Tsao Family Office bets on climate finance

Engaging in the green transition means doing good while making money, the family office’s chief executive tells AsianInvestor.
Tsao Family Office bets on climate finance

For Singapore’s Tsao Family Office, financing for the green transition is at the heart of its impact investment strategy.

Tsao’s chief executive and chief investment officer, Bryan Goh, said the single-family office’s commitment to impact investing stemmed from its decision to situate long-held values at the centre of its operations.

“When I joined four-and-a-half years ago, I was given a family charter and asked to translate it into an investment mandate,” he told AsianInvestor. “It was based, among other things, on Confucian ethics and Taoism, and it translated neatly into an [environmental, social and governance] mandate.”


“Very often in impact investing, you have to accept concessionary returns, but we still have to make money,” Goh said. “That's the balance. So, if you ask me where we can do good and make money, I’d suggest climate solutions.”

“There’s a pressing need, and governments are providing almost catalytic capital,” he explained. “If you insert yourself into that capital flow and pick up a few basis points, that’s a lot of money.”

Bryan Goh

Goh said that making a return on social impact investing was more challenging, and that the Tsao family often simply provided grants or funded social impact such as direct healthcare in the Asian region.

Investing in sectors such as tobacco, extractive industries, and armaments was strictly off limits.

Goh said 90% of Tsao’s portfolio was allocated to managed funds, and that it was able to execute its mandate by seeking out General Partners (GPs) that shared its values and objectives.

“We once invested in a global real estate mutual fund, and we convinced the manager to exclude all gaming exposure,” Goh noted. “We analysed the fund’s track record to the line-item level and demonstrated to the manager that its investments in gaming were diluting the fund’s performance.”


Tsao Family Office is particularly attracted to credit markets, given that they presented relative value and arbitrage opportunities.

“If you invest in equity, you're investing in one market, or at most two markets: emerging markets and developed markets,” Goh said.

“But what you have in credit markets is basically 12 or 13 markets that you can rotate between, and which are not very connected. In credit markets, the corporate bond market, the mortgage market, and the consumer loan market tend to move apart or independently. There's always one market rising – we're not having to resort to operationally risky things like shorting.”

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By contrast, the real estate market had become challenging in recent times, following decades of it being a solid bet due to low interest rates.

“Given that rates have stopped falling, and could be high in the long term, I would be very careful about extending risk in any segment of the real estate market,” Goh said.


Goh said high interest rates had become the primary risk for family offices and other investors. “Since [rates began rising in] 2022, the world has had one risk factor: interest rates.”

According to his outlook, interest rates are unlikely to fall back to the levels typical of the previous several decades, and inflation is also here to stay, reshaping the investment landscape.

“Not only do we think that inflation will be higher for longer, but we also think that the mechanism between interest rates and inflation is not well understood, and that it changes over time, so you can't use the old theories to understand central bank policy,” he said.

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Inflation matters to Tsao not only because it affects the investment climate and the interest rate response to it constitutes an added investment risk — inflation is also often described as a tax on the poor, increasing the level of inequality within and between societies.


“I’m worried about the level of inequality and unhappiness globally,” Goh said. “In 2017-18, there were spontaneous riots and protests all over the world. They had nothing in common except that people were genuinely unhappy. We were getting to the point where inequality began to feel like injustice.”

“But how can we turn this high Gini coefficient to the advantage of societies?” he continued. “Family offices should invest in a collaborative way to de-risk impact investments so that less-wealthy investors can fund the same impact but with less risk.”  

“This type of division of risk between impact investors and commercial investors is called blended finance, and it serves a very important function,” he said.

“We’re increasing our efforts in social blended finance. I think if we can encourage other family offices or any ultra-high net worth investors to take a higher investment risk, we can de-risk these endeavours to make normally uninvestable things investable by the general public.”

He said that putting Tsao Family Office in a position to absorb first-loss also positioned it to reap outsized gains if investments succeeded.

“In typical blended finance, you have the equity tranche, which is the first loss – which is usually where we can afford to be, where the return is not a coupon but a leveraged return,” he said.

“Because we’re involved, the pool can now pay a coupon and raise debt. If everything goes incredibly well, the ordinary investors will make, for example, 7% – but we'll make 30%. If things don't go well, they'll earn their 7% and we'll get zero. So, I wouldn't put all our capital into such investments, but we have the capacity to make some of these bets.”

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