Socially responsible investments

During the last ten years UBS has developed a range of products and services that meet or anticipate clients' needs in the socially responsible investments (SRI) fields. This product offering currently stretches across UBS's businesses in wealth management, investment banking, asset management, and retail banking. It includes SRI funds, advisory and research, and services provided to private and institutional clients.

SRI takes account of environmental, social or corporate governance criteria besides traditional financial factors such as risk and return when selecting securities. SRI products usually apply either a positive or negative screening or engagement strategy or a combination thereof. In the past, specific forms of positive screening have gained attention including best-in-class selection and thematic investment.

Investment products & advisory

In 2008, UBS continued to expand its SRI offering in response to growing demand from a number of markets, including the launch of two new SRI products, the UBS (Lux) Equity Sicav – Emerging Markets Innovators and the UBS Strategy Certificate Energy Efficiency. UBS's SRI offering is diverse and includes products managed according to "best-in-class" practices and theme-based approaches. "Best-in-class" is an active equity management approach that is based on stock selection of companies that generate above-average environmental, social and economic performance. The "best-in-class" offering includes a global fund and a European fund. The theme-based approach focuses investment around segmented climate change, water and demographics strategies. Additionally, UBS offers customized client portfolios in the form of segregated mandates / institutional accounts based on "negative" screening, which excludes certain controversial stocks or sectors from the portfolio based on their negative social or environmental impact as perceived by the client. UBS’s global platform and investment research enable the firm to offer such tailor-made solutions.

In the UK, the asset management business seeks to influence the corporate responsibility and corporate governance practices of the companies it invests in.

In addition to fund management services, UBS provides stock-broking and account management services to alternative energy and SRI fund managers.

Finally, UBS also offers SRI portfolio management solutions to selected private client segments. This offering pools internal and external SRI expertise and includes SRI-focused portfolios in Switzerland and SRI- managed accounts in the US. UBS’s open architecture approach also allows clients to invest in SRI bond, equity and microfinance products from third-party providers.

Positive criteria: applies to the active selection of companies, focusing on how a company’s strategies, processes and products impact its financial success, the environment and society. This includes best-in-class or thematic investments.
Exclusion criteria: companies or sectors are excluded based on environmental, social or ethical criteria, e.g. companies involved in weapons, tobacco, gambling, or with high negative environmental impacts. This includes also faith based investing consistent with principles and values of a particular religion.
Third-party: UBS’s open product platform gives clients access to SRI products from third-party providers. This includes both positive and exclusion critieria, and microfinance investments.

In the past years UBS had experienced increased client demand for SRI and expanded its SRI product offering, resulting in a significant increase in UBS SRI invested assets. In 2008 these SRI invested assets decreased significantly year on year, primarily due to severe corrections in the global equity markets (equities is the preferred asset class for UBS's SRI products), but also due to asset outflows

Research

Identifying material SRI issues is challenging. Essentially, three things help determine which environmental and social issues are critical: society’s perception of what is important; the nature of the competitive pressures facing firms in an industry; and how costs and benefits are (or will be) distributed between stakeholders.

The UBS SRI research teams were established in each of the firm's divisions to serve their respective clients: In the Investment Bank, Equity Research write recommendations and reports for institutional investment clients on renewable energy, the carbon markets and the impact of climate change on companies in a wide range of sectors. SRI and sustainability research is provided by a dedicated team. In the asset management business, an internal SRI research team manages portfolios around themes such as climate change / energy efficiency, water and demographics. The SRI research team in UBS’s wealth management business conducts SRI research and provides advice to private clients for SRI investment solutions.

Client interest in some aspects of SRI – for instance climate change, demographics and water – has grown, and so has research coverage. The SRI teams regularly collaborate with analysts in other teams to write about emerging SRI themes, and relevant research content is regularly published by a growing number of specialists within the mainstream research effort. In 2008 for example, UBS published the report "Mind over Matter", which broadly examines the issue of resources efficiency, and makes the case that higher prices for basic necessities, urbanization, and more stringent climate change policies will eventually yield benefits to those who invest in efficiency upgrades.