For many, investment decisions based on ESG have recently become “flavor of the month.” But as Cornelius Bechtel, Partner at Andersen and Paddock Corporate Services SA and Member of the Advisory Committee of L3A explains, ESG criteria have long been part of the history and future of family offices and are simply being embraced in their investment strategies. 

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How are ESG criteria impacting family office businesses? 

“ESG” has been in the thoughts and minds of family offices long before it became the “flavor of the month” among investment professionals. Family offices that have been servicing several generations of the same family have long discussed values such as sustainability, governance and social needs if only for the benefit of the family itself. Family offices are driven by the need and desire of families to manage and administer their interests for two and more generations respectfully and responsibly. For family offices, ESG is less about a new investment criterion and what does or does not comply with ESG investment standards. ESG considerations have been in the DNA of family offices for generations. 

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“ESG considerations have been in the DNA of family offices for generations” 

  

Do social and governance criteria carry as much weight as environmental criteria? 

The “E” is currently discussed most because emerging laws and regulations are primarily focusing on environmental criteria. When formulating investment strategies, one has to ensure they can be assessed, audited and reported as being ESG compliant overall. However, the efforts to focus first on environmental criteria create the impression that social and governance criteria carry less weight. But that is not what occurs as any family officer will properly balance all three criteria in their investment decisions. These decisions can’t be made to solely comply with environmental criteria, social and governance considerations have to automatically and naturally form part of the decision-making process. 

   

How do L3A members support clients in their compliance procedures? 

L3A members are at the very heart of the process when supporting our clients in complying with ESG considerations. The support comes from many angles and covers all areas. These include helping our clients formulate and pursue the right strategies; helping our clients prepare the right reports; providing data to support the audit process; formulating the most appropriate policy and then designing the procedure best suited to comply with the chosen policy. For the time being, the “uninformed observer” may conclude that there is a veritable jungle of rules, regulations, obligations and pitfalls encompassing the discussion around ESG compliant investments. The role for the L3A, as an association, but also for the members of L3A, is to help our client find a safe pathway through that jungle.