October 23, 2018 / Interview
Clarity Clinic: Mario Knoepfel, UBS Wealth Management
By Joe McGrath, ESG Clarity
UBS Wealth Management’s Mario Knoepfel outlines what is driving the growing interest in sustainable investing among Asian investors, and describes how UBS is responding
Q: Can you briefly describe your role with UBS Wealth Management?
My focus is mostly on sustainable investing advisory. The wealth management business aims to show the end client how we can incorporate sustainable investing in their portfolio by looking at the values of an individual or a family, and reflecting that in their portfolio. UBS has a strong focus on sustainable investing, not only in US and Europe but also in Asia. However, it is a relatively new topic here in Asia to many of our clients, so we are working to build the market for sustainable investing through solutions that are based on our conversations with clients.
Q: How would you describe the levels of sophistication among Asian client groups?
There is quite a broad range. You have families that are ultra high net worths, who have very strong views on climate change, for example. Others prioritise air pollution, which is a persistent issue here in Asia. These groups know what they want and want assistance in how they express that in their portfolio. Others are at the very early stages and have never heard of ESG or sustainable investing as a concept.
There is a lot of first generation family wealth here in Asia and ESG investing can be one way to get the whole family to take an interest in the family’s investment goals. There are many different approaches. The notion that companies with stronger ESG standards tend to produce lower risk returns over time, is something that they understand. When you talk to them and explain how it works, it is very logical for them.
Q: How are Asian companies responding to increased investor demand for sustainable reporting?
Stewardship is much more developed in Europe and the US, than it is in Asia. European pension funds and investor groups engage far more with large multi-national companies. However, pressure on companies to get their supply chain right does trickle down, and that includes Asia. This is where we see some of the pressure for change coming from.
Many of our clients are invested in Asian companies which are listed in Singapore. The country has introduced mandatory sustainability reporting for all companies and that is still very new. It has led to companies really thinking about what they need to show. Some are starting from scratch. In Indonesia, palm oil producers now show higher levels of awareness because there has been a lot of scrutiny in recent years on how they do business. As markets grow in Asia, it will be interesting to see greater numbers of institutional investors engaging directly with companies.
Q: What are the most common sustainability topics for Asian investors right now?
Climate change is a popular topic and pollution specifically – much more so than in Europe. We have rolled out a 100% sustainable portfolio in Europe and Asia, which takes a more holistic approach. It allows investors to delegate investment decisions to us. A strong driver of that has been value alignment, where investors have thought “what do we stand for as a family?” or “what kind of planet do I want to leave for my family?” That is something that resonates quite well. Asian investors are perhaps more return-orientated than European investors. So, we focus on how ESG can help deliver better performance over time.
Q: Has UBS conducted any recent research on ESG trends in the region?
We have very recently published an investor survey, called Return on Values. It is a survey of 5,000 investors looking at attitudes towards sustainability and impact investing. This survey was conducted across 10 countries in Asia, including China, Hong Kong, and Singapore.
It was interesting to see the responses from Chinese investors, who were among the most positive in terms of their attitudes towards ESG and sustainability. In China, there is huge economic transformation going on while developments in artificial intelligence have made people consider how they can become more effective and efficient. They see that as a clear driver for sustainability because it means the use of fewer resources. It is a very natural way of looking at economic development. In Europe, investors see sustainability through an older lens that is more exclusionary and are a bit more sceptical.
Q: What are the corporate areas of focus for UBS Wealth Management in the coming months?
We are building out our offering, some of that is being geared towards globally diversified solutions. We are also looking at areas where we can work with external partners on the impact investing side, in areas such as early stage private markets. We don’t typically manage private market solutions ourselves, because there are others around with exceptionally strong capabilities in this area. We have some solutions where we are co-investing, and others which are exclusive for UBS clients. On the public side, we have launched a partnership with Hermes EOS to engage with companies on resourcing and the development of investment cases.
– Mario Knoepfel is a Hong Kong-based sustainable and impact investing specialist at UBS Wealth Management, and a member of ESG Clarity’s Editorial Advisory Panel.