Impact investing can generate competitive returns while addressing global challenges. Here, we set out our approach to this asset class, which brings great diversification benefits to a portfolio.
A smarter way to invest in a changing world
The global economy is being reshaped by climate change, demographics, infrastructure, and digitalisation. Traditional equity investing is no longer sufficient. Impact equities offer a smarter, more resilient alternative by targeting companies whose core products address these systemic challenges.
Our approach channels capital into companies that are building a resource-efficient economy while delivering competitive returns. These returns are driven by three growth engines: innovation, policy support, and shifting consumer behaviour.
Our impact strategies focus on investing in ‘enablers’ or ‘solution providers’ – companies that are generating revenue by tackling societal and environmental challenges. Unlike ESG, which evaluates a company’s operational quality on environmental, social, and governance topics, impact investing emphasises positive societal contributions. For instance, a tobacco company may have strong ESG credentials through carbon-reduction targets and governance frameworks, but its product, tobacco, lacks societal benefit. We select companies which combine impact alignment with operational excellence by acting as clear enablers.
“That is the essence of our approach: align capital with the companies that are building a more resilient, resource-efficient economy and generate competitive returns while doing so.”
Despite strong operational performances, impact companies remain underappreciated by the market, creating a compelling opportunity to invest in long- term themes.
The impact investment universe is mature and broad, enabling us to apply strict fundamental criteria to portfolio construction. Key investment attributes include growth, profitability, reinvestment returns, leverage, operating momentum, and valuation. Accordingly, the companies we invest in typically have strong balance sheets, disciplined capital allocation, and defensible margins.
Resilience through diversification
Traditional diversification has been eroded by market concentration and rising correlations. The balance between growth and value, cyclicals and defensives, has been distorted by extreme market concentration, with tech and communication sectors driving an outsized share of returns and risk. In this context, impact investing provides a unique path to diversification. For example, the MSCI ACWI Consumer Discretionary index has 248 constituents, yet its two largest names (Amazon and Tesla) account for 35% of the total weighting. This is partly due to ETF flows, which channel capital towards the largest index constituents, reinforcing their dominance and widening the gap between market weighting and fundamental value.
“Impact strategies counter this by offering differentiated returns and true diversification through real-economy exposures across regions and sectors.”
This approach provides high active share and access to unique growth drivers, making it a powerful complement to conventional equity allocations. By focusing on companies addressing systemic challenges, impact strategies deliver resilience and balance to portfolios, even in volatile markets. While some investors choose to fully allocate to impact equities, they can also serve as a powerful complement to broader portfolios, enhancing resilience, depth, and forward exposure for investors who want to retain non-impact equity holdings. Why? Because impact strategies are rooted in the real economy, cutting across styles and geographies, and tapping into growth vectors that mainstream allocations often miss.
Impact investing also offers underappreciated regional diversification. Emerging and developed economies are at different stages of their transition, from advanced clean energy in Europe to early circular economy efforts in Asia and infrastructure modernisation in North America. These varying progress levels create a mix of proven concepts and untapped opportunities, enabling impact strategies to capture both short-term growth and long-term scalability.
Moreover, impact investing’s focus on tangible, measurable outcomes ensures alignment with long-term structural trends, offering investors a way to diversify not just geographically but also thematically.
A forward-looking approach
Impact sectors, from electrification and circularity, to water and biodiversity, are positioned at the intersection of innovation, policy, and long-term demand. These structural growth markets are supported by systemic tailwinds, offering scalable and resilient investment opportunities.
Technologies like AI and data infrastructure are accelerating solutions in areas such as precision agriculture, smart grids, and digital financial inclusion. Early investors in these domains can capture multi-decade growth while mitigating risks like stranded assets.
Take water security: by 2030, over 60% of the global population may face water stress, driving demand for treatment, reuse, and monitoring solutions. Biodiversity is another example: over USD 40 trillion in economic value depends on natural systems, with the restoration economy shaped by frameworks like TNFD, COP16, and nature credits.
Similarly, electrification is surging, with power demand set to double by 2050 and ageing grids spurring investment in smart grids, energy storage, and electrified transport. These are not risks to avoid but growth drivers to seize.
“Impact is no longer an alternative but is a fundamental building block of a resilient and forward-looking portfolio.”
It is important to note that AI and data infrastructure are accelerating impact solutions: from precision agriculture to smart power grids, from satellite-based conservation to digital financial inclusion.
By focusing on these forward-looking themes, impact investing positions portfolios to benefit from transformative global trends while addressing critical challenges.
A maturing asset class backed by UBP’s long-term commitment
Impact investing has matured into a robust, well-regulated asset class, tested across market cycles and regulatory changes. We are at the so-called ‘slope of enlightenment’ in the adoption cycle: seeing positive inflection after a period of disillusion. Once a niche theme, it now attracts institutional investors seeking both financial returns and measurable impact, with only a small number of truly committed managers remaining.
UBP has built its approach around a clear dual mandate: delivering competitive returns while achieving intentional, measurable impact. With a disciplined investment process, active management, and independent governance, UBP offers a forward- looking way to engage with the next frontier of equity investing. Notably, our IMAP process and external Advisory Board are key differentiators in the space. For example, IMAP (Intentionality, Materiality, Additionality and Potentiality) integrates qualitative and quantitative metrics directly into the investment process, ensuring impact is not just claimed, but evidenced, objective, and comparable over time.
Our long-term commitment ensures that we remain at the forefront of this evolving asset class, providing investors with a trusted partner to help navigate the opportunities of impact equities.
The views and opinions expressed by fund managers (internal or external) may differ from the house view. They are shared for informational purposes and do not constitute investment advice or a recommendation.
