Sustainability is expressed through impact-focused, long-term thinking and acting. We help private and institutional customers consider not only potential financial returns, but also potential environmental and social impacts when making their financial decisions. We understand impacts to mean both risks and business opportunities. Accordingly, we give attention to sustainability in all business processes, from analysis and risk management to advisory and investment activities.
As of 31 December 2015, sustainable investments increased to CHF 934 billion from CHF 577 billion at the end of 2014, representing 35% of our total invested assets compared with 21% in 2014. While this increase is primarily attributable to reporting process enhancements for norm-based screening investments (controversial weapons exclusions) and Asset Management's responsible property investment strategy, invested assets also generally increased in our other sustainable investment classes. Major increases in absolute terms were observed among our institutional clients, in particular for screened mandates.
We are committed to testing and applying novel financial solutions across our firm. Examples in 2015 include:
- Wealth Management Americas acted as distributor for the World Bank's first market-linked green bonds for investors in the US
- Wealth Management sponsored a social investment fund in the UK that enables sophisticated investors to invest in a tax efficient way in social enterprises that are helping to tackle poverty.
- Wealth Management launched a UBS investment mandate for Swiss charitable foundations
- Chief Investment Office Wealth Management (CIO) published a series of reports on SI
- Asset Management won a cutting edge mandate to craft a global impact equities portfolio with measureable social impact and partnering with leading edge academics on a multi-year R&D effort to develop scientifically based and easy to understand social impact metrics
- Asset Management developed a leading-edge database of fundamental sustainability data at the company and industry group level that is used alongside valuation data from our analysts to rank the investment universe on both fundamental and sustainability attractiveness
- Asset Management launched the world’s first ESG Fixed Income ETF
- Personal & Corporate Banking launched an environmental bonus to support corporate clients when upgrading to more environmentally-friendly commercial vehicles
Investment advisory & products
We define sustainable investing (SI) as a set of investment strategies (exclusion; integration; impact investing) that incorporate material environmental, social and governance (ESG) considerations into investment decisions. SI strategies usually seek to reach one or several of the following objectives: i) align investments with personal values; ii) reduce portfolio risk / return characteristics; and iii) achieve a positive environmental or social impact alongside financial returns.
Our wealth management businesses and Asset Management offer SI products and services for wealth management and institutional clients. Our teams provide thought leadership, advice and sustainable portfolio management, such as mandate solutions and separately managed accounts. We also offer impact investing products and arrange platforms, roundtables and networking events for our clients to exchange ideas and gather know-how. UBS Portfolio Screening Services are mainly offered to ultra high net worth clients to align their portfolios with their values by assessing portfolios along specific sustainability criteria.
In 2015, we launched an investment mandate solution with SI focus for our Swiss core affluent and high net worth clients. UBS Investment Management Mandate Switzerland with SI focus is built favoring investment instruments with a high sustainability rating. The investment strategy it follows is in line with the UBS House View and is thereby focusing on financial performance as well as considering environmental, social and governance factors.
Asset Management offers a range of SI funds that combine material sustainability factors with a rigorous fundamental investment process. We apply the concept of shared value, according to which companies pursue sustainability practices and not only create value for the shareholder, but also for a wider range of stakeholders. Our investment themes include renewable energy, environmental stewardship, social integration, healthcare, resource efficiency, and demographics. We also manage seven exchange-traded funds that track MSCI’s Socially Responsible Equity Indices (MSCI SRI).
In response to increasing client demand for integrating sustainability issues into fundamental investment analysis and advisory processes, we research the impact of ESG issues on various sectors and companies. Our specialized teams regularly publish research on topics that will shape our future, including climate change, energy efficiency, resource scarcity and demographics. Our experience and sector knowledge help us determine what is material by raising questions about the effects of environmental, social and governance issues on the competitive landscape in the global sectors we cover, as well as about how companies are affected in relative terms.
In 2015, our Chief Investment Office Wealth Management (CIO) published a series of reports on SI commencing in March, with an overarching publication on the topic "Adding value(s) to investing". In it, CIO set out the why, what and how of SI, highlighting reasons and motivations to become involved in it, presenting three SI strategies, and advising on how to implement them in portfolios. Following on from this, CIO also published a report focused on integration and exclusion which also set out to dispel a common myth that SI must lead to financial underperformance.
CIO regularly translates key societal and environmental concerns into investment themes as part of its Longer Term Investments series and Wealth Management's global Research-based Advice (RbA). One important example in 2015 was oncology, with the investment theme identifying companies that develop new treatments for cancer. Wealth Management also raised USD 340 million for the initial close of a UBS oncology impact investing collaboration with MPM Capital.
More broadly, in 2015, RbA featured Performance Plus, which signifies our conviction that success cannot be measured by financial performance alone, but in tandem with performance with regard to the environment, good governance and other key components that make up sustainability and resilience.
For our sustainability-specific strategies in Asset Management, we have developed a leading-edge database of fundamental sustainability data at the company and industry group level that is used alongside valuation data from our analysts to rank the investment universe on both fundamental and sustainability attractiveness.
Corporate and private banking clients financing and advisory
We provide capital raising and strategic advisory services globally to companies offering products that make a positive contribution to climate change mitigation and adaptation, including those in the solar, wind, hydro, energy efficiency, waste and biofuels, and transport sectors.
For clients that contribute to climate change mitigation and adaptation, the Investment Bank provided equity or debt capital market services in 2015 (total deal value CHF 10 billion) or acted as financial advisor (total deal value CHF 35 billion).
In Switzerland, we support corporate and private banking clients in their energy-saving efforts. As promoted by the Swiss Energy Agency's SME model, clients benefit from the agency's 'energy check-up for small and medium-sized enterprises (SME) at reduced costs and are granted UBS cash premiums for committing to an energy reduction plan within the scheme. Until end of 2014, the Swiss Energy Agency recorded double the target for UBS SME in their overall energy savings which is equivalent to the energy consumption of approximately 400 single-family homes. UBS clients have saved more than 1,800 t/CO2 per annum by end of 2014. In addition, the UBS environmental bonus, launched in 2015, supports corporate clients when upgrading to more environmentally-friendly commercial vehicles. Swiss private clients continue to benefit from the UBS "eco" mortgage when building energy-efficient homes. Our commitment as financial partner in the energy transition in Switzerland continues by our sponsorship of the Swiss Energy and Climate Summit.
In 2014, Asset Management's Sustainable Investors Team was introduced to a large European fiduciary manager who had a specific request on behalf of one of their major pension fund clients. They wanted to create a bespoke global equities portfolio that seeks to generate strong financial performance and report on the social impact of four categories: climate change, water, health and food security. The request reflects the increasing interest from institutional investors in impact measurement of global equities.
Asset Management successfully responded to this exciting request – with the result that, in 2015 it won a very competitive and cutting-edge mandate with a large Dutch pension fund to craft a global impact equities portfolio with measureable social impact. As this has not been done before, Asset Management is partnering with leading-edge academics on a multi-year research and development effort to develop scientifically based and easy–to-understand social impact metrics that inform on how the portfolio is contributing to solving important social themes, while minimizing the negative impact on the environment and society. Once developed and vetted, these social impact metrics will help influence UBS investment strategies.