UBS: UK investors 'more cautious' on sustainable finance than global peers
A new report from UBS has found that UK investors have been more cautious to integrate sustainable financial products into their portfolios, largely due to the uncertainties of Brexit.
UBS’ latest Investor Watch report, found that just one-fifth of UK investors currently hold sustainable investments in their portfolios. In total, 39% of the world's investors are participating in sustainable investment practices.
Released today (19 September), the report summarises the views of 5,300 millionaires with at least $1m in investable assets each. The report reveals that emerging markets such as China and Brazil are leading the charge on allocations to sustainable investing, with 60% and 53% of respondents in each nation respectively claiming to hold investments in green financial products.
According to UBS, concerns about how the UK’s financial sector will likely face a period of uncertainty post-Brexit are a key barrier to sustainable investment uptake across the nation. Only 39% of the 450 British respondents to the company’s survey said they were optimistic about the country’s short-term economic future, compared to 62% in Europe and 61% globally.
US-based investors were the slowest to adopt sustainable investment, the report claims, with just 12% making any form of green investment.
Despite the lower number of asset holders adopting sustainable investing in Britain at present, UBS predicts that the proportion will increase by a further 15% by 2023. The financial firm’s research also revealed that half of British respondents would consider making most or all their portfolios sustainable in the future.
“It is disappointing to see the UK lagging behind other markets in the pursuit of sustainable investments - however, the growing momentum among UK investors considering this investment route is undeniable,” UBS’ head of UK domestic Nick Tucker said.
“We’re now at a pivotal moment where increasing investor interest in sustainable investing and an increasing number of available and suitable products are coming together. We expect the UK market to play catch up as this plays out.”
Another prominent global barrier to investing sustainably was found to be a lack of knowledge, with more than two-thirds (69%) of asset managers without green investments claiming that they did not understand enough about such products to use them. Questions about the impact these investments actually generate (78%), lack of track record (67%) and concern about lower returns (67%) were also commonly cited.
Nonetheless, the green finance sector continues to grow at an impressive rate, with a recent report by the Climate Bonds Initiative (CBI) finding that the global green bonds market grew by a staggering 78% between 2016 and 2017. During the twelve-month period, national and institutional investors funnelled more than $150bn into low-carbon projects.
Since the launch of the CBI report, the likes of The European Investment Bank (EIB), and The World Bank have issued new green bonds, with the former launching a €500m (£448m) Sustainability Awareness Bond designed to boost capital market and private sector transparency for climate-related risks earlier this month.
More recently, ING this week revealed that it will work with the companies covered by its £456m ($600bn) green investment portfolio to help align their respective sustainability strategies with the aims of the Paris Agreement - the first move of its kind in the finance sector.