Wealth management: UBS’s big signal on ESG
Environmental, social and governance factors are financially material and the time for debate is over – unless you’re Trump.
In September, UBS Global Wealth Management announced it would be recommending sustainable investments over traditional investments to clients.
It’s a significant signal to the investment management industry that sustainable investing is now mainstream and traditional investing – investing in firms without some lens of sustainability – may become a niche area for the likes of long/short hedge funds and distressed investors alone.
The move carries particular weight, given that several years ago UBS announced a change in strategy for its wealth management business to shift focus from revenue generation to investment performance.
The Trump administration [is] an albatross around the neck of sustainability
The debate around ESG returns has lingered far longer than is helpful. Even this year, there has been discussion around whether outperformance is merely coincidental – ESG funds typically allocate to sectors such as health and tech that tend to be longer-term high performers, and have reduced allocations to oil and gas that have under-performed this year.
However, it’s hard to argue with the largest wealth manager in the world, especially when it also points out the risk of investing in firms that are not taking sustainability seriously.