Sustainable products & services
By integrating environmental and social considerations into our advisory, research, investment, finance and ownership processes across all of our businesses, we provide financial products and services which help our clients benefit from environmentally and socially related business opportunities. In the area of climate change, our activities focus on our client-centric businesses of risk management, investment, financing and research.
We offer investment advisory for wealth management and institutional clients for them to consider values and sustainability issues in their investments.
We offer investment advisory services for wealth management and institutional clients, helping them to consider the potential social and environmental impacts, as well as the potential financial returns, of their investments. Our philanthropy and sustainable investing teams have continued to develop the holistic service offered within our wealth management businesses. These eams provide thought leadership, advice, products and solutions to existing and prospective private clients who wish to make investments in accordance with their own personal values. These services also extend to aiding philanthropic or investment decisions intended to drive positive change. Our services also include sustainable portfolio management, such as mandate solutions and separately managed accounts for private clients and institutions with a strong focus on sustainability across all asset classes. In the US, we also offer managed accounts with environmental, social and governance criteria (sourced from third-party data provider MSCI) embedded into private clients' fundamental investment process, enabling them to identify and exclude securities based on issue-oriented screens.
For institutional clients, Global Asset Management offers customized portfolios in the form of segregated mandates and institutional accounts that allow clients to define and exclude certain controversial stocks or sectors due to their perceived social or environmental impact.
We produce award-winning research on the impact of environmental, social and governance issues on various sectors and companies.
Our specialized teams have regularly published research on topics that will shape our future, including climate change, energy efficiency, resource scarcity and demographics. Our experience and sector knowledge help us to determine what is material by raising questions about the effect environmental, social and governance issues are having on the competitive landscape for the global sectors we cover, as well as about how companies are affected in relative terms.
Increasing client demand for integrating sustainability issues into fundamental investment analysis is reflected in our publications and client conferences:
- In 2013, one of the flagship publications of UBS Wealth Management, "UBS Research Focus,"was produced in collaboration with research teams in Global Asset Management and the Investment Bank. Entitled "Sustainable investing," it discussed how sustainability considerations are increasingly incorporated into investment decisions.
- Our UBS Q-Series® reports focus on thought-provoking discussions on pivotal investment questions, and on making clear investment conclusions, leading to a firm-wide drive for more thoughtful, proprietary and valuable research. Examples of Q-Series® reports published in 2013 include “Human Capital - Corporate culture: Relevant to investors?" and "Global Energy Markets: How much oil in the US transport sector can be displaced by cheap US Natural Gas?“. Other publications focused on nutrition ("Nutrition: Access and traceability") and on sustainable innovation ("Integration - global sustainability and cultural change").
- Our newly established publication, "ESG Keys", address the what, how and why of ESG issues and sustainability investment styles. Reports in 2013 addressed corporate governance, human capital, and energy and climate change.
- The UBS European Conference hosted a number of panels on sustainability issues, featuring experts and UBS research analysts, such as “The great sustainability debate“, “Human capital - driving returns“, and “Energy: prospects and challenges for fracking“.
- We also offer our bundled expertise for example in summits for family offices and young successors where clients can meet our experts from all businesses across the firm, including research, advisory and investment.
- Our outreach and dialogue programs included a three-year partnership with the Smith School of Enterprise and the Environment at the University of Oxford, with which UBS hosted a series of events between 2011 and 2013, open to both UBS clients and employees, and featuring thought leaders from around the globe.
Global Asset Management is committed to environmental, socialand governance integration and has been a signatory to the United Nations-supported Principles for Responsible Investment (PRI) since 2009. These provide a voluntary framework according to which all investors can take into account environmental, social and governance issues in their decision-making and ownership practices and align their objectives with the broader objectives of society.
Global Asset Management offers a range of sustainable investment funds that integrate material sustainability factors with a rigorous fundamental investment process. We apply the concept of shared value, according to which companies that pursue sustainability practices (for example, conserving resources, maintaining a high-quality workforce and a strong supply chain) not only create value for the shareholder but also for a wider range of stakeholders. Our investment themes include energy efficiency, environment, social and healthcare, and demographics. We also manage four Exchange Traded Funds which track MSCI’s Socially Responsible Indices and are listed on the Deutsche Börse (Xetra), the SIX Swiss Exchange and the London and Milan Stock Exchanges.
