Impact & ESG Frameworks #
Impact and ESG frameworks guide how UHNW families integrate environmental, social, and governance criteria into their investment decisions. These frameworks support responsible capital allocation, align the portfolio with family values, enhance long-term resilience, and respond to a growing global focus on sustainability, climate risk, and ethical business behavior.
Context & Importance #
Family offices increasingly consider ESG factors as essential drivers of risk management, competitive advantage, and legacy-building. Impact investing enables families to support measurable social or environmental outcomes alongside financial returns. A robust ESG framework creates clarity, consistency, and accountability across asset classes and managers.
ESG Framework Components #
A comprehensive ESG framework defines how sustainability factors are evaluated, integrated, and monitored across the portfolio.
- ESG policy statement: Principles guiding how environmental, social, and governance factors influence investment decisions.
- Materiality assessment: Identifying which ESG issues most affect the family’s assets or mission.
- Screening criteria: Negative screens (e.g., exclusion lists) and positive screens (e.g., best-in-class practices).
- Integration approach: Embedding ESG data into financial analysis and manager selection.
- ESG scoring system: Rating investments or managers based on sustainability factors.
- Stewardship & engagement: Voting policies, advocacy, and engagement with managers or companies.
- Reporting standards: Using global frameworks to measure and disclose ESG performance.
Impact Investing Framework #
Impact investing emphasizes measurable positive outcomes, often aligned with social or environmental missions. It is particularly relevant for families with strong philanthropic traditions or legacy objectives.
- Define impact objectives: Climate action, education, healthcare, community development, biodiversity, etc.
- Set measurable outcomes: KPIs aligned with recognized frameworks such as SDGs or IRIS+.
- Choose investment vehicles: Impact funds, private equity, venture capital, green bonds, or direct investments.
- Evaluate impact risk: Additionality, scalability, mission drift, and unintended consequences.
- Engage with investees: Regular discussions about mission alignment and progress.
- Impact reporting: Quantitative and qualitative assessment of outcomes.
Global ESG Reporting Standards #
Family offices can adopt or reference internationally recognized standards to ensure consistency and comparability.
- UN Principles for Responsible Investment (UN PRI): Global framework for responsible investing.
- SASB Standards: Industry-specific ESG metrics for financial materiality.
- TCFD: Climate risk disclosures focused on governance, strategy, and scenario analysis.
- UN Sustainable Development Goals (SDGs): Common impact goals used for thematic investing.
- IRIS+ (Global Impact Investing Network): Standardized impact measurement system.
- GRI Standards: Broad sustainability reporting for organizations and investments.
Implementation & Best Practices #
- Start with a values alignment workshop: Identify which ESG or impact themes matter to the family.
- Create an ESG & Impact Policy: Document principles, exclusions, targets, and governance structures.
- Integrate ESG into manager selection: Require sustainability disclosures and scoring.
- Use ESG analytics tools: Leverage external data providers for scoring and screening.
- Engage actively: Vote proxies, engage with managers, and track stewardship outcomes.
- Combine financial and impact reporting: Provide integrated dashboards to the family.
- Review annually: Update frameworks to reflect evolving science, regulation, and family priorities.
Common Challenges #
- Greenwashing by funds or companies.
- Inconsistent data or lack of standardized ESG metrics.
- Balancing financial returns with impact goals.
- Insufficient in-house expertise to evaluate ESG complexity.
- Measurement difficulties in private markets.
- Divergent ESG priorities among family members.
- Regulatory fragmentation across markets.
See Also #
- Investment Policy Statement (IPS)
- Strategic Asset Allocation
- Investment Manager Selection & Monitoring
- Philanthropy & Foundations
- Wealth Reporting & Performance Analytics
