Wealth, pandemic, and climate change: How today’s super-rich are investing their money

When you think how the super-rich usually spend their money, the obvious trappings that come to mind are private jets, multi-million-dollar homes, mega-yachts, a Bentley or Lamborghini or other prized possessions. And while the desire for the finer things in life will never fade, the pandemic, climate change, and global conflicts have influenced how the world’s wealthiest citizens are now choosing to spend their money.

Today’s high-net-worth individuals (HNWI), especially the millennials, are far more eco-aware and tech-savvy, with a greater need and motivation to be globally mobile. The concept of multinational living and sustainability appear to be the main drivers in the wealth management strategies of ‘centi-millionaires’ – the new class of super-rich.

So just how are today’s super-wealthy investing their money?

Golden visas

Border closures, restrictions, and lockdowns during the COVID pandemic had a massive impact on everyone. No surprise, then, that in the wake of COVID, the super wealthy are looking at investment migration opportunities to secure themselves a coveted ‘Golden Visa’.

Golden Visas are an insurance measure to protect HNWIs and their families against political and economic upheaval, allowing wealthy investors the freedom of mobility and the chance to seek a haven in countries with more favourable jurisdictions.

One such ‘haven’ is the UAE. With its enviable lifestyle and reputation as a world-class tech hub, smart city pioneer and provider of first-class infrastructure, the country is fast becoming a desirable location for many of the world’s wealthiest citizens. According to Henley’s latest Global Citizen Report, in Q3 of 2022, Dubai was the world’s 23^rd wealthiest city and home to 67,900 millionaires, 202 centi-millionaires and 13 billionaires.

Across the UAE, the overall number of HNWIs was 163,000 in 2021, according to global real estate consultancy Knight Frank’s 2022 Wealth Report. It’s estimated that this number will increase by 39% to register 228,000 HNWIs by 2026. The future looks bright as the numbers are set to increase thanks to the UAE’s Golden Visa programme.

Metaverse NFTs

Even with the freedom of movement that a Golden Visa offers, it seems the physical world isn’t enough for our global citizens. According to the latest research, nine out of ten HNWIs are investing in the ‘metaverse’. The metaverse bridges the physical world with virtual spaces where you can collaborate on projects or invest and trade in blockchain-backed non-fungible tokens (NFTs) such as virtual land, property, cryptocurrencies and even artworks.

The ‘video game’ concept of avatars and immersive environments is still in its infancy, and the crypto market, especially, can be volatile. But the desire for an ‘alternative universe’ is growing, and this is attracting big money. It’s predicted that the metaverse market could be worth up to US$5 trillion by 2030.

According to multinational technology consultants Capgemini’s World Wealth Report 2022, 71% of HNWIs globally have invested in digital assets such as cryptocurrencies, ETFs, NFTs and metaverse products. The report also reveals that 91% of HNWI digital assets investors are under 40 years old.

Here are some of the reasons why the metaverse is a very ‘real’ investment concept for the super-wealthy:

• In April 2022, HSBC Holdings launched a metaverse investment fund aimed specifically at wealthy Asian clients.

• A digital artwork named ‘Everydays – The First 5000 Days’, created by the American artist Beeple, sold for nearly US$70 million at Christie’s in London. The event made history – it was the very first time a major auction house had conducted the sale of a piece of artwork that doesn’t physically exist.

• Real estate investment in the virtual world is catching up with bricks-and-mortar investments. Plots of land in desirable metaverses such as The Sandbox, Otherside and Decentraland are being sold for millions. In May 2022, a parcel of land in TCG World was purchased for a record-breaking US$5 million.

• The pandemic drove luxury brands such as Cartier, Fendi and Dolce & Gabbana to find alternative digital solutions to their physical stores. Virtual appointments and augmented reality stores continue to allow customers to enjoy a luxury experience from the comfort of their own homes.
  

• In March 2022, Dolce & Gabbana hosted the first-ever metaverse fashion show on blockchain-based metaverse platform Decentraland.
  

