Covid-19 renews Asia's focus on sustainable investing: UBS

Singapore

THE ongoing pandemic has sparked Asia's renewed focus on sustainable investing (SI), with wealthy families increasingly turning to businesses that are able to tide over the global health crisis.

UBS, the world's largest wealth manager, is expecting its family offices in the region to more than double their ESG (environmental, social and governance) asset allocation to 19 per cent of their overall portfolio in the next few years, up from 9 per cent currently.

Mario Knoepfel, UBS head of sustainable investing advisory for Asia-Pacific, told The Business Times that from January to July this year, the firm's flagship 100 per cent SI cross-asset discretionary mandate saw a 50 per cent growth in invested assets from Asian clients.

Launched in Asia-Pacific two years ago, assets under management for the SI mandate crossed the US$1.5 billion mark in July, up from about US$1 billion this February.

"Despite people taking out money from the investment markets in recent months, we have seen continuously strong growth in our SI investment strategy," said Mr Knoepfel.

"Conversations with clients are now focused on companies that are still going to exist going forward, and the ones best positioned to come out of Covid-19 as winners," he noted.

August Hatecke, co-head of UBS wealth management in Asia-Pacific, said in a statement that Asian clients are now more focused on sustainability as they have found that sustainable investments can generate equal or superior returns, compared with traditional investments.

It also helps to de-risk their businesses, and meets mounting consumer demand for sustainable solutions, he added, noting that entrepreneurs make up the majority of UBS's Asian clients.

All of the firm's SI strategies have seen positive performance this year, and are on track to outperform traditional investment strategies.

In particular, UBS's flagship 100 per cent SI mandate, in its balanced strategy, has rebounded about 26 per cent since the market selloff in March.

Year to date, major sustainable indices have performed better than traditional equivalents. To add, inflows into SI equity exchange-traded funds continued throughout the year, even as traditional strategies had seen outflows as soon as market corrections started, said Mr Knoepfel.

"This is another strong indication how investors have confidence that SI allows them to invest into higher quality and more resilient companies," he told BT.

Against this backdrop, UBS on Thursday announced that it has made sustainable investments the firm's preferred solution for private clients investing globally.

Managing US$488 billion in core sustainable assets, the firm said it is the first major global financial institution to make this recommendation.

While traditional investments will remain "most suitable" in some circumstances, UBS believes a 100 per cent sustainable portfolio can deliver similar or potentially higher returns compared to traditional investment portfolios, and offer strong diversification for clients investing globally.

Mr Knoepfel said the firm had in recent months seen growing client interest in sectors such as healthcare, education and disruptors in the food industry, which are poised to be "winners" in the post-pandemic world.

Access to medical care will be particularly relevant to many emerging Asia markets, while enabling education via technology - and consequently relying less on classroom-based learning - will be an important focus in the years to come, he added.

As governments around the world race to accelerate economic recovery, there have been notable investments in sustainable developments as well as regulatory changes to tackle issues such as climate change and social inequality, said Mr Knoepfel.

"Companies that are on the correct side of these regulations will be the big beneficiaries."