New UBS Investor Watch study reveals strong appetite for sustainable investments among U.A.E. investors
A recent study of High Net Worth Investors finds stark global differences: China, Brazil and the U.A.E. have the highest rates of adoption in sustainable investing; U.S. and U.K. the lowest
- The vast majority (93%) of U.A.E. investors believe they are not giving up performance by choosing a sustainable investment (global average: 82%). Further, 66% of U.A.E. investors expect sustainable investments to outperform traditional investments (compared with 50% of investors surveyed globally).
- U.A.E. investors expect sustainable investing to grow from 53% of investors to 66% over the next five years (globally: 39% to 48%). Three quarters of investors (75%) expect it to become the norm in a decade, well above the global average of 58%.
U.A.E. investors are also very interested in acting sustainably in everyday life, and 80% feel strongly about using their time and resources to help protect the environment (global average:65%)
- Barriers to sustainable investment are clear: 72% of U.A.E. investors not allocated to sustainable investments believe it’s hard to know what impact sustainable investments have, and 56% consider high fees to be a barrier to investing sustainably (global averages 63% and 46%)
The latest edition of its UBS Investor Watch report, “Return on values”, the largest recurring global study of High Net Worth Investors (HNWIs) 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.
Ali Janoudi, Head of Wealth Management Central & Eastern Europe, Middle East & Africa at UBS, said: “The findings of the study are very encouraging for the future of sustainable investing but it also uncovered some clear barriers that the financial industry can help break. Investors say that they would like to better appraise what impact their sustainable investments will have and need guidance where to find the best partners and options.”
Niels Zilkens, Head of Wealth Management Arabian Gulf and NRI at UBS, said: “The results show that UAE investors are ahead of many of their peers in Europe and Asia when it comes to investing sustainably. 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.”
To encourage further adoption, UBS has committed to raise at least U.S.D 5bn in impact investments over five years, in support of the UN Sustainable Development Goals. At Davos 2018, UBS announced the first 100% sustainable cross-asset portfolios for private clients, targeting market rates of risk adjusted return as well as positive social and environmental outcomes.