Through our open architecture, we also offer our wealth management clients the opportunity to invest in socially responsible investment bonds, equity and microﬁnance products from leading third-party providers. As of 31 December 2013, invested assets held in socially responsible investments (SRI) totaled CHF 576 billion, representing 24% of our total invested assets. Throughout 2013, invested assets in all of our SRI classes increased. In particular assets that are subject to UBS’s policy pertaining to controversial weapons increased substantially, largely due to the global expansion of the policy.
|Socially responsible investments invested assets1|
|For the year ended||% change from|
|CHF billion, except where indicated||GRI2||31.12.13||31.12.12||31.12.11||31.12.12|
|UBS total invested assets||2,390||2,230||2,167||7|
|UBS SRI products and mandates|
|positive criteria / RPI3||FS11||39.00||32.15||28.19||21|
|policy based restrictions5||FS11||475.14||181.64||180.85||162|
|Total SRI invested assets||FS11||576.12||253.73||240.92||127|
|Proportion of total invested assets (%)7||24.11%||11.38%||11.12%|
|1 All figures are based on the level of knowledge as of January 2014. 2 FS stands for the Performance Indicators defined in the Global Reporting Initiative Financial Services Sector Supplement. 3 UBS Global Asset Management Responsible Property Investment strategy. 4 Includes customized screening services (single or multiple exclusion criteria). 5 Assets subject to restrictions under UBS policy on the prohibition of investments in companies related to anti-personnel mines and cluster munitions (includes all invested assets held in Global Asset Management actively managed discretionary segregated mandates and all actively managed funds (retail and institutional) held by Global Asset Management, Wealth Management and Retail & Corporate). In 2013, the scope of this policy became global. 6 SRI products from thirdparty providers apply either positive and exclusion criteria or a combination thereof. 7 Total SRI / UBS’s invested assets.|
Socially Responsible Investments are products that consider environmental, social or ethical criteria alongside financial returns. SRI can take various forms, including positive screening, exclusion or engagement.
Positive criteria apply 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 whereby one or several sectors are excluded based on environmental, social or ethical criteria, for example, companies involved in weapons, tobacco, gambling, or companies with high negative environmental impacts. This also includes faith - based investing consistent with principles and values of a paricular religion.
UBS globally provides capital raising and strategic advisory services to companies offering products that provide a positive contribution to climate change mitigation and adaptation, including those in the solar, wind, hydro, energy efficiency, waste and biofuels, and transport sectors. In 2013, the Investment Bank supported 190 clients that provide a positive contribution to climate change mitigation and adaptation, either in equity and debt capital market transactions (total deal value CHF 28.5 billion) or as financial advisor (total deal value CHF 49 billion). For example, we supported transactions that included a USD 50 million equity capital raising for Cool Planet, a US-based renewable energy company which has developed a patented process to convert non-food biomass into gasoline, a USD 300 million three-year bond offering for the China Longyuan Power Group, the largest wind power generation company in Asia, and a CHF 400 million dual-tranche bond for Sika AG, a Swiss specialty chemicals company providing products to the construction and transportation industries that enhance durability and promote the efficient use of energy, water and other resources. In addition, we helped our clients manage their exposure to the emissions markets, while in Switzerland, we helped SMEs to save energy and support retail clients when undertaking energy-efficient renovations.
Calculating and reporting on climate change-related financing & advisory activities
In our Annual Report we report that in 2013 the Investment Bank supported 190 clients that provide a positive contribution to climate change mitigation and adaptation, either in equity or debt capital market transactions (total deal value CHF 28.5 billion) or as financial advisor (total deal value CHF 49.4 billion).
The methodology behind these numbers consists first in identifying clients who, through the products and services they offer, work to mitigate the effects of global climate change and help to adapt to changing climate impacts. Using internal expertise from UBS's Global Asset Management Sustainable Equities team and external third party sources, we identified 190 such clients to which we provided capital market or financial advisory services in 2013. The activities of these clients span all industry sectors, including renewable energy generation and clean tech but also energy efficiency, waste management, transport, infrastructure renewal and development or water management. They reach from small-cap and pure play startups to large international and diversified companies.
We then aggregated total CHF deal value of all global capital market deals in which UBS acted as lead manager or bookrunner for these companies and aggregate total CHF value of deals where UBS acted as either buy-side or sell-side financial adviser. Note that the data represents all our transactions with these clients and not only to transactions that can be classified as directly climate-related.
Read more in case studies below.
