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Wealth transfer seen boosting sustainable investing in Asia
Next generation of family business leaders show growing awareness of ESG issues
16 Feb 2021 | Tom King

Over the past few years sustainable investing has been on a consistent upward trend across Asia. While the growth is not exponential, it is becoming broad-based and is taking up an important part of many portfolios. 

According to Mario Knoepfel, head of sustainable investing advisory, Asia-Pacific, at UBS Wealth Management, the past 12 months have given investors ample time to cogitate on sustainable investing and consider the benefits it offers to their portfolios.

“Throughout last year we accelerated discussions on sustainable investing with clients, what it means for their portfolios, the pros and cons, addressing their challenges in greater detail. With clients travelling less it was a very intense year of one-on-one conversations.”

The interest has been broad-based, Knoepfel says, pointing out that the demand has been strong not only from the traditional wealth hubs of Hong Kong and Singapore but from across Asia-Pacific.

According to UBS’ Global Family Office Report 2020, almost three-quarters of family offices globally (73%) currently invest at least some assets sustainably. 

In Asia, where wealth is beginning a transformative generational handover, family offices are at the forefront of sustainable investing in areas such as education, healthcare, automation and robotics, and alternative food sources.

Personally engaged

The next generation of family business leaders are becoming increasingly aware of the importance of sustainability in business operations, with some personally engaged in addressing environmental, social and governance (ESG) issues, well before they inherit the family wealth or take the reins of the family business.

Knoepfel believes that such a focus will continue to grow and deepen, with the next generation adopting sustainability strategies for their family wealth portfolios and business interests.

To meet the evolving demand for sustainable investment solutions, UBS launched a 100% sustainable cross-asset discretionary mandate in the region three years ago. The mandate is now US$2.8 billion, up from US$1 billion towards the end of 2019.

In the third quarter of last year the bank rolled out a personalized advisory offering which lets clients select their sustainability preferences. By the end of December that service had already pulled in more than US$300 million in assets.

Min Lan Tan, head of APAC Chief Investment Office at UBS, thinks investors in Asia are increasingly shifting their attention and portfolios towards the real-world impact of their investments.

“In the coming year, a further maturing of the sustainable investment toolkit, a greater focus on impact investing and transformational trends are likely to keep the momentum growing,” says Tan. 

Driving force

Would disruptions now affecting many industries impede sustainable investing or help it flourish?

“Disruption comes in many different forms but in general tends to be biased more towards sustainability. For example, the auto industry is getting disrupted by electric vehicles and ride-sharing, both of which reduce our carbon footprint,” says Amanda Lyons, investment manager, disruptive growth and technology, at GAM Investments.

She points out that the increased use of technology in the workplace has also reduced the need for business travel as communication technologies have brought the world closer together. And that sector may well have passed its peak with many predicting travelling for business will never return to its pre-coronavirus levels.

The same disruption has also been a driving force behind changes in the investment community.

“ESG is a core part of our investment process and we challenge management of investment companies about ESG-related issues,” Lyons says. “The pressure on corporates from the investment community is bringing about change and moving us towards a more sustainable world.” 

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