Sustainable investing has already arrived

written by UBS Editorial Team

USD 31 trillion is invested in global sustainable investing (SI) strategies, up 34% since 2016, according to the Global Sustainable Investment Alliance. (UBS)

Fifteen years ago, Mike Ryan, Chief Investment Officer Americas, rarely encountered a wealthy investor who wanted to learn about sustainable investing (SI). The topic of aligning your portfolio to your values came up in about one in 10 family meetings he attended, he recalls. How things have changed.

"Today, I don't go into an ultra-high-net-worth meeting anymore where sustainability does not come up," Ryan said. "And it's no longer just about your beliefs; this is about investing in responsible and resilient companies."

Ryan was among dozens of thought leaders to share their insights on the growing popularity of sustainable investing at UBS's second annual Sustainable Investing Forum in New York in April. Forum organizers saw interest rise significantly this year, and anticipate greater attendee capacity with more expansive programming next year.

Expressing your values through your wealth

Jason Chandler, UBS Head of Wealth Management in the U.S., sees sustainable investing as a tool that strengthens relationships between investors, their families and their advisors. Heightened interest in SI only makes this more possible.

"What people are more and more thinking about is: 'How do I express my principles and values through my wealth and the way I invest?' I don’t think this is a fad or a trend," noted Chandler. "And clients approach their relationships with family, their wealth and what they want to accomplish in similar ways. Sustainable investing lends itself well to that."

'Sustainable investing has already arrived'

Once viewed by some as a niche interest, sustainable investing is catching on as a mainstream approach. According to the Global Sustainable Investment Alliance, USD 31 trillion is invested in global SI strategies, up 34% since 2016. And even then, investors expect it to grow further. In fact, according to fall's global UBS Investor Watch: Return on values, 58% of investors expect sustainable investing to become the standard approach to investing in 10 years. Just recently, global assets invested in UBS's firm-discretionary Sustainable Investing solutions crossed the USD 5 billion mark, reflecting the fast-growing investor demand.

"Sustainable investing has already arrived," said Mark Sanborn, UBS Head of Investment Platforms and Solutions, Wealth Management Americas. He said the future will likely bring new approaches to sustainable investing across a variety of asset classes and ways to drive positive change. "These will become mainstream investments that we will be talking about and evaluating as part of the normal course of activities."

As investor demand and familiarity grows, the supply of differentiated and high-quality solutions will follow. "You can invest sustainably across asset classes with expected risks and returns matching those of traditional investments," explained Andrew Lee, Head of Sustainable and Impact Investing, UBS Chief Investment Office Americas.

The rise of the 'conscious consumer'

Today, younger investors are the most likely to be very familiar with sustainable investments and to already have them in their portfolios, UBS research finds. The wealthiest investors, meanwhile, are much more likely to believe sustainable investments will outperform traditional investments. There is also evidence that women tend to be more receptive to these approach, panelists said.

One panelist, Amy O’Brien, Nuveen Head of Responsible Investing, said much of the interest in sustainable investing is being driven by both increased attention to corporate responsibility and what she called "the rise of the conscious consumer"—those basing their purchase decisions, at least in part, on the social or environmental implications.

As these trends take hold, more investors are viewing sustainable investing "as a better way to invest," she commented.

A 'powerful long-term growth opportunity'

Daniel Roarty, Alliance Bernstein Chief Investment Officer, Thematic and Sustainable Equities, pointed to the growing role of the U.N.'s 17 Sustainable Development Goals in helping guide investors in their decisions about how to invest sustainably. These "SDGs" range from eliminating extreme poverty and hunger, to tackling climate change and income inequality.

"They are a really a roadmap to helping find what are the most important, most complex, largest environmental and social challenges that we face on the planet," Roarty said. "To the extent that you can organize a portfolio along those (lines) and find companies that are providing solutions, we think it’s a great way to connect a portfolio to a really powerful long-term growth opportunity."