We believe that voting rights have economic value and should be treated accordingly. Where Global Asset Management has been given the discretion to vote on behalf of our clients, we will exercise our delegated fiduciary responsibility by voting in the manner we believe will be most favorable to the value of their investments. In 2013, we voted on more than 69,000 separate resolutions at 7,075 company meetings. Our approach to corporate governance is an active one and is integral to our investment process. We are an active member of a number of collaborative shareholder bodies.
Since 2010, Global Asset Management in Switzerland has been offering UBS Voice, a free service enabling holders of Swiss institutional funds to express voting preferences ahead of shareholder meetings of major Swiss corporations. This provides additional additional shareholder input into the voting decisions of the funds’ management company. More than 40% of invested assets for which UBS Voice is offered participate in this service.
UBS offers a state of the art values-based portfolio screening and investment approach to support not only our private but increasingly our institutional clients in their efforts to align their values with their investment approach. To serve our institutional clients, Wealth Management cooperates closely with Global Asset Management.
Social and environmental changes will have a major impact on the way we live and do business in the future. For forward looking investors these aspects are also playing an increasingly important role in long-term business success and as a consequence also in our investment approach.
The investment behaviour of socially or publicly exposed institutions such as churches, charities or foundations has come under media scrutiny as the public demands higher level standards. Well known non-profit organizations have been alleged of pursuing an investment approach which focused entirely on profit. It is no longer accepted that, for example, a non-profit engaged in children’s welfare is invested in companies accused of child labour. Environmental non-profit organizations increasingly ensure that none of their investments are involved with industries or companies that have a negative impact on the environment.
The UBS Values-Based Investing team is a solution provider with the mission to support our clients in establishing their sustainability goals and to help them to reflect them in their portfolio.
UBS is increasingly facing questions from clients around how to align investments with personal values. Public awareness regarding the importance of environmental protection and labour conditions in developing countries is growing and clients increasingly wish to avoid conflicts between their values and their investments.
UBS has responded to this growing trend by offering its ultra high net worth clients the Values-Based Investing (VBI) portfolio screening service. In a first step the client and client advisor discuss personal values and related financial and non-financial objectives. Once a sustainability profile has been established UBS draws upon its in-house developed database that rates financial instruments according to a number of different sustainability dimensions. These ratings use inputs from various external, specialized rating sources to ensure an objective assessment of each financial instrument covered. Where the sustainability assessment identifies a misalignment between the client's sustainability profile and portfolio holdings, the client advisor together with the values-based investment specialist propose alternatives that are in line with UBS's portfolio guidelines. Clients have the option to set portfolio management instructions that ensure ongoing alignment with their sustainability values.
We are considering technical options to offer a sustainability portfolio screening for all Wealth Management clients, prospectively starting in 2015 for clients domiciled in Switzerland.
The UBS Donor-Advised Fund (DAF) is a charitable giving vehicle that allows individuals or families to make an irrevocable contribution of personal assets to a public charity and, subsequently, to recommend grant distributions to charitable organizations.
UBS Financial Services Inc. in partnership with the National Philanthropic Trust (NPT) has created a Donor Advised Fund program.
Clients make an irrevocable contribution to National Philanthropic Trust (NPT), a public charity. The client may contribute cash, publicly traded stocks and bonds, restricted stocks, mutual funds and other assets to their account.
The DAF has no set up costs and it can be established immediately. Donors may name the fund after themselves, a family or company, in memory of someone or after a specific cause. They can also designate successors or charitable beneficiaries so that their charitable gifts last beyond their own lifetime. With each grant they make the client can chose what kind of recognition they would like to receive, or whether they would prefer to remain anonymous.
Assets contributed to the DAF are not immediately gifted and can be invested according to the wishes of the client. To that end, UBS offers a wide range of investment solutions. This includes the option for the client to place a sustainable or values-based emphasis on their investment through the discretionary Managed Portfolio. This portfolio includes a wide array of funds and Exchange Traded Funds managed by sustainable investment boutiques. They are organized into a globally asset-allocated sustainable portfolio according to a client's risk tolerance and return objectives.
UBS Private Wealth Management's second annual Young Successors Program was held in New York City in June 2013. It brought together members of more than 20 families.
The event acted as an educational forum and platform for young adults to test and develop their wealth management knowledge with professional guidance. Senior professionals from different areas of UBS engaged the audience in topics such as estate planning, financial planning, philanthropy, sustainable investing, and asset allocation.
Attendees learned how best to explore family legacy issues, examine and articulate their own values, develop their philanthropic identity and align their values with investments. These sessions were aimed at helping attendees to focus and transform their personal values into opportunities and create building blocks for the future.
