That is the view of James Gifford, the chief investment officer and head of impact investing at , the analytics firm, a rising percentage of asset managers look at environmental, social and governance factors alongside more traditional financial tests to identify opportunities and risks. And a recent report by Boston Consulting Group and MITSloan Management Review found that investments that deliver financial results are closely correlated with those that are deemed sustainable (Investing For A Sustainable Future, 11 May 2016). Separately, a study by Barclays found that investment-grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015 (source: MSCI). Impact investing has a way to go in terms of size, but the amounts are already large. There are $60 billion of impact investing assets under management, and $12.2 billion of fresh investment was expected to be put in place last year, according to the Global Impact Investing Network, a forum for the sector. One forecast has impact investing AuM topping $3 trillion over the next decade.

Rising interest in such areas even fuels corporate M&A activity; last year, Tiedemann Wealth Management, a US firm, acquired a Seattle-based organisation in part to obtain its impact investing expertise.

Sustainable appeal
Gifford spoke about why clients would want to participate in sustainable investing, and what the investment world is doing to meet client demand for the sector.

“There are the societal returns,” Gifford said. “There are big problems in society, and the sustainable development goals process which is identifying a funding gap of over $2 trillion a year for next 15 years. That will only be filled by large scale business and investment. And we believe there is an important role for private wealth given the trends, in mobilising capital for these sustainable goals. Everything is lining up in terms of demand from clients and interest in clients. On the supply side there are now large asset managers stepping up by providing institutional-quality product. We think that we are at the point where the supply side of investment product can now help deliver a 100 per cent sustainable and impact investing portfolio, which ideally gives better returns than traditional portfolios.”

What does UBS have in store for the future?

“At the world economic forum in Davos last year, we committed to deploying $5 billion of client’s capital into impact investing over the next five years. It’s a big commitment we still have a long way to go to get to the target over the five years in impact investing. But we will be onboarding additional funds in private markets and possibly shareholder engagements going forward.”

This commitment on sustainable investing from UBS is not the first time it has been reported by this publication, as in December, UBS launched the world’s first healthcare development impact bond aimed at reducing the number of maternal and newborn deaths in Rajasthan, India.

Other firms are also looking to work within the sector to improve the social issue. In November last year, this publication reported that  Societe Generale had launched a “sustainable and positive impact finance” offering. Last October, Standard Life Investments launched its first impact investment product, the Global Equity Impact Fund.