Family Offices are the missing link to bridge a $195 billion gap in India's impact investing

Family offices emerge as India’s USD 195 bn missing link in impact capital

India’s family offices are transforming from discreet family-run desks into some of the most influential capital allocators in the private markets, having grown more than six-fold in six years — from just 45 in 2018 to nearly 300 in 2024 —now advising over $4.5 billion in assets.

Yet, when it comes to plugging India’s yawning gap in leveraging private capital for social and environmental change, or social financing, this formidable pool of capital had largely remained on the sidelines.

Impact Investing – Falling Short

A report by Indian wealth advisory firm Waterfield Advisors and the Impact Investors Council (IIC) pegs the shortfall in India’s social sector funding at Rs 14 lakh crore ($170 billion) in FY24, projected to widen to Rs 16 lakh crore ($195 billion) by FY29. As public spending already accounts for 95% of the outlays, the report fears that without private wealth stepping up, this gap will only widen.

Between 2021 and 2024, as many as 923 unique high networth families made some form of impact investment, that capital has been short-lived. Of the 316 families who entered in 2021, only 64 remained active by 2024, implying the average “investor life” in the impact ecosystem has lasted less than two years.

“Impact is rarely a strategic priority,” Prabhir Correa, Director & Head – Philanthropy and Impact Advisory at Waterfield Advisors said. “Families anchor wealth in listed equities, real estate, or their operating businesses, and impact tends to be opportunistic. Without in-house teams, they struggle to source, monitor or measure impact - and the funding winter of 2022–23 only amplified the pause.”

In other words, families are dabbling, not doubling down.

Seed-stage Bets

Two-thirds of all family-backed impact deals between 2021 and 2024 were at the seed stage, and accounted for less than 30% of the total deal value. By contrast, later-stage investments (Series B/C onwards) were under 10% of deals but contributed over 25% of deal value. That leaves a “valley of death” in mid-stage enterprises that find it challenging to progress from proof-of-concept to commercial viability without adequate funding.

“Families lump impact into ‘alternatives’ and apply the same return lens as venture or private equity,” Prabhir Correa said. “That drives them to smaller-ticket, early bets where the risk feels contained. The challenge is these don’t scale.”

Compare this with mainstream private markets, where family offices readily allocate larger cheques to Series B/C rounds via AIFs. In impact, however, they largely stay at the seed stage, leaving enterprises starved of capital to scale up.

Financing Blind Spot

Blend finance is the strategic use of development finance to mobilise private capital to frontier markets, which benefits both investors and communities.

Globally, blended finance has emerged as the tool to de-risk early markets, as well as crowd in the institutional capital. In India, it has barely registered with only one family surveyed to have ever participated in a blended finance structure.

“Awareness is the real barrier,” Correa pointed out. “Families find structures complex, lack case studies, and worry about who benefits - intermediaries or end beneficiaries. Until reporting is standardised and dashboards provide IRR-style clarity on both returns and impact, the hesitation will persist.”

That is a serious constraint as policymakers had hoped that family office would step up through the blended finance route. Sebi has already launched the Social Stock Exchange (SSE), while creating a dedicated Social Impact Fund (SIF) category under AIFs. Both were designed with family offices and UHNI participation in mind. But without a buy-in, the platforms run the risk of being under-utilised.

Caution looks even starker in global context, as Indian families contribute just 0.1–0.15% of their wealth to philanthropy, compared with 1.2–2.5% in the US and 0.5–1.8% in the UK. Retention in impact investing is also weaker, as Waterfield’s survey showed that most families exit within two years, whereas in Europe and North America, repeat allocations are increasingly the norm.

“Our families are still in the first or second generation of formal wealth management. It’s natural we’re behind the curve,” Correa said. “But with 300 family offices today, from just 45 in 2018, the base is expanding. Impact will eventually ride that growth.”

Family offices have become symbols of financial sophistication - professional CIOs, global allocations, and growing exposure to private equity and venture capital. Yet in impact investing, the same families remain tentative, trapped between philanthropy and commercial investing.

The missing piece in India’s impact economy is not money but conviction, experts have said. Unless family offices transition from episodic bets to structured strategies, this $195 billion gap in social financing will only widen.