Equity analysis within our Chief Investing Officer (CIO) Research departments adopts a thematic investment methodology which also considers the sustainability angle of investments.
In addition to weaving sustainability considerations throughout a portfolio, investors may also wish to build exposure to specific investment themes that aim to address a range of environmental, social and governance concerns. By directing assets to identifiable themes, investors can pursue potential growth opportunities, express their values in their financial portfolio and make an impact on the world around them.
While there are many trends that could conceivably fall under a sustainable investing umbrella, we focus on some of the more readily investible and compelling long-term themes, such as food availability and access to nutrition, renewable energy, energy efficiency and water management.
Besides regular updates about these investment themes, we published in collaboration with our Investment Bank and Asset Management colleagues a flagship publication about Sustainability in July 2013 (UBS Research Focus: Sustainable investing). Our goal with this edition of UBS Research Focus was to evaluate the evolution of sustainable investing, anticipate future developments and demonstrate why we believe a well-considered sustainability approach will add value to your portfolio.
In a 2011 article in the Journal of Financial Economics, Alex Edmans showed that Fortune's 100 best companies to work for in the US outperformed their benchmark since the list started in 1984 ('Does the stock market fully value intangibles? Employee satisfaction and equity prices'). We in the Global Sustainability Research team believe that human capital is an important issue from an investment perspective, yet we still consider human capital to be a relatively under-analysed topic. This prompted us to explore in a Q-Series report, why should and how could investors grapple with human capital as a driver of business (Jeaneau, H., Hudson, J. and Zlotnicka, E., 'Human capital - Corporate culture: relevant to investors?', August 2013)?
Partly because of relatively low levels of corporate disclosure on human capital, we leveraged third party data to create an employee satisfaction indicator for over 200 companies in 20 sectors, and harnessed UBS sector analysts' expertise to put this data into an investment context. Our work indicates that employee satisfaction matters most for customer-focused and innovation-driven industries. In the retail sector especially, we found an important correlation between employee and customer satisfaction which may be an under-estimated factor of performance. In fact, there is sometimes a temptation for retailers to be over-zealous in cutting down labour costs, which enhances profits in the short-run but can lead longer term to vicious circle of declining sales and profits.
We also found that although employee satisfaction matters, corporate culture matters even more. In particular, an important risk for successful, employee focused companies with high levels of employee satisfaction is indeed to stop challenging the status quo and slowly become complacent rather than staying innovative. On the other hand, idiosyncratic corporate cultures are not always well captured by employee satisfaction metrics. We view in particular highly meritocratic work environments as highly conducive of value creation, but this type of culture is likely to be less consensual.
UBS Global Asset Management’s Global Real Estate (GRE) business is a member of the Global Real Estate Sustainability Benchmark (GRESB), a leading benchmark measuring the sustainable performance of real estate portfolios on a global scale. It is the only sustainability benchmark that captures more than 50 data points to reflect the sustainability performance of an investor’s real estate portfolio. GRESB’s mission is to enhance and protect shareholder value by evaluating and improving sustainability best practices in the global real estate sector. GRESB has grown from an initiative pioneered by three institutional investors with the assistance of Maastricht University into the leading benchmark measuring the sustainable performance of real estate portfolios on a global scale.
GRE has achieved strong results in the 2013 GRESB, with the majority of the responding funds ranking in the first quartile of their respective peer groups. Three funds ranked first in their peer groups and another three funds ranked second.
These strong results in multiple regions are indicative of GRE's strong commitment to sustainability. Thomas Wels, Head of Global Real Estate, commented: "Sustainability is no longer seen as a niche area but rather as a key component of successful real estate management, and this year’s results reflect that. While the financial objectives of our clients remain the primary focus of our investments, we must also consider long-term social and environmental aspects".
The survey was completed by 543 real estate portfolios in 46 countries worldwide, representing a total property value of USD 1.6 trillion (GAV).
Overall, GRE's funds improved on their 2012 performance versus peers and the number of funds achieving "Green Star" status increased from zero in 2012 to six in 2013, while two funds were also awarded "Sector Leader" status.
The topic of sustainability is ever-present in today’s commercial environment but can have more than one meaning. We base our definition of sustainability on the Brundtland report of 1987, which defines sustainability as follows: "Sustainable development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs and choose their life style."
