Environmental, social and corporate governance (ESG) is set to become a standard consideration in investment decisions within five to 10 years, says UBS.
Speaking to InvestorDaily, UBS Asset Management head of Australia and New Zealand Bryce Doherty said ESG is likely to become part of the normal global equities investment process.
“It’s just about identifying things that are going to make [a] company perform better,” he said.
Mr Doherty said true ESG investing is not about filtering out certain stocks; it’s about selecting stocks that will provide growth and value due to their ESG components.
“We need to move on that; it’s not just about [ethics] and that it’s a good investment decision to be involved with [companies] that have good ESG factors.”
Mr Doherty noted that the branding of ESG funds is currently difficult. He said for his firm, which is set to launch a sustainable-focused global equities fund in Australia next year, there is significant debate around whether to use the label “sustainable” or “just global equities”.
“Should we just call it global equities and let the research community see that ESG is just part of it?
“Is the market ready to understand that this should just be part of our normal global equities investments or should we be putting it up in lights?”
Mr Doherty argued that, ultimately, the performance of sustainable and ESG-focused funds will speak for themselves.
He believes a foremost hurdle in normalising ESG investing is getting investors to understand that it does not mean underperformance.
“There’s still work to be done here in Australia for people to understand that ESG doesn’t equal underperformance.
“Because we’ve had such a big resources economy here, if you’re excluding resources out of your Aussie equities you have underperformed until recently. That hasn’t helped," he said.
However, Mr Doherty concluded that consumers are nonetheless on the right track and are, to a greater extent, starting to demand sustainable investment products and strategies.
"The consumer is actually much more powerful in these decisions than even regulation."
The onus is on the world’s biggest asset owners to solve society’s biggest issues without compromising on their financial responsibiliti...
Investors will have to brace themselves for climate change and start taking stakes in areas such as infrastructure and agriculture, with cur...
Mayfair 101 has launched its second fixed interest investment product in response to increasing demand for income-producing investments in t...