Family Offices Key to Closing India’s $195B Impact Investment Gap

The Impact Investors Council (IIC) and the Indian wealth advice company Waterfield Advisors’ analysis estimates that India’s social sector financing deficit would reach Rs 16 lakh crore ($195 billion) by FY29, from Rs 14 lakh crore ($170 billion) in FY24.

Family Offices Driving Change

After expanding more than six times in only six years, from just 45 in 2018 to almost 300 in 2024, India’s family offices are evolving from private, family-run desks to some of the most powerful capital allocators in the private markets, now advising over $4.5 billion in assets.

Yet, when it comes to closing India’s huge gap in leveraging private finance for social and environmental transformation, or social financing, this enormous reservoir of resources has mostly stayed on the sidelines.

Impact Investing: Not Up to Par

The Impact Investors Council (IIC) and the Indian wealth advice company Waterfield Advisors’ analysis estimates that India’s social sector financing deficit would reach Rs 16 lakh crore ($195 billion) by FY29, from Rs 14 lakh crore ($170 billion) in FY24. The analysis worries that this disparity would only become worse if private wealth does not step up, as state spending now makes up 95% of the expenditures.

Up to 923 distinct high net worth households made impact investments between 2021 and 2024, albeit these investments were short-lived. It seems that the typical “investor life” in the impact ecosystem has lasted less than two years, since only 64 of the 316 families that joined in 2021 were still engaged by 2024.

Impact Lacks Strategic Focus

“Impact is seldom a strategic objective,” said Prabhir Correa, Waterfield Advisors’ Director & Head of Philanthropy and Impact Advisory. Families often have an opportunistic influence and base their wealth on listed stocks, real estate, or their own enterprises. They find it difficult to source, track, or quantify effect without internal teams, and the budget freeze in 2022–2023 made matters worse.

To put it another way, families are experimenting rather than doubling down.

Bets during the seed stage

Between 2021 and 2024, two-thirds of all family-backed impact transactions were in the seed stage, making up less than 30% of the deal value overall. Later-stage investments (Series B/C and beyond) made up more than 25% of transaction value, while they made up less than 10% of deals. Without sufficient capital, mid-stage businesses struggle to go from proof-of-concept to commercial viability, creating a “valley of death.”

According to Prabhir Correa, “Families bundle impact into ‘alternatives’ and use the same return lens as venture or private equity.” This encourages people to place early, smaller-ticket wagers where the danger seems manageable. The problem is that they do not scale.

In contrast, family offices can distribute bigger checks to Series B/C rounds via AIFs in mainstream private markets. However, in practice, they usually remain at the seed stage, depriving businesses of funding to expand.

Blind Spot in Financing

The intentional mobilization of private money to frontier markets via development finance is known as “blend finance,” and it helps communities and investors alike.

Blended financing has been a popular method for crowding in institutional capital and de-risking early markets worldwide. Only one family in India has ever used a hybrid financing structure, according to a poll.

“The true obstacle is awareness,” Correa said. Families worry about who benefits—intermediaries or end users—find structures complicated, and there are not many case studies available. The hesitancy will continue until dashboards provide IRR-style clarity on returns and effect and reporting is standardized.

Policy Gaps Hinder Impact

Policymakers had anticipated that family offices would take the lead via blended finance, therefore this is a significant limitation. In addition to establishing a specific Social Impact Fund (SIF) category within AIFs, Sebi has already developed the Social Stock Exchange (SSE). Family offices and UHNI involvement were considered in the design of both. However, the platforms risk underutilization if there is no buy-in.

Given that Indian households only donate 0.1–0.15% of their money to charity, compared to 1.2–2.5% in the US and 0.5–1.8% in the UK, caution becomes even more glaring in a worldwide perspective. Impact investing retention is also lower since, according to Waterfield’s study, most families leave after two years, whereas repeat allocations are becoming more common in North America and Europe.

Conviction Drives Impact Growth

“The first or second generation of formal wealth management is still in place in our family. We are naturally lagging behind,” Correa said. However, the base is growing, since there are already 300 family offices, compared to only 45 in 2018. Impact will ultimately follow that expansion.

Due to its professional CIOs, international allocations, and increasing exposure to venture capital and private equity, family offices have come to represent financial sophistication. However, these same families continue to be hesitant about impact investment, caught between commercial and philanthropic investing.

According to experts, conviction—rather than money—is what India’s impact economy is lacking. Family offices will continue to worsen this $195 billion social finance gap until they switch from episodic investments to structured strategies.