Research

White paper suggests sustainability should not be treated as a risk management exercise

By James Langton |


Companies perform better when they treat sustainability as a return opportunity, rather than as a risk management exercise, says a new report from Zurich-based UBS Group AG.

The chief investment office at UBS Wealth Management today issued a white paper that says companies can improve their performance by meeting enhanced standards and actively seeking sustainable business opportunities, rather than treating their sustainability efforts as a way to manage operational and reputational risks.

According to the report, global assets managed according to responsible investment criteria grew from US$18.3 trillion in 2014 to US$22.9 trillion in 2016. It adds that widespread adoption of the United Nations Sustainable Development Goals (SDGs) will require US$5 trillion to US$7 trillion in annual investment over the longer term, which will boost demand for sustainability-related products and services.

"Amid increasing pressure from investors and other stakeholders, companies can best address their sustainability challenges by treating them as opportunities. A ‘business with impact' approach can help them enhance not only their social and environmental footprint but also their financial returns," said Mark Haefele, global CIO at UBS Wealth Management, in a statement.

The paper says that, among other things, firms seeking to become "businesses with impact" should work with other organizations to test business approaches, meet client demands, and overcome internal constraints; learn how to invest on a long-term basis from sustainability-focused clients and investors; and, establish digital platforms that enable them to connect more easily with socially-responsible investors and to identify suitable ‘impact' opportunities.

"Our wealthiest clients are increasingly focused on sustainability in both their investments and their businesses," added Simon Smiles, CIO for ultra high net worth at UBS Wealth Management. "We expect them to gravitate increasingly toward a ‘business with impact' approach when dealing with their own companies as well as firms in which they invest."