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The concept of conscious capitalism is becoming increasingly popular in Family Office. The idea itself was popularized by Whole Foods co- founder John Mackey and author and marketing professor Raj Sisodia and is described as a socially responsible financial philosophy that supports the use of capital to serve a higher purpose than purely pursuing financial returns. The idea behind conscious capitalism is that businesses should operate ethically while in pursuit of profits.
This growing influence in Family Office, can be attributed to the generational changes taking place in Family Office leadership. A decade ago, Family Offices used to be managed predominantly by first generation family members or the wealth builder, however, in recent years there has been a shift, which has seen the next generation begin to actively participate in Family Office decisions that determine the way the family wealth is managed and administered.
These next generation leaders are recognized by their unique traits; they are highly collaborative, they value diversity and want to stamp their mark in the world by tackling big social issues such as climate change, poverty alleviation, gender inequality, amongst many other possible causes.
Family Offices are vehicles in which the wealth of high-net-worth individuals and families are managed and preserved. They serve large multibillion dollar families and are structured to operate in a similar manner to businesses. Their main objective is to preserve and sustain wealth for the family and its future generations. Profit and return on investment are therefore key measures of success. However, this concept of preserving wealth for future generations can misalign with the principles of sustainability, equality, and egalitarianism which the next generation leader holds dear.
How can Family Office leaders incorporate conscious capital into their Family Office strategy to effectively drive this ambition?
Impact Investing
Making investments where the return does not focus solely on profits but consciously builds social and environmental impact in the outcomes.
In the UBS 2024 Global Family Office Report, 57% of Family Offices surveyed, that had an operating business, had built sustainability considerations into their operating businesses, or planned to do so. Almost half of these Family Offices believe that it makes commercial sense to manage financial and non financial risks, by building sustainability themes such as net zero, clean energy transition, education, healthcare into their investment portfolios and business operations.
Philanthropy
Philanthropy is highly rewarding, and Family Offices can incorporate new and innovative approaches to philanthropy in line with the shifting mindset and motivations of the next generation of leaders. For new leaders, philanthropy can be a valuable vehicle for inculcating right leadership disciplines. More seasoned professionals can bring learnings from their corporate life into their philanthropic endeavors and effect meaningful change.
Active participation
According to a KPMG Disruptive Philanthropists report, an increasing number of Family Office leaders believe that giving away money to a deserving cause is no longer enough. Impactful philanthropy involves being actively involved beyond writing the cheque. Active philanthropists give of their time, expertise and utilize their networks and contacts to effect meaningful change.
Starting their own social enterprise
Many next generation philanthropists can directly tackle an issue or push for change by starting up their own social enterprise in their area of interest. Running their own enterprise affords them the opportunity to operate within a broad spectrum, ranging from running a business that prioritizes impact over financial returns or a business that prioritizes financial return but incorporates some level of social impact. The level of impact can range from setting up a business which supports a local community in an impoverished area to running a profit focused enterprise which values CSR or diversity, equity, and inclusion.
Profit making and social impact don’t have to be mutually exclusive. For the next generation leader, it is a rewarding balancing act to successfully fulfill both objectives.