• In July 2022, Tiffany & Co announced the launch of exclusive handcrafted pendants available only to Cryptopunk NFT holders at an average price of around US$50,000.

Sustainable investments

Climate change and the urgency to reduce reliance on fossil fuels is a growing issue, and the super-wealthy are by no means unaffected. Eco-awareness is driving the involvement of HNWIs in sustainable projects and eco-friendly investments, especially in the ‘green technologies’ sector. Capgemini’s World Wealth Report reveals that 55% of HNWIs are investing in environmental, social, and governmental (ESG) projects globally.

One famous example is Mike Cannon-Brookes. The Australian tech billionaire has pledged AUD500 million of his personal funds in the fight against climate change. One of the wealthiest people in Australia, Cannon-Brookes also plans to invest billions in sustainable corporations and green technologies.

Eco living: the new luxury

Eco awareness is also changing how HNWIs choose to live. Attitudes to opulence are shifting towards a more socially and environmentally responsible mindset, especially among the younger generation of tech billionaires. When it comes to luxury real estate, eco-friendly interiors, smart home technologies, water and air filtration systems, solar energy and electric car charging stations are far more appealing to today’s discerning buyers than gold taps and marble-clad swimming pools.

Eco-estates are fast becoming the new playground for the eco-conscious super-rich. Developments such as the Zimbali Estate in South Africa and the exclusive ‘Al Barari’ community in Dubai are dedicated to creating eco-sensitive environments without compromising on luxury. Eco-conscious residents can enjoy the best of nature in opulent surroundings where lush botanical landscaping and solar-powered energy integrate seamlessly with state-of-the-art amenities and luxury, eco-designed homes.

It is predicted that around 50% of the world’s ultra-high-net-worth individuals, known as ‘centi-millionaires’, will live in, or own, an eco-estate by 2050. The Serenity 74, a 74-foot, solar-powered luxury yacht, is another example of this trend. Built by Grand Cayman-based Serenity Yachts, the Serenity 74 can be purchased for a cool US$5.5 million.

And what better place to enjoy a solar-powered super yacht than the luxury island of Sandalah in the Red Sea? The island resort, due to open in 2024, is part of Saudi Arabia’s ambitious NEOM smart city mega-project, aligned with Saudi Vision 2030. The one-of-a-kind island will offer an unforgettable experience of enhanced nature, rich marine life, advanced technology and ultimate luxury, while setting the global standard for responsible and sustainable tourism.

Luxury marketing trends

There is no denying that the pandemic and climate change have transformed how the world’s most affluent think and behave. When it comes to luxury marketing, there are definite trends that companies catering to the wealthy should take notice of. Growth areas include:

• Ethical brands and companies that show an authentic and proactive commitment to the environment.
• Socially responsible investing in causes with ESG objectives.
• Digital asset investments in NFTs and the metaverse.
• Brands that offer unique and personalised offerings for emerging client segments, such as wealthy women, next-gen HNWIs and tech-wealth HNWIs.
• The exponential growth of HNWIs in China, Asia, and the Middle East.
• Significant investment in the ‘metaverse’, with brands shifting towards digital products, experiences and NFT alternatives.
• Greater interest in and commitment to ‘green technologies’.
• The consumer space market. As the quest to see the Earth from above becomes a viable prospect, brands are preparing to reach for the stars. For example, Tesla is collaborating with SpaceX to launch Tesla into orbit, and Virgin Galactic has partnered with Under Armour to create luxury consumer space suits.

As countries such as the UAE aim to decrease their reliance on oil and fossil fuels, wealthy investors are also looking at ways to diversify their portfolios. Advanced technology, digital assets, sustainability, and responsible investing are proving to be the way forward for those looking to safeguard their wealth.

Inevitably, how HNWIs and UHNWIs choose to invest and spend their money will impact established and emerging markets alike, bringing opportunities and challenges to the businesses and marketers that cater to them.