The next generation of Asia's wealthiest families are leaning on sustainability to stamp their mark on their businesses and also to grow returns in the post-COVID-19 world, according to senior UBS Group AG executives.
The next-gen, or the upcoming cohort that will inherit the wealth of the ultra-high net worth families, is one of the key drivers for for environmental, social and governance issues in Asia, particularly in Greater China, said Amy Lo, co-head of global wealth management in Asia-Pacific and head and chief executive of UBS Hong Kong.
"As more next-gen are taking over the control of the family business, they start to reposition themselves with a stronger emphasis on sustainability and innovation, to be seen as the leaders [and] in order to attract new investors as well," Lo said at a July 5 media briefing on sustainable finance and investments. The young scions are driven by the desire "to do good for society, and build a better world for future generations."
The volatility caused by the COVID-19 pandemic has seen investors place greater emphasis on business resilience, Lo said.
According to S&P Global Market Intelligence data, ESG funds outperformed the S&P 500 index throughout the first year of the pandemic, from March 2020 to March 2021. In 2020, UBS has grown its core sustainable investment assets by 62% to $793 billion, which represents 19% of its client-invested assets. That number "is going to grow and to grow fast, with Asia leading this change," Lo said.
According to UBS's latest investment sentiment survey published April 28, 66% of its clients believe that sustainable investing is the second-best opportunity for investing, just a notch behind industries being transformed by technology, which 67% of clients believe in. Meanwhile, COVID-19 is the top concern amongst Asia-Pacific investors.
The next generation of Asian business leaders are uniquely positioned as they are in line to take over businesses that are also household names, said Gaetano Bassolino, head of global banking Asia-Pacific at UBS. They are keen on incorporating ESG into their businesses and actively investing in it, mainly via green and sustainability-linked bonds.
"We're also reaching a pivotal point where the second or third generation business owners are starting to take over the reins of running the company. In many cases, pursuing a sustainable development is very close to the hearts of the next generation business owners," Bassolino said.
The bank itself is doubling-down on its ESG initiatives in the region, Bassolino said. ESG is one of the three growth areas that the bank's executive board has endorsed for Asia-Pacific, and that has been reflected in some of the ESG-linked deals in the region in the first half of 2021.
In Greater China, there are many opportunities for innovative ESG structures, such as sustainability-linked bonds, UBS said. In January, Hong Kong real estate giant New World Development Co. Ltd. issued 10-year sustainability-linked bonds, which were oversubscribed six times by investors from Asia and Europe in the first public bond of its kind in Asia excluding Japan. UBS and JPMorgan Chase & Co. were the joint global managers for the sale.