Family Office

New Research Explores ESG And Family Governance Models

Wendy Spires, Head of Research, 4 October 2021

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WealthBriefing and Jersey Finance have teamed up to survey and interview family governance experts internationally to discover how sustainability and ESG priorities are playing out in the UHNW space.

WealthBriefing and the promotional body for the international finance centre, Jersey Finance, have today launched a new research paper on two of the most pressing – and tightly interlinked – topics of the day for UHNW families: governance models and ESG.

Virtuous Circles: Sustainable Family Governance Models in an Evolving Environment is essential reading for families and advisors who are seeking to know what the current sentiment is in this space, and what industry luminaries see as emerging best practices. It unites the findings of a global survey of practitioners and the views of a panel of experts drawn from leading firms but, perhaps most interestingly of all, the paper features a wealth of real-world examples illustrating what forward-thinking families are doing right now to create lasting legacies.

“Virtuous Circles” centers on the fact that the ways in which enterprising families conduct themselves in the management of their businesses, in their investment strategies and in their interpersonal relations are inextricably linked. As one expert observes, families can only project and promote the virtue of good governance into the wider world when they first have their own houses in order. Therefore, developing governance models based on clearly articulated values and goals provides the foundation for all the other good a family might aim to do.

While family governance is a large and complex area, it can be simply defined as the communication and decision-making frameworks a family and its advisors deploy to ensure the smooth management and transition of its assets through the generations – and in such a manner that the family’s most deeply held values manifest in everything it does. Given its critical role in ensuring longevity of wealth, positive impact from that wealth and harmonious relations, robust family governance is what all good advisors will be steering their clients toward. 

A paucity of planning  
Yet abundant research demonstrates that even the basics of family governance are absent at alarming levels. Despite the fact that, according to our survey, three-quarters of advisors believe that a formal business succession plan is absolutely vital, studies continue to show that only around a third of enterprising families globally actually have one in place. The confusion and potential for conflict likely to ensue when this is the case and when founders pass away or become incapacitated is plain to see. 

Advisors see that a lack of available expertise, awareness or time may all be contributing factors to the paucity of succession planning, but the majority (62 per cent) say that families are simply unsure as to how to proceed. As the expert contributors to this paper observe, advisors need to cast away their fears of overstepping the mark and (sensitively) guide families toward more formalized plans for the management and ownership of their business empires and other assets. 

As the title indicates, the central theme of this paper is the idea that Environmental, Social and Governance (ESG) considerations are both the driver and the product of family governance deliberations. By coming together to lay down what the family stands for and the impact it would like to have on the world, its members can create a platform for sustainability in every sense of the word. Far from simply being an overlay placed upon investment strategies, ESG principles are rapidly becoming the North Star for everything families do. The phrase “virtuous circles” is apt indeed.

Manifold positive impacts   
The positive impacts on families themselves are manifold, from promoting the purposeful engagement of next generation members who might otherwise become merely very wealthy and rudderless, through to binding disparate branches of the families who often become highly dissociated from both each other and the assets secured by the founders. But it is the positive impact that well governed families can – and are – having on the world at large which is the real story here.

As our expert contributors point out, family money is able to achieve public good in ways which other forms of funding often simply cannot. Helping significantly wealthy families deploy their capital purposely in all its forms – financial, social, intellectual, human and spiritual – is now where advisors are increasingly focusing their energies. It is no exaggeration to say that ESG and sustainability are coming to underpin the whole advisory process.

Virtuous Circles: Sustainable Family Governance Models in an Evolving Environment takes in a huge range of family governance issues, from the vital elements families should include, asset-level trigger points, drivers and challenges, generational differences in attitudes, factors affecting family office locations and more – all of which are illuminated by expert commentary from:

•    Dr Emiko Caerlewy-Smith, founder and chief executive officer, KIT Consulting;
•    Catherine Grum, partner, head of Family Office Services, BDO;
•    Richard Joynt, head of Family Office Services, Highvern;
•    Rupert Phelps, partner – Family Wealth Group, Smith & Williamson; and
•    Warren Thompson, head of Family Office and UHNW, Coutts.

We would urge anyone interested in the evolution of family governance models and ESG to download their complimentary copy of this research paper. To view the discussion in the webinar, click here.

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