Brazil’s newest generation of family wealth holders is a promising force for catalytic impact investing in the country.
Younger members of wealthy families are using their family offices’ philanthropic strategies as a gateway to impact investing, observes Fernanda Camargo of Wright Capital, a São Paulo-based multi-family office that integrates impact in its investment strategies.
“The families we work with already have [an impact] mindset,” because of their philanthropic work, she tells ImpactAlpha. Those accustomed to making donations without the expectation of financial return are moving into impact investing as an opportunity to earn a financial return while promoting social and environmental initiatives.
“They are not just investing capital, but in businesses that are driving transformation,” she explains.
A recent survey from philanthropic advisor Juliana de Paula and consultant Cássio Aoqui, backs up the trend Camargo sees among her clients at Wright Capital. “Perspectives and opportunities for the philanthropy agenda in family offices,” which primarily focuses on philanthropic trends, finds that 44% of Brazilian family offices are also already engaged in impact investing.
Family impact strategies are largely driven by the transfer of wealth to women and younger generations, who offer “new ways of looking at the management of family assets,” says Aoqui.
Moreover, the strategies they’re developing have the potential to be highly catalytic to early-stage social enterprises, he adds. Families, especially those that amassed wealth in the financial or technology sectors, see venture philanthropy as a natural evolution of their giving strategies, because they “come with this risk-philanthropy approach and think very much from an investment perspective.”
“Part of it is a donation, which can be a guarantee, protection capital in a fund, or money that finances technical assistance for a business,” adds co-author de Paula.
Shifting impact priorities
Families’ engagement in venture philanthropy is a hopeful sign for Marcel Fukayama of Din4mo, an impact ecosystem builder in Brazil. Climate change, inclusion and other impact themes have taken a hit in the current geopolitical and fundraising environments.
With “impact in equity facing a slowdown,” he says, “if philanthropy grows, it’s possible that impact investing will also grow.”
Family allocations to impact investing are small, and many strategies are nascent-stage. Wright Capital’s clients allocate about 1% to 4% of their total assets to impact, says Camargo. There’s interest to invest more, she adds; the low availability of impact products and funds in Brazil is the biggest barrier.
How Brazilian families are thinking about impact investing has evolved in line with shifting global trends on technology, climate change and social issues. A decade ago, the impact landscape was more diversified, says Camargo. Investors showed interest in education, health, financial inclusion and other social themes.
Now the emphasis leans toward the green economy.
This partly because investors increasingly see carbon emissions, environmental regulations and community risks as portfolio risks. Investing with an ESG lens is “a crucial risk management factor for wealth,” she says.
The growth in green investing is also self-reinforcing. “Over time impact funds became green, because the green checks grew,” says Camargo.
The green investment trend is now progressing into the bioeconomy and nature-based solutions.
Reframing fiduciary duty
Growing families’ allocations to impact in Brazil requires a rethink of wealth managers’ role and their fiduciary duty, says Camargo.
“It’s no coincidence that large European banks have departments dedicated to philanthropy. It’s a way to stay close to clients, their legacy and future generations,” she says.
Wright Capital tries to model this more proactive approach, she adds. “We invest time, conduct analyses and educate all families” about impact investing.
This educational stance is fundamental to overcoming barriers imposed by traditional fiduciary duty, which focuses on maximizing financial returns. Familiarizing families with the idea of capital with purpose will in turn spur a broader shift in how wealth managers support clients’ investment and portfolio goals.
“Strategy and intentionality are lacking” at this stage, says de Paula. “If the family doesn’t demand it, the stance will always be reactive.”
If families demand greater attention to both philanthropy and impact investing opportunities from their financial managers, she says, “then the game changes.”
Adds Aoqui, “The opportunities are immense, especially in the green economy and financial inclusion.”
