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UBS’ ESG portfolio attracts $208 mn in Asia

UBS’ ESG portfolio attracts $208 mn in Asia

This year UBS’ Asia-based private banking clients have invested CHF 200 million ($208.4 million) into its 100% sustainable investing portfolio, the bank has revealed.

Globally, the mandate attracted CHF 2.55 billion ($2.65 billion), top executives told reporters at a media briefing in Singapore.

The Swiss private bank launched the sustainability-focused mandate in Asia this April, following a January launch in Europe.

Mischa Eckart, Asia-Pacific head of client investment specialists said the strategy has returned 2.7% year-to-date to investors.

‘We have to see the performance as a positive sign that indeed, we don’t have to compromise returns [in a sustainable portfolio],’ he added.

According to Tan Min Lan, the Asia Pacific head of UBS’ chief investment office, the sustainable portfolio has outperformed similar traditional portfolios by close to 1%.

She said the sustainable portfolio replaces the US Treasury allocation of traditional portfolios with an exposure to World Bank bonds, and swaps investment grade corporate bonds with green bonds.

‘The World Bank bonds give you a pick-up of 10-15 basis points over US Treasuries. Because this portfolio is so focused on companies with strong ESG scores, it’s a quality portfolio. In an environment where there is so much uncertainty, quality actually outperformed,’ she added.

Tan expects the portfolio to return 5.3% per annum over a seven-year period, and its riskier version to return 8.1% over the same period, based on UBS’ capital market assumptions. The cross-asset, globally diversified portfolio invests in equities and bonds through mutual funds and exchange-traded funds.

As such, UBS relies on the fund managers to measure the environmental, social and corporate governance-related (ESG) impact of the fund, working with asset managers like Hermes on shareholder engagement with some of the underlying companies.

The balanced portfolio has a 55:45 split between equities and bonds, investing in companies that are ESG leaders, firms with improving ESG scores as well as ESG-focused thematic equities.

‘At the outset, we don’t want to go out and say if you invest in sustainable investing, you can do much better, because that’s never the way that we look at it. We are basically saying that there is no sacrifice to performance,’ Tan explained.

Investor sentiments

In other developments, UBS’ latest Investor Watch Survey has found that despite an increasing focus on ESG in the wealth management industry, 72% of the high-net-worth individuals surveyed in Singapore said that they have never been offered a sustainable investment.

The survey, which covered 401 investors in Singapore, found that only 35% had adopted sustainable investing.

The difficulties of measuring the impact of sustainable investments was a top concern for the non-adopters in Singapore, and three-quarters of the survey participants felt that the practice wasn’t well-established.

The highest adoption rate in Asia was found in China, where 60% of the participating investors had at least 1% of their investable assets in sustainable investing.

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