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"UBS position on relationships with clients and suppliers associated with controversial activities"

Corporate Responsibility

UBS has established processes and commitments to make Responsible Banking a cornerstone of the culture and brand. We have developed and continue to develop policies and guidelines to identify, manage and control environmental and social risks in our business transactions. Specifically, in providing financing or advice to corporate clients, we assess environmental, social and human rights risk factors before proceeding with a transaction or extending a client relationship.

Some of our clients operate in sectors characterized by consistent environmental and social challenges. To support the consistent identification and assessment of such risks, we developed internal industry sector guidelines in 2009. The guidelines currently cover six sectors: chemicals, forestry products & biofuels, infrastructure, metals & mining, oil & gas, and utilities. These guidelines have been adopted by each of our business divisions in transactional and client due diligence processes.

In 2010, we decided to further strengthen our environmental and social risk management (including human rights) by identifying controversial activities where we will not do business, or only do business under stringent pre-established guidelines. Therefore we will not knowingly provide financial services to corporate clients, nor will we purchase goods or services from suppliers, where the use of proceeds, primary business activity, or acquisition target – involves the following risks:

Environmental Risks: Extractive industries, heavy infrastructure, forestry and plantations operations that risk severe environmental damage to or through:

  • Endangered Species: of Wild Flora and Fauna listed in Appendix 1 of the Convention on International Trade in Endangered Species (CITES)

  • High Conservation Value Forests: as defined by the six categories of the Forestry Stewardship Council (FSC)

  • Illegal Use of Fire: uncontrolled and/or illegal use of fire for land clearance

  • Illegal Logging: including purchase of illegal harvested timber (logs or roundwood)

  • Palm Oil Production: unless a member in good standing of the Roundtable on Sustainable Palm Oil (RSPO) and actively seeking to enhance certification of its production

  • Wetlands: on the RAMSAR List

  • World Heritage Sites: as classified by UNESCO

Social Risks: All commercial activities that engage in, or threaten:

  • Child Labor: according to ILO-conventions 138 (minimum age) and 182 (worst forms)

  • Forced Labor: according to ILO-convention 29

  • Indigenous Peoples: all rights in accordance with IFC Performance Standard 7

  • Diamond Mining and Trading: rough diamonds unless Kimberley Process certified

The above criteria are in force with immediate effect. Environmental and social risk processes are being adjusted over time. In the implementation period UBS will proactively engage with potentially affected clients and suppliers.

These lists are not intended to be all-inclusive. UBS will continue to assess environmental and social risks in related areas, and will consider adding to the lists, or increasing the stringency of items already on the lists, as we deem necessary. Additionally, we already require enhanced due diligence and approval processes in certain other areas, such as coal mining practices that use mountain top removal (MTR) as an extraction method. As part of this review, we assess to what extent companies rely on MTR mining for their revenue generation, and we need to be satisfied that the client is committed to reduce over time its exposure to this form of mining.

Internally, we will work with our client teams on managing existing client or supplier relationships – and, over time, further expand the sustainable employment of our purchasing and internal resources. In particular, the Investment Bank will seek to redeploy resources from non-sustainable client business to new opportunities in sustainable technologies, services, and infrastructure, and encourage clients to embrace sustainability standards such as FSC forest certification, the recommendations of the World Commission on Dams, or UN-Program on Reducing Emissions from Deforestation and Forest Degradation (REDD) for carbon storage, as they become more established. We believe this strategy will provide the greatest long term value for both our clients and our shareholders, while enhancing the UBS brand and minimizing risk.