Family investors and their advisers are seeing new priorities for their impact investments in the light of Covid-19’s effect on local economies.
“The appetite for impact investments has dampened with the steep economic downturn,” Noor Quek, family wealth adviser based in Singapore, told AsianInvestor.
Michael Au, in charge of impact investments with Hong Kong-based single-family office District Capital, also observed a degree of caution among family investors in 2020.
“Just from the perspective of our office, we’ve actually deployed more into sustainable and impact investments, as Covid highlighted many merits to those strategies," he said. "But I know that in general, most offices are being more cautious simply because of a convergence of macro events.”
This trend was confirmed by Philo Alto, Hong Kong-based CEO of impact investing advisory firm Asia Value Advisors, although he said it was more like a shift of priorities.
“Post-Covid-19, as Hong Kong’s economic situation turned for the worse, the economic and public health crises have had mixed impacts on philanthropic funders and foundation investments," he added.
"For some, this has resulted in the drastic scaling back of operating businesses, including layoffs and retrenchments, that fund their foundation activities. For others, it may have compelled them to ‘double down’ their efforts to support the broader local community.”
The Covid crisis has catalysed greater collaboration between like-minded family offices, Alto said.
“Government responses have typically been reactive and broad in impacts that have not kept pace with the speed and disruptive nature of the pandemic’s onslaught.”
SUPPORTING SOCIAL ENTERPRISES
The families and foundations have bought into the idea of providing support for social enterprises that are serving a public benefit and generating earned revenues. These include businesses providing affordable vocational training, elderly care services, health and well-being initiatives and support for migrant workers.
“Many of these enterprises – which otherwise had viable business models pre-pandemic – are currently facing liquidity crunches. Meanwhile, existing philanthropic grants and SME loans are not fit for purpose, relative to the hybrid nature of their businesses," said Alto.
Much of the shift in priorities has to do with the families' individual roots, said Quek.
"Many of them are not doing it for the money. They are not interested in getting tax benefits, as such. Certainly the older generation are not that interested. The younger generation are, but they also want to make sure it is relevant, with health and education taking priority.”
Quek said she knows organisations who say they understand that a popular cause for families is highly relevant; “but they say, let’s look at the lesser ones, because maybe they have someone within the household with a connection to an operation in greater need.”
A recent example in Hong Kong is the Community Resilience Fund (CRF), which seeks to provide liquidity support for social enterprises, to help them adapt and continue supporting Hong Kong’s local communities.
The CRF was initiated in March 2020 and is jointly operated by the Sustainable Finance Initiative, set up under the auspices of the Hong Kong family office RS Group and Social Ventures Hong Kong (SVHK), an organisation committed to social innovation for Hong Kong’s urban challenges.
Florence Cheng, head of impact strategy at SVHK, said the CRF consortium decided a zero-interest loan serving as bridge financing would be an appropriate structure to help viable social enterprises survive and adapt to the current situation.
Since the fund was opened to applications, eight loans have been disbursed. No details of the amount invested by the families was forthcoming from the consortium – only that it was “a few million Hong Kong dollars.”