Energy consumption of buildings makes up a major proportion of Switzerland's overall energy consumption. Therefore responsible ownership and operation of real estate property can have a significant positive impact on the environment. Existing real estate properties often have huge potential for sustainability. As such, with a full refurbishment including insulating the building shell in properties built before 1980, for instance, energy consumption can, as a rule, be reduced by 30-60%.
The sustainability strategy of the Swiss real estate market, as part of UBS Global Asset Management’s Global Real Estate business, is embedded in the global strategy. As such, the entire lifecycle of a real estate investment is covered by the strategy. It is characterized by 10 sustainability targets, in addition to the three dimensions of ecology, economy and society, each with its own quantifiable sub-targets.
On the basis of a representative sub-portfolio, overall energy consumption, CO2 emissions and the share of renewable energies was calculated. For the circa 900 real estate properties held by Global Real Estate in Switzerland, this results in total annual energy consumption of about 690 GWh and annual CO2 emissions of some 143,400 tons, corresponding an energy consumption of 143 kWh/m2 and CO2 emissions of 30 kg/m2 per year.
Compared with total Swiss-wide real estate, our properties emit about 19% less CO2 per m2 and consume about one quarter less energy. The share in renewable energy stands at about 11%.
China Longyuan Power Group Corporation Limited, PR China
In August 2013 UBS acted as Joint Bookrunner on a USD 300 million 3-year bond offering for China Longyuan Power Group Corporation Limited a pioneer in clean energy in the People’s Republic of China. China Longyuan is the largest wind power generation company in terms of consolidated installed capacity in Asia, and the second largest in the world. The company designs, develops, manages and operates wind farms, selling the electricity generated to local grid companies and has made a concerted effort over the past decade to switch from coal to renewable power generation. Currently, 82% of the company’s total installed capacity comes from renewable power, which is three times the industry average. Within the last year, the company’s wind power capacity increased by 31% and within the next five years, it plans to add another 5,400 MW of renewable energy capacity. The proceeds from the bond offering were used to strengthen the working capital of China Longyuan.
In June 2013, UBS acted as Lead Bookrunner on Cool Planet's $50mm equity private placement. Cool Planet is a Denver based company, with operations in California. Their technology is addressing three of the world’s largest markets: food, fuel, and water. They have developed a patented process that economically converts non-food biomass into sustainable, high-octane fuel, which can be used in any vehicle on the road today. Cool Planet's process, known as the carbon negative fuel cycle, processes biomass through a mechanical fractionating system that uses pressure and heat to create a series of useful volatile components that then go through proprietary catalytic systems to make high octane fuel. In addition to the fuel, the process creates a solid, inert carbon, known as biochar. Biochar has many potential uses; currently Cool Planet is selling their first commercial biochar product labeled CoolTerra™ which enhances soil quality through improved water and fertilizer retention and thereby increasing crop production. The Cool Planet process has the capability of being carbon negative, removing atmospheric carbon to reverse the effects of fossil fuel consumption resulting in greater than 100% carbon footprint reduction for every gallon used. A portion of the proceeds from the equity placement are being used to fund construction of its first commercial production facility in Alexandria, Louisiana.
In October 2013, UBS acted as Joint Bookrunner on a CHF 400 million duel-tranche bond for Sika AG. The transaction marked the first bond issue by Sika since their last appearance in the CHF bond market over a year prior, on which UBS acted as Sole Bookrunner. Swiss based Sika is a globally active speciality chemical company who's product line offers attractive opportunities for a reduction in energy use in a number of industries including construction and transportation. Sika supplies products that enhance durability and promote the efficient use of energy, water and materials such as highly reflective polymeric roof membranes that boost the efficiency of solar installations and lower the cooling demand in buildings, roof membranes that entail 30% lower CO₂ emissions than other less durable roofing sheets or special corrosion protection systems for offshore wind farms that lead to longer service lives under rough conditions. The company also offers various structural adhesives and sealants for the automotive industry, supporting the development of lighter vehicles and reduced CO₂ emissions in the transportation sector. The net proceeds of the bond transaction will be used to support the growth strategy of Sika and to service the company’s long-term, general financing.
UBS has made a two-year commitment as a Prime Partner to the Swiss Swiss Energy and Climate Summit (ECS) which exists to facilitate dialog about energy transition in Switzerland between the worlds of business, politics and science. By signing the Kyoto protocol, Switzerland has made an international commitment to achieving a 20% reduction in its domestic greenhouse gas emissions by 2020 compared with their level in 1990. By its presence at the annual summit, UBS is positioning itself as a financial partner for energy transition.
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