UBS Study: Wealthy US Investors Lag Behind on Sustainability

(Photo Credit: Mathieu Turle)

by | Sep 21, 2018

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US investors

(Photo Credit: Mathieu Turle)

Wealthy US investors had the slowest rate of adoption in the sustainable investing landscape compared to the rest of the world, according to UBS. The multinational investment bank and financial services company released the latest edition of its Investor Watch report this week.

Called “Return on Values,” the UBS report was conducted between June and August 2018 and surveyed more than 5,300 millionaires with at least $1 million in investable assets, excluding property. UBS explained that the global sample was split across 10 markets: Brazil, China, Germany, Hong Kong, Italy, Singapore, Switzerland, the United Arab Emirates, the United Kingdom, and the United States.

For sustainable investing, the US respondents had the lowest rate of adoption — 12% compared to a 39% adoption rate among respondents worldwide. China, Brazil, and the UAE were all at the top with 60%, 53%, and 53% of respondents saying that they have sustainable investment holdings, UBS found.

Globally, 71% of respondents said they focus on pollution and waste for sustainable investing. Climate change, water, and products and services were also high on the focus list. Ethics, people, and governance rounded out the top seven areas.

Define Your Terms

“We found that while some investors understand the basic concept, confusion about sustainable investing terms, its various approaches, and even its impact, is widespread,” the report says. “For example, investors make little distinction among the three major sustainable investment approaches: exclusion, integration, and impact investing.”

UBS defines sustainable investing as integrating societal concerns, personal values or an institutional mission into investment decisions. The three main approaches are:

  • Excluding companies or industries from portfolios where they are not aligned with an investor’s values
  • Integrating environmental, social and corporate governance (ESG) factors into traditional investment processes, seeking to improve portfolio risk and return
  • Investing with the intention to generate measurable environmental and social “impact” alongside a financial return

The wealthy Americans investing sustainably are committed, though. UBS found that this subset of respondents dedicated 49% of their portfolios to sustainable investments compared to the 36% that their global counterparts dedicated. These US investors stateside tend to be young — nearly three quarters are 18 to 34 years old — and quite wealthy, with 40% indicating assets over $50 million.

Despite low overall sustainable investing adoption in the United States, UBS says that momentum is building and adoption is expected to increase by 58% in the next five years. At the same time, sustainability investing methodologies are emerging to help encourage better and more standardized ESG disclosures.

“Across all ages, wealth levels and regions, many believe sustainable investing will become a more mainstream approach over time,” said Paula Polito, global client strategy officer for UBS Global Wealth Management. “Many of the investors surveyed believe that sustainable investments are wise investments and see no need to compromise their personal values for financial returns.”

The full report is available here.

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