Why impact investing is not just ‘nice to have’ for HK, SG families
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Family offices in Hong Kong and Singapore are investing to create a positive impact not just on the environment and society but also on their family businesses.
The goal is often to provide environmentally friendly products for customers and ensure long-term self-sustainability, according to one family member as well as industry veterans.
“Impact investing is one way for families to diversify portfolios and build in-house expertise on solutions that are relevant or adaptable to business operations,” said Katy Yung managing partner at Sustainable Finance Initiative (SFi), an impact- and sustainable investing-focused non-profit platform for smaller family offices.
"I think this is part of the motivation for family offices to drive impact investing, particularly on the topic of decarbonisation, using investment capital to advance breakthrough innovation to get past proof-of-concept or proven solutions to scale,” she told AsianInvestor.
IMPACT TO BOTTOM LINE
Many families in the region made fortunes in traditional manufacturing, property, consumer, technology, and energy industries closely tied to global supply chains.
As the pandemic disrupted these links and inflation soared in developed markets, Asian families proactively sought solutions to reduce costs and optimise operations, Yung noted.
The need to step up sustainability efforts became apparent also when they faced new ESG-related regulatory standards for imported goods in Europe. Asia, too, is increasingly focused on Net Zero.
“With the various touch points influencing business operations, families are realising the urgent need to find sustainable operational solutions. This is no longer a ‘nice to have’, but it's becoming a ‘must have’ as it has the potential to impact their bottom line,” said Yung, who is also a consultant to Hong Kong-based single family office RS Group, which focuses on responsible and impact investment across asset classes.
GENERATIONAL SHIFT
On the other hand, she noted that as the second or third generation of 20th-century-founded family businesses gets more involved in investments, members often look beyond purely operation-driven impact investing.
“The focus shifts away from just looking at cost reduction, risk mitigation, or being compliant to environmental and regulatory standards, but more towards a true desire to make a difference or make a change and ‘future-proofing’ the business through impact investing,” Yung said.
“This generation of impact investors is educated in a way that they are more aware of all the planetary issues that we're facing,” she added.
Poman Lo, vice chairman and managing director at Hong Kong hotel group Regal Hotels, exemplifies this mindset. As a second-generation member of the family business, Lo is an active advocate for impact investing.
In 2022, Lo founded AlphaTrio Capital, which focuses on impact investing through a sustainable technology fund. It concentrates on early-stage investments in property tech, sustainable living, agri-food tech, and clean tech – all closely related to the family’s businesses.
“I'm genuinely interested in projects that do well by doing good. I am a keen believer in impact investing, I believe that it should become mainstream eventually, if we actually do want to save the planet,” Lo said during the HKVCA China Private Equity Summit in Hong Kong in late May.
IMPACT ALIGNMENT
One project Lo has been actively looking at is a water capture and treatment technology that was developed at Stanford University. The method aims to quickly disinfect water using solar power, reducing cost and energy use as compared to traditional methods.
“That is a very sustainable source of water. And most importantly, we are able to actually put it to good use in our own hotel operations,” Lo said. She shared that the family’s hotels in Hong Kong consume over three million plastic bottles each year.
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“By installing this water filtration, we can first of all, save on plastic, cut down on emissions while also save on costs,” Lo said.
She said the water tech startup is profitable, with an estimated return-on-investment period of under two years.
“This is a very good example of investing in something that can drive return alongside impact,” she said.
To date, AlphaTrio Capital’s internal rate of return was 22.3%, according to its website.
COMMUNITY DEVELOPMENT
Lo’s plan for her family business coincides with the Hong Kong government’s single-use plastic ban on April 22 for hotels and restaurants, as the city begins to drive sustainable development for local businesses.
Anthonia Hui, Head of Singapore at multifamily office AlTi Tiedemann Global, also highlighted multiple factors for families in the region to be interested and engaged in impact investing.
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These include each family’s values, next-generation aspirations, regulatory requirements on business operations, and community or peer pressure.
“Using technologies is one way to help improve sustainability,” Hui told AsianInvestor.
“Pivoting their business model and working with the public sector and local communities are required [along] with a long-term, actionable strategy that requires ongoing review and adaptation to the evolving environments and technological advancement."