What does the family office explosion mean for the world?

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A Texas district judge yesterday dismissed ExxonMobil’s lawsuit against an activist shareholder who challenged the oil major’s climate change risks, ending a six-month campaign by Exxon with far-reaching implications for shareholder rights. Exxon said its lawsuit had “put a spotlight on the abuse of the shareholder-access system”.

And last night, the US Senate voted nearly unanimously to pass the ADVANCE Act, a bill that aims to cut red tape in the licensing process and unleash a more rapid build-out of both advanced and small modular nuclear reactors.

Taken together, these developments signal that while the US has built bipartisan support for investing in new sources of clean energy, climate activists have not yet secured a beachhead to shut down dirtier ones.

For today’s newsletter, I looked at the way some super-wealthy families are managing their fortunes through private offices, and what the trend can tell us about how some of the world’s richest investors view green and social investment strategies. Thanks for reading.

philanthropy and impact investing

How the super-rich are deploying their growing wealth

The global number of family offices — privately owned firms managing the fortunes of rich families — has exploded.

Preqin, a data provider, found that the total number of family offices more than tripled between 2019 and 2023 alone. A growing chasm between the rich and the rest has stoked the take-off, with the total number of individuals worth $100mn or more growing from 46,400 in 2009 to 90,870 in 2023, according to research group Wealth-X.

As the wealth of the super-rich grows, how they deploy it — through both investments and philanthropy — will have big implications for the world’s response to environmental and social challenges.

Emblematic of the boom is Iconiq Capital, a San Francisco multi-family office built on the thesis that a client base of brainy, big-name investors would give it an edge. Iconiq has touted its ability to leverage personal relationships across Silicon Valley as it has made big bets on software companies such as cloud computing businesses Datadog and Snowflake.

The firm, founded in 2011, manages more than $80bn, including much of the personal wealth of Meta co-founder Mark Zuckerberg and fellow tech executives such as Asana’s Dustin Moskovitz and LinkedIn’s Reid Hoffman. The advisory board, all of whom are investors in either Iconiq’s family office or at least one of its funds, according to founding partner Mike Anders, includes wealthy business leaders such as General Motors’ Mary Barra and Indian steel magnate Aditya Mittal.

Many of Silicon Valley’s tech billionaires speak publicly about their interest in social and climate issues, so one might expect that one of the major funds managing their wealth would invest it to drive environmental and social outcomes. But rather than focusing on investing in these areas — which would signal a belief that there are financial gains to be made — Iconiq has set up a separate philanthropic arm to give away capital earned through the family office.

Anders helped set up the charitable platform, Iconiq Impact, which launched in 2019 and had enabled $519mn in charitable giving to 245 grantees as of December.

Iconiq’s decision to “barbell” its strategy in this way, with profit-seeking ventures cleaved off from donations aimed at social and environmental impact, suggests that some of the world’s richest people are sceptical of green and social investment strategies.

Preqin said that out of all the family offices that disclosed information to it on their environmental, social and governance strategies, just 6.2 per cent had committed to investing in ESG-aligned funds or assets.

‘They didn’t know how to give’

Before Iconiq Impact was launched, Anders said, “we were hearing from our families that they didn’t know how to give. That was really a driver, to figure out, ‘OK, why not?’ And we realised that it was a lack of a resource around them, and that traditional giving was just not working for them.”

One problem, Anders argued, is that the status quo is too slow-moving, with dollars destined for charity “sitting and idle” in foundations and donor-advised funds. He said Iconiq Impact had found a strategy to move faster by using external experts to “bring us philanthropic deal flow that’s been highly vetted”.

Iconiq Impact’s grantees are wide-ranging, including organisations as diverse as a women’s council in northern Tanzania and a US-based non-profit promoting work opportunities for people who lack a college degree. The platform has borrowed from the trust-based giving philosophy popularised by MacKenzie Scott, the billionaire former wife of Amazon founder Jeff Bezos — making donations quickly and minimising burdensome reporting criteria.

Matti Navellou, who runs Iconiq Impact, said the approach was tailored to clients’ passions. “Some clients come to us and are hyper-focused on refugee resettlement, and we’ll build around that,” she said.

The most popular theme has proved to be environment and climate, which has attracted more than a quarter of Iconiq’s advised giving to date, followed by education, global health, criminal justice reform and US democracy.

The resulting grantee portfolio may be surprising. If the stereotype of Silicon Valley philanthropy is a “move-fast-and-break-things” emphasis on technologies with efficiency and growth potential — vaccines, or bed nets to keep out mosquitoes — Iconiq Impact has made big commitments to Indigenous-led and local groups. The group has also organised “learning journeys” for donors to visit grantees in person.

Growing scrutiny

As philanthropic donations by the world’s growing class of billionaires have surged, so has scrutiny of this giving. The emphasis on making philanthropy an enriching experience for donors contrasts sharply with efforts in both public policy and public markets to identify cost-effective ways to tackle issues such as climate change.

The charitable Gates Foundation has come under particular scrutiny for its outsize role in setting the agenda for issues in disease and global development. Pulitzer Prize-winning science reporter Laurie Garrett has written that “few policy initiatives or normative standards set by the [World Health Organization] are announced before they have been casually, unofficially vetted by Gates Foundation staff.”

The Gates Foundation has recruited some of the world’s foremost experts on disease, and emphasises the scientific rigour of its approach. But it ultimately answers to a small board of trustees including the closely involved Bill Gates, Microsoft’s co-founder. Critics, such as the author Anand Giridharadas, have argued that there is a risk in allowing rich private individuals, and the organisations they build, to play an outsize role in identifying the best solutions to social issues.

Donor influence over science policy was recently in the news when the non-profit Science Based Targets initiative announced that it would allow greater use of carbon credits towards the corporate climate targets that it certifies. The decision followed talks with the Bezos Earth Fund founded by Amazon’s Jeff Bezos, a financial supporter of SBTi. It prompted a revolt by staffers who said the board had pre-empted ongoing work by the group’s technical team. The Bezos fund said it did not “make decisions” with the SBTi and was not involved in the statement.

Those concerned about wealthy donors’ influence over public policy might have questions about Iconiq Impact’s efforts to reform US democracy. These have included support for organisations such as the Center for Ballot Freedom, which supports a multi-party, rather than a two-party, political system for the US.

Asked about potential objections to this work, Navellou said that it was non-partisan, and added: “The process for our democracy work was actually very democratic. It was a national [request for proposals]. We allowed any groups to apply for this funding.”

Different strokes

While the Iconiq Impact platform is separate from Iconiq Capital, other family offices have chosen to take a more blended approach to achieving financial returns and social objectives.

One example is Hillspire, the family office of former Google chief executive Eric Schmidt and his wife Wendy, according to former president Ken Goldman, who left the California-based family office in 2022.

“Wendy is very much into the environment, climate and social activities. We would do things that were for the good of the environment, and other attributes that she felt were important. Several of them could have been pure charitable, some of them could have [been] for-profit,” Goldman told me.

While some reckon Silicon Valley billionaires have too much influence over the world’s response to its biggest challenges, those managing their money appear to disagree. Anders says the super-wealthy have much more to contribute — especially if they club together.

“The collective wisdom of a group of people is just going to be smarter than any one individual — assuming that these are founders, and CEOs, and operators, and hard workers,” Anders said. However, he added: “Most of our clients are still running companies . . . and the world doesn’t have time for them to retire, and then go reinvent the wheel.”

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