says. “Navigating these conversations often involves a delicate balance of respect for achievements and legacy and a broader understanding of the context of systematic inequality.”
