Sustainable investing may good for the world, but can it also be good for your portfolio?
Stephen Freedman, Head of IPS Sustainable Investing Solutions, UBS, says it can. In fact, a common misconception is that you have to sacrifice financial returns to align your investing with your personal values and aspirations.
"There is no evidence that you are leaving money on the table" by investing for the broader good, he said.
Freedman's insights were among the many shared by dozens of thought leaders and investment professionals at UBS's inaugural Sustainable Investing Forum in New York in April.
Keynote speaker Brian Deese said that, as sustainable investing goes mainstream, the question of whether investors should consider it for their portfolio has evolved from "Why?" to "Why not?"
"We are to the point … where you can get the same and potentially better financial outcomes over time while actually aligning your capital with companies that are engaging in more socially responsible behavior," said Deese, Global Head of Sustainable Investing, BlackRock, and former Senior Advisor to President Barack Obama.
Some wealthy investors are coming to view such approaches as an opportunity to build their legacy in a way that complements their philanthropic endeavors.
"In a goals-based wealth management framework, non-financial goals are important, and philanthropy is not the only way to address non-financial goals," Freedman said. Investors "can use these investment instruments to achieve those goals—not 'instead of' philanthropy, but 'in addition to' philanthropy."
With sustainable investing, the aim is to find approaches that offer similar financial outcomes as conventional ones while still "being better for people and the planet," said Andrew Lee, Head of CIO Sustainable and Impact Investing, UBS.
For example, diversified exposure to green bonds can allow an investor to support a wide range of projects, from clean energy to clean water, yet still generate returns comparable to a mix of traditional high-grade and investment grade corporate bonds.
Lee said more securities analysts today are also incorporating environmental, social and governance (ESG) information not covered by traditional analysis into their evaluation to gain a fuller picture of a company's long-term financial performance.
"This is the future," Lee said. "Whether it's five years or 10 years from now, this is just going to be a different part of investing. And it's better investing."
Are your investments prepared for a changing environment? Together we can find an answer. Connect with your UBS Financial Advisor or find one.