Sarasin's chief investment officer has challenged the use of passive fund vehicles where no account is taken of how sustainable a business or sector actually is.

Index-tracking and buy-and-hold strategies may be the wrong types of investments in the decade ahead, as many stock indices do not incorporate sustainability analysis, says Burkhard Varnholt of Sarasin.

Varnholt, chief investment officer at the Swiss bank, argues that the world economy is simply "too dynamic" for exchange-traded funds or traditional buy-and-hold approaches to work.

Investors should instead evaluate all their assets, including those assumed as safe, and try to pin down whether they are exposed to economic risks stemming from the well-known problems of the Western World such as increasing public and private debt, underfunded social security programmes and aging populations.

"I am convinced that the worldwide adoption of sustainable asset management marks the most important paradigm shift at the moment in the field of modern asset management," Varnholt writes in a new report.

As a result, the question of what is a safe haven needs to be radically re-examined, according to Sarasin's CIO. For example, the thought of government bonds as the ultimate safe haven could come under pressure in the future - if it has not already done so.

"But in the absence of an undisputed safe haven asset class, modern portfolio theory doesn't work," Varnholt says.

Winston Churchill once famously said that democracy is the worst political system - except for all the rest. In an investment note, Varnholt says that the ongoing sovereign debt crisis is a perfect example of one of the intrinsic weaknesses of democracies: political leaders making expensive and unsustainable election pledges. As a result, in Varnholt's view, many Western governments sit on underfunded and unsustainable welfare programmes, which naturally lead to more public debt. This, in turn, has a negative effect on birth rates, which puts even more pressure on social safety nets.

"We are living in challenging times and are personally bearing witness to fundamental social, economic and political experiments," Varnholt says. "We should shun such experiments in asset management because the premiums for those risks are too low. Those who follow this advice and choose to embark on a rigorously sustainable path can create high-grade value in the years ahead with asset management. That’s why I remain an optimist."