Family offices should begin their impact investing journeys with a solid financial infrastructure foundation and thinking about the causes that matter most to them to identify opportunities, according to Robert Kim, managing director of JLin LLC, the family office of professional basketball player Jeremy Lin.
Having met with families over the past few months in Asia, Kim noted that many of them are at a stage where they are ready to get started with impact investing.
“That’s where most of the families are at in Asia; some have already done it for a long time,” he told AsianInvestor. For the former, the question they often ask is: “How do we get started?”
To which Kim’s answer is that it always starts with laying the groundwork from a financial infrastructure perspective, then building the impact pieces on top of that. “Otherwise you run the risk of not being able to achieve your portfolio level returns,” he said.
Earlier this year, Kim moved from the Bay area in San Francisco where the company is based to South Korea, where he has been meeting with family offices and venture groups as the firm finetunes its impact investing strategy for Asia.
Before that, he was a senior client advisor for Caprock, advising families and foundations while focussing on impact investments across geographies and asset classes.
Once the financial infrastructure foundation – such as liquidity, income, return targets, and target asset allocation – is established, then comes the impact side of things.
“[Families should then] think about what they care about, or what matters most to them from an impact ESG (environmental, social and governance) perspective,” he said.
“Let’s say a family cares a lot about serving underserved youth, then we unpack that,” he explained. “If you were in the shoes of that underserved youth, then it’s not just access to education that matters, right? It’s actually the livelihood of the entire family, for instance the mental health of your parents is incredibly important to a flourishing human child.”
In this case, families could think about the impact investing opportunities that could help in the area, for instance affordable housing strategies within urban areas.
“If parents live far away from where they work, because they can’t afford to live in urban areas, how much time do they get to spend with their kids?” he said.
Another example he gave is through private lending to small mom-and-pop businesses where underserved communities work at. Families can then engage with these businesses as investors to encourage better employment care and benefits, he said.
Impact investing does not have to be limited to the private markets either.
“We often start with the safest asset class after cash, which is public fixed income, especially investment grade. And a lot of people laugh, saying that's boring. But it's fascinating. Fixed income oftentimes funds a lot of the infrastructure that we enjoy publicly, right? Whether it's water, housing or education,” he said.
“And there's enough options now out there where you can choose an investing strategy through a separately managed account that reflect your own values. They customise it for you,” he said.
Obviously, these services are not available to everyone, he added, but the ultra-high-net-worth, single-family offices with enough wealth can deploy into these strategies.
Through positive and negative screening within the public fixed income allocation, family offices can pick up on ESG knowledge and expertise through the experience, before moving on to public equity, then private debt (“because it’s a three-year lockup”), then real estate (“because it’s an eight-year lockup”), then venture-tenor lockup, he added.
Family offices have been pivoting to ESG investments in recent years. In Hong Kong, 80% of family offices said they allocated to ESG or impact investing in 2021, and 85% planned to ramp up allocations this year.
In Singapore, family offices have been keen on impact investing, while being wary of greenwashing, having to put in place their own checks to avoid such situations.
“Impact investing really grew because of three things,” Kim said. “One is technology, which just improved access to information for everybody. Second, which was more powerful, is I think a generational thing. When I say generation, I don't mean old generation, young generation, but more in terms of humankind history, where people want to do something meaningful with their time.”
Third, is the rise of entrepreneurs who also want to do something meaningful, whether it is innovating new, ESG-friendly businesses, or transitioning their existing businesses to become more Earth-friendly.
Kim is also cognisant of the pressures that entrepreneurs face. And tapping the influence JLin LLC has in Asia, particularly in China, “with the potential to carry over to Southeast Asia”, the firm had the potential to help alleviate some of that stress.
“We wanted to address the mental health of some of these entrepreneurs. We felt that having the reach and influence with the founders matters. So Asia was prioritised, and also when I think about the huge mass of deserved populations here, and the potential of all these different countries, we got really excited,” he said.
The firm has been exploring investments through limited partnerships across Asia, although they have looked towards direct investing over the last few months and have been actively looking for deals. It also has exposure to private debt across the world, including the US, Asia, Southeast Asia and Latin America.