Investors across Asia Pacific are showing strong demand for sustainable and impact assets across classes and product lines, according to UBS.
As of the end of September 2021, UBS's sustainability focus and Impact investing assets grew by 63% to US$207 billion, said Desmond Kuek, head of sustainable finance, Asia Pacific and global head of sustainable finance group, group sustainability and impact, UBS.
Within UBS's global asset management, sustainable-focused and impact assets under management totaled over US$ 97 billion by the end of September 2021, with the firm expanding their Climate Aware suite of products and Climate Aware AUM growing to more than US$ 20 billion. Clients are showing "significant interest in sustainable real assets in areas such as clean energy and water projects," Kuek said.
" This shows a major trend with clients - increasingly, they want their investments to do well, while also ensuring that they are having a positive impact on our planet and its people," he said.
Sustainability will continue to be a key conseration for APAC clients, Kuek said.
"About 70% of our clients in Asia are entrepreneurs," he said. "They are becoming more focused on sustainability because they have found that sustainable investments can generate equal or superior investment returns when compared to traditional investments.
"In our wealth management business, one example is our flagship 100% sustainable investing cross asset discretionary mandate. We reached a record USD5 billion in our 100% SI portfolios with almost one in five clients already invested. This is a 160% year-on-year increase in assets."
Looking ahead, UBS also sees sustainable bonds as a key growth area for Asia, having grown "significantly" over the past five years.
"In 2021, the total ESG bond issuance in APAC was US$118 billion, higher than the amounts raised for the full years in 2019 and 2020," Kuek said. "UBS expects growing investor demand and government support to drive issuance and this could lead to a doubling of total Asian sustainable bonds outstanding within the next three years."
Kuek noted that Asian sustainable bond issuance "is likely to be bolstered by government initiatives that affirm the region's intention to take ESG practices seriously."
He noted that mainland China has committed to achieving carbon neutrality by 2060, South Korea has set a 2050 carbon neutral target, Singapore has announced the Singapore Green Plan 2030 with detailed carbon-reduction targets and Hong Kong has launched a Green Bond Framework "intended to support sustainable development and facilitate regular issuance."
In the area of impact investing, Kuek pointed to UBS's oncology impact fund. Clients have invested US$650 million in MPM Capital's Oncology Impact Fund 2 (OIF 2), an impact investing initiative that invests in private and public companies developing innovative treatments for cancer.
He said that further investment opportunities lie in Greentech, clean air, and carbon reduction, as well as electric vehicles.
"China's solar and wind industries are poised to ride high on a surge of domestic and global demand for clean energy equipment," Kuek said. "The ambitious renewable energy targets set by the world's governments will mean a growing influx of orders for solar panels and wind turbines - where Chinese suppliers hold leading positions globally."