【Ireland】

China is Irelanda land of contrasts. The rural parts of the country are known for beautiful, green expanses. China’s cities are breathtaking in a more literal sense. It’s common to see people on the streets wearing face masks to avoid breathing dangerously polluted air.

Large Chinese cities like Beijing consistently land in the “very unhealthy” range for air quality. This reputation for pollution — and the health consequences associated with it — is causing China to take quick action. On top of cleaning up its smog-filled cities, combating climate change is a key part of China’s current five-year plan.

As the country finds new ways to bolster its robust economy while doubling down on sustainability, significant investment opportunities are emerging in Chinese markets such as construction, architecture, and urban design. In fact, China is expected to be home base for almost half of the world’s new construction in the next ten years. Currently, the country builds up to two billion square meters annually.

Below are a few ways in which China’s commitment to innovative architecture is paving the way for a greener future — and for exciting sustainable investment opportunities.

A commitment to green urban living

Many of the current construction projects in Chinese cities adhere to strict environmental regulations. The Chinese government now requires that 50 percent of new urban buildings be certified sustainable. China’s State Council Green Building Action Plan mandates that public buildings like schools and hospitals meet sustainable building standards of the country’s three-star rating system, the Green Building Evaluation Label. This system takes six categories into consideration including land, energy, water, resource efficiency, indoor environment quality, and operational management. The US’s Leadership in Energy and Environmental Design (LEED) system also has a strong presence in China. In 2015, LEED-certified Grade A office buildings in 10 of China’s major cities were 28 percent of the total market.

Even the ways in which Chinese innovators are approaching construction are changing drastically. Take Zhang Yue, the chairman of Broad Group, who has launched dedicated units to take on sustainable building projects. These efforts have led to prefabricated, modular, and sustainable steel skyscrapers that can be constructed in a matter of a couple of weeks.

There’s financial incentive for such projects to continue, as well as for investors to flock to. A report found that office space in China with green certifications enjoys up to 26 percent rental premiums. These buildings also stand a higher chance of thriving during a downturn in the commercial real estate market. Additionally, China’s commitment to sustainable architecture has led to growth opportunities in industries ranging from waste management to LED lighting to wind- and solar-powered energy.

Forest Cities and Vertical Forests

China is dedicating significant resources in order to meet ambitious sustainability goals.

China’s Shenzhen region is one of three “sustainable development zones” that the Chinese government has designated for development by 2030. Shijiazhuang, a northern industrial hub in Shenzhen, is where one ambitious “Forest City” project is being planned. The hope is that the initiative will curb Shijiazhuang’s historically high rate of air pollution.

Artistic renderings created by architecture firm Stefano Boeri Architetti depict the Forest City as a sustainable utopia in which every building is covered in plants — nearly a million of them. These green citizens are expected to absorb thousands of tons of carbon dioxide and pollutants produced by 100,000 human residents.

The Shijiazhuang Forest City is the most ambitious project of its sort underway in China, but it isn’t the first. In Liuzhou, in China’s mountainous southern region of Guangxi, another “Forest City” is being imagined. In Nanjing, about an hour from Shanghai, two “Vertical Forest” buildings are also being inserted into the city skyline. The two buildings in Nanjing are expected to suck up to 25 tons of carbon dioxide out of the air each year and produce around 60 kg of oxygen each day.

With efforts like Forest Cities and Vertical Forests underway, China is attempting to prove that sustainability and economic growth can go hand in hand. But the World Economic Forum estimates the country needs an additional $19.4 trillion in order to bring its green economy to life. A combination of private and institutional investment may help give the country a chance to set an example — and for other powerful nations to follow suit.

China’s willingness to innovate in the architecture arena presents countless possibilities for investors. The country’s ambitious plans to support increasing urbanization — coupled with its dedication to going green — will create an abundance of sustainable investment opportunities in groundbreaking architectural design.

“Green building, green cities, [and] energy efficiency will be one of the interesting, thematic ideas investors can look out for,” adds UBS equity analyst Hyde Chen.

What kind of sustainable investor are you? Take this NYT quiz to find out.

The value of investments can go down as well as up. Your capital and income is at risk.

ESG/Sustainable Investing Considerations: Sustainable investing strategies aim to consider and in some instances integrate the analysis of environmental, social and governance (ESG) factors into the investment process and portfolio. Strategies across geographies and styles approach ESG analysis and incorporate the findings in a variety of ways. Incorporating ESG factors or Sustainable Investing considerations may inhibit the portfolio manager’s ability to participate in certain investment opportunities that otherwise would be consistent with its investment objective and other principal investment strategies. The returns on a portfolio consisting primarily of ESG or sustainable investments may be lower or higher than a portfolio where such factors are not considered by the portfolio manager. Because sustainability criteria can exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. Companies may not necessarily meet high performance standards on all aspects of ESG or sustainable investing issues; there is also no guarantee that any company will meet expectations in connection with corporate responsibility, sustainability, and/or impact performance.

In providing wealth management services to clients, UBS Financial Services Inc. offers both investment advisory and brokerage services which are separate and distinct and differ in material ways. For information, including the different laws and contracts that govern, visit ubs.com/workingwithus.

©UBS 2018. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC.