(June 10): On a crisp morning last October, a few dozen students with wildly diverse backgrounds and expertise filed into the red-brick building of Harvard University’s Kennedy School. Three things united them: they were young, they wanted to do good and they were all staggeringly wealthy.
The group was attending a joint course run by Harvard and the University of Zurich, in collaboration with the World Economic Forum, called “Impact Investing for the Next Generation.” In this context, that generation means the heirs to some of capitalism’s greatest fortunes. Participants had to pass an interview before paying up to US$12,000 ($16,335) for a week of classes in the US and Switzerland, not including airfares and board. A more intensive related course costs US$58,000.
The program has barely been advertised since its founding in 2015 and word is spread through old-money networks and among European royalty. Alumni include Chung Kyungsun, grandson of Hyundai Group’s founder, and Antonis Schwarz, who came into his fortune aged 16 when the drugmaker his grandfather founded was sold for 4.4 billion euros ($6.8 billion).
The graduates represent a quiet insurgency among the world’s wealthy millennials. As their peers march to protest climate change and inequality, these privileged few are arming themselves with the skills and arguments they need to convince their families -- often against bankers’ advice -- to make more “impact investments” that are designed to benefit society as well as turn a profit.
“It gets the scions of the world’s wealthiest families together to talk about impact investing, and I don’t know a lot of programs like that,” says Schwarz, 30, who established the Guerrilla Foundation to support activists and grassroots social movements. “People go in not knowing much about the impact space and they come out as impact champions.”
The push comes amid rising pressure on the world’s wealthiest citizens to give more back. A widening gulf between haves and have-nots is helping drive populist movements around the globe. And while politicians dither over issues like climate change, fearful of votes, and corporations make charitable contributions with one eye on shareholder profits, high-net-worth individuals have the money and freedom to make rapid and influential investment decisions -- they will have almost US$70 trillion at their disposal by 2021, according to Ernst & Young LLP.
School Bullies
Asia is a prime example of both the potential upside and huge challenges facing young heirs trying to do good. While the region now holds one-third of global wealth, it contributes a much smaller portion of the total in impact investing, according to Abhilash Mudaliar, research director for the Global Impact Investing Network. Family offices in the region donate about 80% less to philanthropy than their European and American peers, although that’s partly because many Asian families give back to communities via more informal channels.
Heirs like Chung are trying to change that. As an introverted child at an all-boys school, he was bullied for his love of books and video games and had little interest in joining the Hyundai family business. The more he read, the worse he felt about a world with a growing gap between rich and poor, where many had no access to basics such as healthcare. In South Korea, the blame for those inequalities was falling on the nation’s family-run conglomerates -- the chaebol.
“I don’t want to say that I’m responsible for that, or that my family is responsible for it, but I’m definitely someone who’s benefiting from this social structure,” Chung, 32, said. “That’s why I felt that I needed to do something about it.”
Early charity work for Chung’s family foundation gave him a taste of positive change, but that came with its own set of expectations and limitations. So despite his parents’ misgivings he backed his own ideas, took the Harvard course and later co-founded Root Impact to launch co-working spaces for social ventures, offer financial grants for affordable housing and environmental programs that benefit children, women and people living in poverty.
“In Asia especially, parents don’t allow children to do their own thing, or if they do, it’s with very limited funds,” Chung said. “They feel very lonely because they feel like they’re the crazy ones.”
Sustainable Capitalism
Recruiting people like Chung to the sector is vital because the scale of the challenge is too great for government aid or philanthropy alone, said James Gifford, head of impact investing at UBS Group AG and co-founder of the Harvard course.
“The heavy lifting of, say, pulling a billion people out of poverty has to be through sustainable capitalism,” said Gifford, an Australian who worked as an environmental activist.
Because this class of financing is designed to make money, the theory is that families and institutions can put in more cash because they’ll eventually make it back. With some of Chung’s impact investments coming good, his father is now a convert and looking to contribute more of the family’s money.
Gifford said working with the new generation is important because younger people are more likely to identify with the need for social and environmental change. While the stereotype of rich kids popping champagne on family yachts is often true, many of them are also keen to fund positive change. Almost 90% of heirs surveyed in 2018 by Credit Suisse Group AG and the Young Investors Organization said they were interested in making impact investments.
The Global Impact Investing Network estimates that around US$502 billion is currently being managed in impact investing assets globally and networks such as The ImPact and Nexus Global have sprung up requiring participants to pledge investment. While more than 100 students have participated in the Harvard course, they’re only a fraction of the wealthy millennials who are attracted to the idea. The Asian Venture Philanthropy Network expects the momentum to continue, with 35% of the region’s wealth set to shift to the next generation over the coming five to seven years.
Persuading Dad
Singaporean Rebekah Lin is studying gerontology at King’s College in London after becoming interested in impact investing. Her father helped found Singapore-based private equity firm Tembusu Partners and has long supported charitable causes, but even he still needed persuading that business and social good could be combined, she said.
“Traditional Chinese and Asian families are still quite conservative -- they want to take a longer time to decide what they want to give and are a lot more hands-on,” said Lin, 33. Thus she -- and the growing pool of her peers who are keen to work in the space -- spend much of their time “proving their mettle and making sure they have a couple of years in finance, or with an impact investing firm, to show their parents they’re serious about it.”
It’s why a key segment of the Harvard course focuses on how to change the status quo from the inside. Over the week of transoceanic classroom study and 40 hours of individual and group work, participants learn how to source deals, conduct due diligence and evaluate the social as well as financial impacts of an investment.
They’re also taught “soft skills” -- how to navigate family politics to convince people to back their ideas. Graduates are encouraged to examine assets in the family business that could be used to deliver aid, such as a fishing fleet in Indonesia or an investment office in Bangkok.
“When people see there are people changing the world and earning a lot of money at the same time, I believe it will set an example for others of our generation to follow,” said Cheng Ming Zhe, an analyst at Singapore-based multifamily office Golden Equator Wealth, whose family made a fortune in property. Cheng met like-minded heirs through a course on social entrepreneurship at the University of Oxford last year and has a friend that did the Harvard program.
Battered Durian
To be sure, there’s no guarantee that such clubs, groups and courses aren’t little more than fashionable embellishments for the well-heeled. Good impact investments are hard to find and often come with higher risks, so enthusiasm could wane when transactions sour.
But for now courses like the one at Harvard are helping bring like-minded investors together to create valuable bonds. One evening in April, 10 young heirs, including a graduate of the program, stepped through a door disguised as a refrigerator and into a Singapore speakeasy called The Dragon Chamber.
Over rounds of stir-fried chicken with Sichuan pepper and battered durian desserts, they voiced their discontent about the private-banker attitudes standing in their way. Few had met before, but all expressed a sense of liberation that they were no longer alone and a belief they can bring about change.
“There are literally tens of thousands of ultra-high-net-worth people, and a lot would have multiple children,” UBS’s Gifford said. “We’ve barely scratched the surface.”
