There’s been a surge in the number of family offices forming in India in recent years, fueled by ambitions of wealth preservation and growth for future generations of the country’s most successful business families. With that, impact dealmaking among India’s wealthy families is on the rise.
The challenge: Only a small number have embraced impact investing as a strategy for accomplishing that.
“For many, impact investing appears to remain in an experimental phase,” states Impact Investors Council, an industry body, and Waterfield Advisors, a multi-family office and wealth advisory firm, in a survey of Indian family offices’ impact investing activities. “There is a pressing need to move from episodic engagement to sustained conviction if family offices are to play a meaningful role in India’s impact economy.”
Of the 17 Indian family offices polled, just three have intentionally invested in impact funds or enterprises, according to “From legacy to leverage: India’s family wealth and its role in the impact capital spectrum.” Half said they do not pursue impact investing, while a quarter stated that they do not know if they have impact investments in their portfolios.
A broader look at IIC’s impact deals database, however, found that more than 85 family offices have made at least one impact investment in recent years.
“In most cases, these investments were likely routed through their conventional investment pools rather than through a dedicated impact strategy,” the report authors write. Although this signals an availability of commercial impact opportunities in the country, families often view impact investing as a complex way of making concessional investments.
“The grant mindset persists not because families reject the idea of impact investing – but because the ecosystem has yet to offer the clarity, success stories, and infrastructure needed to make that leap feel worthwhile or manageable,” states the report.
Impact 101
About $1.4 trillion in generational wealth is set to change hands in India in the next five years. A growing number of the country’s wealthiest business families are turning to professional managers to invest their money via family offices. One estimate suggests the number of family offices in the country has climbed to 300, up from 45 in 2018.
Prominent names include Premji Invest from the family behind information technology giant Wipro; automaker Anand Mahindra’s Mahindra Partners; and infrastructure conglomerate owner GV Sanjay Reddy’s Reddy Ventures.
Wealthy families tend to separate their investments from values-based work, which are funded through charitable family foundations.
“Traditionally, our family has viewed philanthropy and investing as two distinct pursuits,” said Priyavrata Mafatlal of the textile company Arvind Mafatlal Group. For his Mafatlal Family Office to venture into impact investing, “I’d need to see more evidence—real case studies that show how this approach has worked in practice.”
A challenge for family office engagement is the complexity of impact funds and deal structures, which often blend different types of capital.
“Blended finance remains an abstract or unfamiliar construct—often conflated with concessional philanthropy or misunderstood as overly complex,” says the report. Only one of the survey participants said they had knowingly participated in a blended-finance impact deal.
Simplifying blended finance structures “with model term sheets, legal templates and playbooks,” could increase family offices’ interest and engagement in impact opportunities, the authors suggest.
Family impact interests
Among families actively pursuing impact strategies, about a third of their impact allocations have gone to climate tech in recent years. Other top sectors include financial inclusion (23% of impact capital), education (15%), technology for development (12%) and healthcare (11%).
Two-thirds of impact deals that involved family offices were for seed-stage businesses and small-ticket deals. A handful of families focus on later-stage deals, but those deals accounted for more than 45% of family impact capital.
“The middle continues to be thin,” states the report. “While family offices are active where risk is either very low (seed stage) or justified by proven traction (late stage), they remain absent where support is most critical- during the messy, uncertain middle.”
Fifteen fund managers also shared their experiences working with family offices with IIC and Waterfield. They reported that families tend to invest in sectors where they’re already engaged through their businesses or foundations, such as education, climate and healthcare.
Families tend to prefer direct deal-making over fund investments.
“While the level of engagement is still emerging,” the report observes, “there is growing openness to learning and interest in understanding how structured vehicles can align with long-term intent.”
