Addressing Climate Change

UBS considers efficient and sustainable management of the firm’s energy requirements, and the measures it has taken to reduce its carbon emissions, as an important factor in being a responsible corporation.

In addition, UBS seeks to support clients in understanding and managing the risks, opportunities and adaptation needs relating to climate change. UBS actively participates in initiatives aimed at creating a dialogue between shareholders and companies on issues relating to climate change, for example the Climate Disclosure Project, of which UBS has been a signatory since its inception in 2002.

Reducing our direct impact

Although our direct contribution to climate change as a financial institution is rather small compared to other industries, UBS considers the efficient and sustainable management of energy and the reduction of its CO2 emissions to be an important aspect of our corporate responsibility. The Group Executive Board decided in February 2006 to set a group-wide CO2 emission reduction target of 40% below 2004 levels by 2012. UBS seeks to achieve this target by implementing:

By end of 2007, these measures allowed UBS to reduce its CO2 emissions by 22% compared to 2004, an important step toward achieving the 40% reduction target by 2012.

Energy consumption and energy efficiency

Energy represents an important environmental impact area for UBS and is a major contributor to its overall greenhouse gas emissions. Energy efficiency measures are therefore an important component of UBS’s program for achievement of the firm’s Group-wide CO2 emission reduction target. Measures include investments in energy-efficient technology, and encouraging good housekeeping measures. In 2007, UBS has been awarded the “Energy Model Zurich” trophy for the firm’s achievements in improving its energy efficiency in Switzerland by 17% since 1997. The firm’s newly renovated offices in Stamford, Connecticut, were awarded the Silver and Gold ratings by the US Green Building Council’s Leadership in Energy and Environmental Design (LEED). The building incorporates many energy optimizing features, such as light harvesting where sensors detect levels of sunshine, and the building automatically adjusts interior lighting depending on the level of exterior light. Going forward, UBS has adopted a technical standard supporting world-wide oversight of measures taken to improve energy efficiency in the fields, such as building operation, replacement investments, and rehabilitations.

Renewable energy

In addition to its energy efficiency programs, UBS seeks to improve the energy mix it purchases towards a higher proportion of renewable energy. The percentage of renewable energy and district heating purchase rose from 24% in 2004, to 45% in 2007. In 2007, UBS signed a new agreement (roughly 210 GWh per year) under which 90% of the electricity supply for its buildings in Switzerland now comes from renewable sources, such as water and solar power stations. In addition, UBS purchases Renewable Energy Credits (RECs) in the US electricity markets, which accounted for 10% of its electricity consumption in the US in 2007. Both these initiatives are a continuation of the renewable energy purchasing that began in 2000 in Switzerland and 2003 in London, and represent an improvement on the previous contracts in terms of the increased volume sourced from renewables.

Business travel and offsetting

Business travel is a significant contributor to UBS’s greenhouse gas emissions. While the firm encourages its employees to use environmentally friendly alternatives to air and road travel, for example video conferences, travel is essential for a global financial services firm that strongly believes in personalized client relationships. Therefore, since 2006, UBS has decided to offset emissions from business related air travel, i.e. over 110,000 tons of CO2, representing about a quarter of its total CO2 emissions. Offsetting means that UBS indirectly neutralizes its business air travel emissions by investing in third-party projects that reduce an equivalent amount of greenhouse gas emissions. For 2007, UBS selected projects in Brazil, India, China and Germany, on the basis of their adherence to international quality standards and of their additional environmental and social benefits.

Engaging investors in climate change issues

UBS wants to help investors evaluate risks and opportunities presented by climate change in their investments. To do so, the firm produces relevant research and raises investors’ awareness by hosting dedicated conferences and seminars. It also seeks to increase the availability of data by collaborating in the Carbon Disclosure Project.

At the end of January 2007, the research team in the wealth management business published a report examining the scientific, technological, and economic effects of climate change. Its authors argue that climate change will have far-reaching implications for the global economy and the worldwide investment climate, and concluded that measures to combat global warming will increasingly influence people’s behavior, the risk profiles of certain industries, and prospects for investment. The analysis suggests that products and processes that improve energy efficiency, as well as the development of renewable or low-CO2 energy sources, have great potential to slow climate change.

In the Investment Bank, over 60 analysts were involved in collaborative work on climate change in 2007. The utilities team wrote on the link between CO2 and utilities share price since 2004. This team also now writes on and forecasts the CO2 price traded on carbon exchanges. Elsewhere, sector teams cover photovoltaics, wind and other alternatives, as well as energy efficiency.

In addition to producing research on the effects of climate change on certain companies and sectors, UBS regularly invites institutional investors and other clients to attend conferences focusing on these topics. In 2007 alone, UBS hosted eight conferences and seminars featuring distinguished speakers on climate change related topics in London, Tokyo, Hong Kong, Amsterdam, Stockholm, Paris and New York. For example, the UBS Global Alternative Energy Conference in New York City is one of the largest of its kind and represents an opportunity to meet investors and executives from leading companies in the sector.

UBS is a founding member of the Carbon Disclosure Project. In collaboration with other institutional investors, it sought information from the world’s largest companies concerning the business risks and opportunities presented by climate change and greenhouse gas emissions data. In 2007, unlike in previous years, responding companies appear to have moved beyond awareness and have implemented carbon strategies: 76% of respondents disclosed existing greenhouse gas emissions reduction efforts with targets and timelines. This marks a significant shift from 48% in 2006.

Investment products

UBS offers several investment products that explicitly address aspects of climate change. The offering includes a Global Innovators fund, a Japan Climate Change fund, and Climate Change certificates. The UBS Europe Carbon Optimized Index, UBS Global Warming Index, the UBS Greenhouse Index and other index-linked products have also been introduced to clients.

Financing and advisory services

UBS’s renewable energy investment banking business arranges financing and provides strategic and financial advisory services for companies in the biofuels, solar, wind, wave and other renewable energy sectors. Since 2006, UBS has led over 20 financing transactions, raising over USD 5 billion for renewable energy companies worldwide and winning a top-five ranking two years in a row (including the prestigious “Top Underwriter” award in 2006) from New Energy Finance, a specialist provider of financial information and analysis to investors in clean energy. UBS provides advice on a number of high-profile strategic combinations including the merger between US BioEnergy Corporation and VeraSun Energy Corporation, the largest transaction of its type in the history of the biofuel sector.

UBS is also a founding financial partner in the Clinton Foundation’s Climate Initiative (CCI), Energy Building Retrofit Program. The program, which includes five other major financial institutions, ten of the world’s largest energy service companies, and 16 large cities, is designed to reduce energy consumption in existing buildings. Under the program, participating city governments and local building owners will retrofit buildings for increased energy efficiency. Participating cities include London, Paris, New York, Mexico City and Tokyo, among others. UBS has committed expertise and other resources to create financial structures capable of delivering capital effectively to public and private projects in this program.

Carbon trading

UBS is an active participant in emissions trading markets and is a member of the Intercontinental Exchange (ICE), an electronic marketplace for energy and emissions trading in conjunction with the European Climate Exchange (ECX). In ‘cap and trade’ emissions markets, such as the EU Emissions Trading Scheme, companies are issued with permits that limit, or cap, their emissions. Companies who are able to reduce their emissions at low cost have the ability to sell their unused permits to other companies requiring them, thereby creating an emissions allowances market, and ensuring that emission reductions are achieved in a cost-effective manner. Through the use of carbon financial instruments UBS is able to help clients manage their exposure to the emissions markets.