Markets are undergoing a profound transformation as investors factor in the implications of climate change and other sustainable themes. Changing societal values, accelerated regulatory pressure, growing investment opportunities and risk management are all underpinning client demand. The pandemic has underscored this trend: investors reassessed their portfolios and broadly added to sustainable strategies, especially funds focused on the energy transition.
This shift toward a sustainable world has prompted a need for increased transparency, along with better disclosure and data around sustainability-related goals and metrics. Inconsistent, backward-looking data makes it difficult to accurately compare sustainable investments and choose the most suitable option. Improving data and disclosures can provide better insights into risks and opportunities. In the field of climate reporting, we support the standard set by the Task Force on Climate-related Financial Disclosures, as it helps to inform investment decisions.
We are also exploring new analytical approaches that utilize non-financial “big data.” Ultimately, we expect investors to set the pace for sustainability reporting and determine whether the available data is sufficiently sound to inform their decisions. “Investors are increasingly embracing sustainability as a fundamental investment driver, particularly around the issue of climate risk. This is a trend that we believe is here to stay. Our goal is to be at the forefront of the transformation, providing the tools and tailored solutions investors need to understand the risks and align their portfolios with their chosen glide path,” says Suni Harford, President of UBS Asset Management.
For institutional investors, climate change remains one of the primary concerns. In a global survey, European asset owners told us that systemic environmental factors (the climate crisis, biodiversity loss) will be more material to their investments in the next five years than financial factors.
To address these challenges, UBS has developed a forward-looking methodology designed to help investors become fully “climate aware.” UBS Asset Management’s Climate Aware framework helps clients align their portfolios to their chosen climate glide path. In 2020, we expanded the Climate Aware approach across asset classes, both active and passive, broadening the suite of climate solutions available to our clients and thereby helping harness private capital to close the finance gap.
In the case of private clients, while traditional investments will remain suitable in some circumstances, we believe that a 100 percent sustainable portfolio, such as that offered by UBS Global Wealth Management, can potentially deliver similar or higher returns and better manage sustainability-related risks. As such, in 2020, we became the first major global financial institution to prefer sustainable over traditional investments for private clients who choose to invest globally.
UBS has been at the forefront of sustainable finance for over two decades and we are committed to our sustainability activities. We want to be a financial provider of choice for clients who wish to mobilize capital towards the UN’s 17 Sustainable Development Goals (the SDGs) and transition their portfolios to a more sustainable future.
We believe that at the heart of any solution sits the need for collaboration, as epitomized by the partnerships for the goals (SDG 17). That is why we highlight our own collaborations to address gaps in the sustainable investing landscape. In 2020, we met our goals of directing USD 5 billion to SDG-related impact investments, more than one year early. By the end of the year, the total assets invested reached USD 6.9 billion. We recognize the power of collaborative philanthropy, exemplified through the UBS Oncology Impact Fund. In 2020, the Fund distributed a record donation of USD 4 million, split between UBS Optimus Foundation and the American Association for Cancer Research, in addition to its for-profit investments in cancer treatments. Meanwhile, UBS Asset Management has played an important role in Climate Action 100+, one of the world’s largest coalitions of institutional investors, who together are committed to engaging with nearly 170 companies that are critical to the net-zero emissions transition.
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