UBS launched its latest Investor Watch report, polling 5,300 HNW persons across Brazil, China, Germany, Hong Kong, Italy, Singapore, Switzerland, the UAE, the UK, and the US.

Despite this being the age of green investors, around seven in ten high net worth investors globally find the language of sustainable investing perplexing, according to new UBS research. The Swiss bank also found that fewer than half of investors it polled are very familiar with the term “sustainable investing”, which is defined as integrating societal concerns, personal values or an institutional mission into investment decisions itself. 

UBS launched its latest Investor Watch report, "Return on values", which surveyed 5,300 persons with at least $1 million in investable assets (excluding property). The global sample was split across 10 markets: Brazil, China, Germany, Hong Kong, Italy, Singapore, Switzerland, the UAE, the UK, and the US.

However, despite not fully understanding some terms, some 65 per cent of investors want to create a better planet with their money. But not nearly as many investors apply their values to their investing. Currently, only 39 per cent hold sustainable investments in their portfolios, defined as at least one per cent of their investable assets.

China (60 per cent) had the most investors who currently invest at least one per cent of their investable assets in sustainable investments, which was closely followed by Brazil (53 per cent), UAE (53 per cent) and Italy (51 per cent). The US (12 per cent) and the UK (20 per cent) had the least amount of investors who invested at least one per cent of their investable assets in sustainable investments.

The report suggests that for all the constant industry noise around environmental-, social- and governance-directed (ESG) investing, "impact investing" and the like, even more sophisticated investors aren't clear as they should be on what these terms mean. With firms using these ideas as part of their marketing efforts to win and retain clients, this is a cause for concern. One issue that has arisen is that of "mission drift", caused by the weight of new money chasing ESG or impact investing causing these ideas to lose focus.

The report found there is expected to be a sharp increase in the adoption of sustainable investing, from 39 per cent of investors today doing so to 48 per cent over the next five years. Additionally, many investors expect to increase the allocation of sustainable investments in their portfolios.

Investing and returns
Pollution and waste was the biggest area globally that sustainable investors looked into, which stood at 73 per cent. Climate change (71 per cent), water (70 per cent), products and services (70 per cent) and ethics (67 per cent) made up the top five ways to invest sustainably. 

Some 93 per cent believe sustainable investments will generate equal or superior investment returns compared with traditional investments. Three-quarters (75 per cent) of investors without sustainable investments agree. 

Half of wealthy investors believe sustainable investments will outperform traditional investments. Another third of investors (32 per cent) expect the same performance from both. Only 11 per cent believe sustainable investments will underperform traditional investments.

Return expectations vary significantly across countries. For example, in Brazil, where the adoption of sustainable investing is relatively high, 77 per cent of all investors believe sustainable investments will outperform traditional investments. In the US, only 19 per cent of investors expect sustainable investments to generate higher returns.

Opposition
Not all respondents were quick to show the positives of sustainable investing. Some 72 per cent said that it is hard to know the impact of the investments, which was the most common negative towards sustainable investments.

Around 68 per cent said that sustainable investments are not well established, and 67 per cent said that they prefer to maximise returns and focus on donating. 

Other reasons for not investing sustainably were being happy with their existing investment approach (66 per cent), worried about lower returns (63 per cent), do not know enough about sustainable investing (62 per cent) and some have never been offered a sustainable investment (60 per cent).

Age of sustainable investors
The 18-34 age range (56 per cent) were found to be the biggest group who invest at least one per cent into sustainable investments.  

The older the investor – the less likely they are to invest into sustainable investments. 35-50 year olds were second with 46 per cent, followed by 51-64 year olds (38 per cent) and 65+ (27 per cent).