UBS Group AG has seen a sharp increase in its clients in Asia seeking sustainable investments this year as the coronavirus pandemic helped sharpen the focus on environmental, social and governance issues globally.
UBS's Global Wealth Management clients in Asia who subscribed to the bank's 100% sustainable investment strategy grew 50% in the six months starting February. The Swiss bank's assets under management classified as 100% sustainable rose to US$1.5 billion by July, from US$1.0 billion in February, Mario Knoepfel, the head of sustainable and impact investing advisory in Asia-Pacific at UBS Global Wealth Management told S&P Global Market Intelligence in an interview.
The bank announced Sept. 10 that all factors being equal, it will now recommend sustainability-linked investments first to its clients, before other opportunities. ESG-linked investments have also outperformed the market in 2020, proving that sustainability has a higher degree of performance resilience.
"We really made a point to engage clients around this topic," Knoepfel said. Conversations with clients have shifted from questioning sustainable investing portfolio returns to how they should shift their asset allocations to capture the ESG-related returns as the global economy recovers, he said.
"If we look at government efforts and economic recovery efforts, then a lot of the spending is directed towards the sustainability recovery of the economy," he said. "What ESG offers in this context is a deeper understanding of how companies actually operate, which companies have sound business models or are leaders in their sector, both in terms of managing the current business, but also positioning for the future."
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The pandemic has brought ESG concerns to the forefront across the world, particularly among investors. BlackRock Inc. Chairman and CEO Larry Fink noted in a July 17 earnings call that demand for sustainable products continues to accelerate as clients increasingly turn to ESG, "not only for investments that reflect their values but also to enhance performance, risk management and portfolio construction."
As a fast-growing wealth region, Asia has attracted considerable ESG efforts from other banks too. Deutsche Bank AG is currently looking into making ESG commercially viable in Asia-Pacific, and DBS Group Holdings Ltd. is helping its clients transition to more sustainable business models.
Demand, not coercion
ESG investments always existed as an option, but now they are "moving to the preferred option" as part of an evolution, said Andrew Lee, global head of sustainable and impact investing at UBS Global Wealth Management.
"We're not forcing any client to follow sustainable investing strategies. For us, it's very important that clients have a choice. But we really feel that as a preferred solution, sustainable investing is really going to add value to our clients' portfolios," Lee said.
Last month, UBS launched a personalized sustainable investing advisory product for its global wealth management clients. Clients can indicate preferences among six sustainable investing topics — climate change, pollution and waste, water, people, products and service, and governance — and the bank will aim to provide personalized investment recommendations, Knoepfel said.
On the lending side, UBS has previously said that it will exit offshore-oil projects in the Arctic, thermal coal mines and oil sands on undeveloped land globally.
The UBS executives didn't disclose future ESG-related targets. As at end-2019, UBS managed US$488.5 billion in "core sustainable investments" globally or 13.5% of total invested assets, according to its 2019 Sustainability Report.