Wealthy investors in Asia are showing more interest in sustainable investments as the coronavirus pandemic focuses more attention on health and the environment, according to UBS Group AG.
The private banking unit’s 100% sustainable portfolio in Asia more than doubled to $1 billion in assets since the start of last year, with about 60% of the investments coming from Greater China, UBS said. The Swiss bank says the portfolio is the biggest of its kind in the region.
“The mindset has switched from ‘I don’t know about it, I’m skeptical,’ to ‘I’ve heard about it, I want to know, I want to learn,’” said Mario Knoepfel, head of sustainable and impact investing advisory for Asia Pacific at UBS’s wealth management unit. “That is the major difference that we have seen.”
While the UBS cross-asset portfolio has been around for two years, demand has heightened since the Covid-19 outbreak, which has sparked more questions about health, environment and even alternatives to traditional food and retail products.
“We have seen good traction in our sustainable investing solutions in 2020 so far,” Knoepfel said in an interview in Hong Kong. “It will remain a core topic and will help also the awareness.”
It doesn’t hurt that sustainable funds are holding up relatively well as equities tumble around the world this year. U.S. stocks in the top quintile of ESG scores have beaten the S&P 500 Index by 5 percentage points since its February peak, while ESG gauges in Europe have topped broader benchmarks this year, Bank of America strategists wrote in a note last week.
“ESG is a bear market necessity not a bull market luxury,” the strategists wrote, referring to environmental, social and governance investing. “Our contention has been that ESG is even more critical during a downturn, and recent evidence supports this.”
ESG-based investing has proven a popular strategy this year with a net $14.2 billion invested in related exchange-traded funds globally, data compiled by Bloomberg show. Longer term, an MSCI ESG index for Asia excluding Japan outperformed the broader index eight times over the past 10 years.
The UBS sustainable investing discretionary portfolio, which allows the bank to manage the money for a fee, returned more than 18% last year for a balanced strategy that allocates about 50% in equities, Knoepfel said. The portfolio has grown from zero interest to having a share of nearly 20% of all its investing mandates in Asia Pacific, he said.
While the immediate social and economic concerns are centered on the coronavirus and its impacts, the larger ESG issues aren’t going away, said Wai-Shin Chan, head of the climate change center at HSBC Holdings Plc. The virus may result in fresh considerations of the resilience of global health-care systems, lower emissions and air pollution, he said.
“Some consequences of the pandemic will be good for society, others bad,” Chan said in a research note. “In time, businesses will have to rethink the true level of resilience to potential shocks – virus, climate or otherwise.”
Huey Ko, a UBS private-banking client in Singapore, is planning to increase the proportion of her portfolio to sustainable investing because she thinks the sector adds value for her investments.
“There are many critical issues we face right now as a global community,” Ko said. “Threats like pandemics and climate change do not respect borders and they remind us of our interdependence with one other and with our environment.”
©2020 Bloomberg L.P.