Desmond Kuek, UBS
There is a growing interest in sustainable investing in Asia Pacific, as investors are more committed personally to improving their environmental impact and to social concerns, according to UBS.
As at end of 2021, sustainability-focus and impact investments at UBS increased 78% year-over-year to reach $251bn, up from $141bn a year ago, said Desmond Kuek, head of sustainable finance, Asia Pacific and global head of sustainable finance group at a media briefing ahead of the second UBS Apac sustainable finance conference
The bank sees strong demand across the region, with about 50% of the bank’s sustainable investment volumes coming from their Singapore and Southeast Asia clients, and the other 50% from clients in the greater China region.
When it comes to sustainable investing, apart from the “invest among leader” approach, where investors identify and allocate their assets to companies with strong performances from a sustainability perspective, UBS also noted that their clients are interested in adopting a thematic approach.
The Swiss bank has therefore identified four top sustainable investing themes: energy, cybersecurity, food, and climate.
The transition to sustainable and renewable energy has not only been boosted by widespread adoption of measures to lower carbon emissions, but has been boosted since Russia’s invasion of Ukraine.
Without the oil and gas supply from Russia, more European governments are looking into other ways to ensure energy supply by investing in renewables, noted Kuek.
“From a security point of view, even if they need more oil and gas, it is of strategic interest for governments to diversify from oil and gas into other renewable sources of energy,” Kuek added.
As more data and information are created, the importance of cyber security, as an aspect of personal, corporate, and national security will continue to build.
“Strong cyber defence is becoming even more crucial, and stocks linked to this theme have outperformed the global index this year,” said Kuek.
As the crisis arising from the Russian invasion of Ukraine worsens, accompanied by fears of a digital war, UBS expects an increase in spending on cyber security to continue in the years ahead.
UBS thinks that food supply has become an obvious concern this year because of sanctions and supply chain disruption resulting from the Russian-Ukraine war.
“As food and commodities are not going through Ukraine as easily as previously, there is a potential shock to the supply chain across the world,” said Kuek.
“Investors should think about where to diversify away from the more traditional sources of food supplies, and the sustainability of food becomes increasingly important.”
The urgency and importance to take action against climate change has been a popular area within sustainable investing and is expected to continue, according to UBS.
Despite governments’ commitments to reach net zero, the bank noted that the world is not on track to meet its climate goals, and the frequency and severity of climate events will rise.
As at end of 2021, UBS’s climate aware AUM grew to $23.4bn, and it has supported 103 green, social sustainability of sustainability living bond transactions last year.