(Bloomberg) -- Hedge fund managers are increasingly incorporating environmental and social metrics in their investments, according to research by analysts at UBS Group AG.

“Hedge funds have continued to step up sustainability integration into investment strategies,” according to the Jan. 10 note published by the Global Wealth Management business of UBS. There’s also “a subset pursuing dedicated sustainable investment deployment via equity long/short and credit strategies, mostly within thematic equities and green, social and sustainable bonds.”

Hedge fund clients also saw “viable options” to get access to so-called compliance carbon markets, UBS noted.

The investment industry is eyeing new possibilities within ESG as the prospect of lower interest rates in 2024 encourages bets that green assets will recover from the beating they received last year. At UBS, the expectation is the Federal Reserve will move ahead with rate cuts amid a “soft-ish landing.” 

That should “increase confidence for business investment in areas tied to sustainability,” analysts at the Swiss bank said. “Selectivity remains important, however.”

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