As business and political leaders gathered in the Swiss town of Davos for the annual WEF, the bank set out what it is doing to push sustainable investment ideas and gave ideas on how wealth managers must act.

UBS, the world’s largest wealth manager, has launched a batch of services designed to foster sustainable growth, including a platform connecting clients with investment opportunities and portfolios that target particular returns as well as benefit society the environment.

The Swiss banking group set out its announcements in a white paper, published to coincide with this year’s annual World Economic Forum conference in Davos, Switzerland. Politicians, including US President Donald Trump, business leaders, commentators and activists are gathering in the small Alpine town to thrash out issues almost a decade on from the global financial crisis. 

The UBS paper, written by experts from across the bank, outlines the steps taken to put capital to work, including private wealth, towards the sustainable development goals (SDGs) and has set out a number of SGD-based partnerships. Banks such as UBS, BNP Paribas, Bank of America and Goldman Sachs, among a few, have embraced impact/sustainable investing ideas in different ways. In some cases, the move is seen as responding to client wishes, such as among younger clients more concerned, so it is said, about the non-financial aspects of investing. 

The trend of interest in socially responsible/impact investing appears to be strong. For example, a recent survey of US asset managers by Cerulli Associates, the analytics firm, showed a rising percentage of asset managers look at environmental, social and governance factors alongside more traditional financial tests to identify opportunities and risks. And a recent report by Boston Consulting Group and MITSloan Management Review found that investments that deliver financial results are closely correlated with those that are deemed sustainable (Investing For A Sustainable Future, 11 May 2016).

Separately, a study by Barclays found that investment-grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015 (source: MSCI). Impact investing has a way to go in terms of size, but the amounts are already large. There are $60 billion of impact investing assets under management, and $12.2 billion of fresh investment was expected to be put in place last year, according to the Global Impact Investing Network, a forum for the sector. One forecast has impact investing AuM topping $3 trillion over the next decade.

Partnerships
UBS said its SGD-related partnerships include:

-- 100 per cent sustainable cross-asset portfolios for private clients, targeting market rates of risk-adjusted return as well as positive social and environmental outcomes. These portfolios include an exclusive partnership with the World Bank on an allocation to World Bank debt instruments, which offer a more explicit sustainability focus than other highly rated debt, as well as a new best-in-class, shareholder engagement strategy involving Hermes Investment Management; 
-- A partnership with Solactive and “green” bond managers on new indices featuring World Bank, multilateral development bank, and green bonds. The indices enable asset allocation along three dimensions – financial return, financial risk, and sustainability; and
-- The launch of Align171. This is a platform, as announced last year, designed to connect a range of public, institutional, and private wealth investors with SDG-related investment opportunities. Align17 is a WEF Young Global Leaders initiative supported by UBS, PwC, Linklaters, the IFC, and Hamilton Lane.

The bank said it is not involved in choosing private investments made available on the Align17 platform and it will not carry out due diligence or suitability reviews regarding such investments.

The white paper said wealth management firms must work more closely with multilateral development banks such as the World Bank to explain their clients' expectations over financial and social/environmental returns. The paper said firms must also co-operate to standardise how sustainable and impact investing is measured, to avoid mislabled products from genuine sustainable/impact investments, a danger that could discredit the philosophy.

“Sustainable and impact investments should be defined as generating at least market rates of financial return, alongside positive societal benefits. Financial firms must cooperate on building out new SDG-related financial instruments, across all asset classes, which meet this definition. Client appetite for such instruments is rising, as shown by the significant demand for our impact investment partnership with TPG Growth on the Rise Fund,” the white paper said.

“A `one-size-fits-all’ approach to underlying giving and investing opportunities is unlikely to appeal to private individuals and their highly personal sustainability preferences. UBS has seen significant client interest in a comprehensive set of sustainable and impact investments, ranging from cross-asset portfolios to liquid single asset class solutions, private market vehicles, and early-stage venture capital,” it continued.