By James Lee / Forbes ME
UBS today launched the latest edition of its UBS Investor Watch report, “Return on values”, the largest recurring global study of High Net Worth Investors (HNWI’s) in the world.
The study reveals stark differences in the sustainable investing landscape. Emerging economies, such as China, Brazil and the U.A.E, indicate they have the highest rates of adoption of sustainable investing (60%, 53% and 53%), while investors in the U.S. and the U.K. lag far behind (12% and 20%). The global average stands at just 39%.
Sustainable lifestyle translates to investment decisions
U.A.E. investors are some of the most passionate when it comes to philanthropy, with over 9 in 10 (92%) believing it is their responsibility to give back and that doing good is more important than having more money. This mentality translates into their investment approach as a significant majority (80%) of the U.A.E.’s wealthy investors think it’s very important to use their time and resources to help create a better planet (versus a global average of 65%). All ages and genders in the U.A.E. are engaged with these issues.
As a result, 83% of U.A.E. investors are actively aligning their spending decisions with their personal values (global: 81%) and paying more for products from companies with sustainable practices (U.A.E. 76%; global: 69%)
Barriers standing in the way
The study finds that among non-adopters of sustainable investing in the U.A.E., 72% say quantifying impact is the biggest barrier. Nearly as many 69% (compared to 68% globally) believe that sustainable investment options are not firmly established, noting short track records and a lack of well-known sustainable companies. Furthermore, a strong perception exists amongst U.A.E. non-adopters that sustainable investments have higher fees, with 56% taking this view (compared with 46% globally).
No trade-off between personal values and returns
The study shows that very few U.A.E. investors expect to sacrifice returns when investing sustainably. In fact, 93% of U.A.E. investors (82% globally) believe the returns from sustainable investments will match or surpass those from traditional investments. They view sustainable companies as more responsible, better managed and more forward thinking – thus, good investments.
Indeed, return expectations vary significantly between countries. In China, U.A.E. and Brazil, where the adoption of sustainable investing is high, over 60% of investors believe sustainable investments will outperform traditional investments (U.A.E.: 66%, global: 50%). In the U.S and the U.K., this figure is just 19% and 27% respectively.
Sustainable investing has strong momentum
Despite remaining deterrents, U.A.E. investors expect sustainable investing to grow significantly in popularity, from 53% adoption today to 66% over the next five years. In fact, U.A.E. investors are the most convinced of all countries that sustainable investing will become the new normal” in 10 years (75%). In contrast, only one third of investors in the U.S. and the U.K. agree that sustainable investing will become mainstream in this time period.
Leading adopters of sustainable investing are U.A.E. investors aged over 65, with 73% of this age group expecting to hold sustainable investments by 2023, compared to 65% of 18-34-year olds.
“The results show that UAE investors are ahead of many of their peers in Europe and Asia when it comes to investing sustainably,” says Niels Zilkens, Head of Wealth Management Arabian Gulf and NRI at UBS, “They do not believe they are sacrificing returns, rather they feel that the steps many are now taking will become normal practice in the future. The priority in the medium term will be for them to continue feeling able to align their personal priorities with their investment needs.”
Rachel Whittaker, Sustainable Investing Strategist, Chief Investment Office of UBS Global Wealth Management, added, “It is encouraging to see how many investors in the Middle East translate their personal convictions, particularly when it comes to protecting the environment, into sustainable investments. We now need to address the concerns of those who remain skeptical, and demonstrating that investing sustainably can deliver market rate investment returns will be an important step in that direction.”