This news service recently spoke to the wealth management house about trends in philanthropy and impact investing, among other topics.
UBS, the world’s largest wealth management house by assets, has made a point about its philanthropy offering in recent years. The very term “philanthropy” can mean different things depending on one’s point of view. The term can and is sometimes mixed up with areas such as “impact investing”, for example, but strictly speaking these are distinct. As wealth managers are offering advice – and charging fees – in such areas, getting the terms clear is not just an academic nicety.
UBS held its Asia Philanthropy Forum in Hong Kong yesterday, setting out its study, Values and Vision: Perspectives on Philanthropy in 21st Century China. The study was conducted and published by the Ash Center for Democratic Governance and Innovation at Harvard University's John F. Kennedy School of Government, and supported by UBS. The study involved interviews with more than 30 wealth holders, 15 experts in the field, and staff from several Chinese foundations.
Among the findings of the study were that giving is increasing and becoming more institutionalized with two-thirds of individuals interviewed for the study having established or planning to establish foundations. Education is a high priority for philanthropists with a focus on creating opportunity and promoting equality in China’s rural and poor provinces. A number of new philanthropic initiatives are building on China’s accomplishments in technology-based innovation. Philanthropy in China is both deep seated and continues to evolve. While the charitable motivations of China's philanthropists are rooted in traditional Chinese values, there is a willingness to borrow from Western philanthropic practices and a view that philanthropy is an activity in which almost everyone can, and should, engage.
This news service asked UBS senior managers about the state of play in philanthropy and other fields.
There are a lot of terms such as impact investing,
venture philanthropy and social enterprise. As we are often told,
philanthropy isn't the same as impact investing, for example. How
important is it for client understanding that these terms are
“UBS defines sustainable investing as a set of investment strategies (integration, exclusion and impact) that incorporate material environmental, social and governance considerations into investment decisions. SI strategies usually seek to reach one or several of the following objectives: 1) achieve a positive environmental or social impact alongside financial returns; 2) align investments with personal values; and 3) improve portfolio risk/return characteristics,” Mario Knoepfel, head of sustainable and impact investing APAC, investment platform and services, UBS Wealth Management.
“Sustainable investment strategies range from the softer approaches such as integration to more targeted approaches known as impact investing. Integration strategies are more holistic and may involve a best in class-ESG rating system for companies which investors would also consider alongside pure financial criteria,” Knoepfel continued.
“Impact investors are not (necessarily) philanthropists. When looking at impact investments, investors typically look at what social or environmental impact they can achieve through their investments, where – depending on their chosen strategies - they expect full market-rate returns or may be seek intentional concessionary returns to strengthen their impact,” he continued.
Of all the areas (venture philanthropy, impact investing,
etc) which ones appear to be the busiest in terms of the advice
UBS is being called on to give to clients? Also, where do you see
the most money going? What trends are you seeing in these
“A quick look at sustainable investment asset growth figures in Asia in recent years suggests that integration strategies are generally preferred. Exclusive strategies involve negative screening of companies involved in certain activities (controversial activities) such as tobacco, alcohol, weapons, gambling and adult entertainment,” Knoepfel said.
“This approach has often been associated with faith-based investors. Impact investing is a very direct approach where investors seek to achieve a measureable positive social or environmental impact alongside a financial return. Examples include community investing, microfinance, as well as a private equity or private debt investing in education, healthcare, basic infrastructure, alternative energy etc. The UBS Oncology Fund is a prime example of an impact investing solution. Interestingly, sustainability themed investments in general are enjoying attractive growth in Asia. UBS has been especially active in this area with the development of a number of long term sustainability themes that revolve around demographic megatrends with a long-term investment fund solution offering exposure to these themes,” he said.
How does UBS help clients measure effectiveness of these
areas (such as data on the outcomes of social impact bonds,
venture phil., etc)? Some of these areas are new - are there
issues with having sufficient data that can be
“Clients who invest their wealth with a purpose are keen to know what is happening with their investments and ensure that these are aligned with their personal values. This is why our impact investing solutions not only provide financial updates to investors but also demonstrate the impact effectiveness through dedicated impact reporting. Furthermore, UBS offers its clients following sustainability approaches throughout their portfolios with comprehensive sustainability reporting, providing transparency on the sustainability profile of their portfolio,” he said.
How is UBS finding that a focus on these topics helps cement client relationships? Are these front and centre of the overall wealth management offering? What has client feedback been like in having these issues raised with them?
“Personal values beyond pure financial goals play an increasingly important role in our clients' investment decisions. Speaking with our clients actively about environmental or social controversies which are important to them, and extending these values to the way their entire portfolio is managed, helps not only to improve our understanding of a client’s needs but it also makes investments personal,” Susan Sy, head of philanthropy advisory, South Asia, said.
Any predictions you want to make around what is likely to
happen in future around philanthropy, impact investing,
“Increasingly UBS is aware that changing societal attitudes are supporting a trend in sustainable investing which is growing faster than the financial industry at large. The number of institutional investors that are signatories to the UN Principles of Responsible Investing (PRI) reached 1,353 in 2015 from just 200 a decade ago,” Sy said.
“In 2013, KPMG reported that close to three quarters of the 4,100 companies it surveyed worldwide undertake corporate responsibility reporting. Similarly in a 2014 consumer survey of 30,000 respondents undertaken by Nielsen across 60 countries, found that over half of respondents were willing to pay more for products and services from companies committed to positive social and environmental impact. We at UBS believe that the attitudes of employees, investors and civil society at large are changing perceptibly and placing more stringent demand on companies. This is reflected in our clients rising interest in sustainable investing services and solutions, a trend that would be unwise for a global wealth manager to ignore,” Sy added.