5 ways wealth managers can support the UN Sustainable Development Goals: our lessons from 2017

UBS World Economic Forum annual meeting 2018 white paper

Our lessons from 2017

As the 47th annual meeting of the World Economic Forum gets under way in Davos this January, more than 2,500 participants from around the world will attend 400-plus panel discussions under the theme of "Creating a shared future in a fractured world." The aim is to renew a commitment to international collaboration in solving critical global challenges.

UBS's contribution this year is a follow up to our 2017 white paper "Mobilizing private wealth for public good", where we unveiled a blueprint for channeling private wealth towards the United Nations Sustainable Development Goals (UN SDGs). The world is falling well short of raising the USD 5 - 7trn in annual investment needed to achieve the UN's 17 different SDGs. As the world's largest wealth manager, we believe we are in a position to enact real change in closing this gap.

What we did in 2017

Our efforts in 2017 were focused on Sustainable Development Goal number 17 – to strengthen the means of implementation and revitalize the global partnership for sustainable development. Since WEF 2017, we've worked very hard to achieve this goal through:

  • Partnerships with our Global Philanthropist Community to promote innovative, impact, philanthropy approaches
  • Working with UBS Global Visionaries to highlight, promote, and aid their efforts to fund SDGs by, among other things, refocusing our Social Innovators program to assist them, and by hosting them, at our major client events
  • Launch of a major thematic private market impact investment partnership with TPG Growth, linked to SDG-related impact priorities that stressed the "dual bottom line"
  • Supporting the development of the independent digital platform, Align 17.*

Throughout these activities, we learned more on how wealth managers can support the UN's goals. The following are our top five learnings from 2017:

What are the UN Sustainable Development Goals (SDGs)?

Announced in 2015, the Sustainable Development Goals (SDGs) are a collection of 17 global goals set by the United Nations. They range from eradicating poverty to establishing strong partnerships across institutions.

What we learned

Multilateral Development Bank (MDB) bonds are issued by international financial institutions to finance humanitarian goals in developing economies. Despite delivering healthy risk-adjusted returns, these bonds are rarely found in private client portfolios and are not easily accessible by investors. We believe MDB bonds can be a core holding, which is why we partnered with the World Bank to create a new sustainable investing allocation that allows private investors to build a sustainable portfolio.

MDB bonds can be a great core holding for every portfolio.

From impact investing to green bonds, financial instruments have different names and definitions depending on where you are in the world. For this reason, private clients often struggle to understand what it is exactly that they are investing in and how it is related to philanthropy.

We are working together with industry collectives, such as the Impact Management Project, to develop and publish a standard definition for impact investments. We believe greater transparency will help explain that it is possible to not only do good for society without sacrificing returns, but also make private investors more comfortable with a sustainable portfolio.

There is still confusion about what exactly sustainable and impact investing means.

We have developed the world's first-ever 100% sustainable portfolio. This allows private clients to support the UN's goals, while targeting risk-adjusted returns that are comparable to traditional portfolios. In constructing this portfolio we became aware of some gaps in the types of publicly-listed sustainable instruments available to investors. Investors are limited to "exclusion" based strategies which, for example, exclude businesses that are considered unethical.

So what can be done to widen the investment horizon? We believe that moving away from a one-size-fits-all approach focused on exclusion will require a full suite of next-generation, sustainable and impact investment solutions. This is why we are teaming-up with Hermes Investment Management to define and develop a best-in-class shareholder engagement strategy.

We have developed the world's first-ever 100% sustainable portfolio.

The textbook definition of philanthropy is the desire to promote the welfare of others, through donations to good causes. However, as societal outcomes are not measured, it is often unclear what happens after the money has been donated. In this context, our clients are asking increasingly for more effective ways to deliver philanthropic capital spending.

We suggest an impact-philanthropy approach such as the UBS Optimus Foundation-backed The Collaborative hosted by UBS, or its alliance with Yunus Social Business, the Rockefeller Foundation, and Impact Water, which aims to develop the first 'Social Success Note' (SSN) to support clean water and sanitation in Africa.

These partnerships exemplify an outcome-based approach by encouraging different organizations to direct investment where they have the most expertise, and by inspiring generations of social entrepreneurs to deliver measurable societal impact in a commercial and scalable way.

We suggest an impact-philanthropy approach.

Social entrepreneurs are pragmatic visionaries who combine business acumen with societal benefits. We believe there is much to learn from their innovative solutions to sustainability-related problems. To help social entrepreneurs scale their businesses and address the UN SDGs more effectively, leading firms can provide mentorship, financial sponsorship, technological solutions and investment-gathering capabilities. For example, we have sponsored and produced a Social Investment Toolkit in collaboration with Ashoka.

Through our Global Visionaries network, we've learned about the power of social entrepreneurs and how firms can benefit from partnering with them. We believe that connecting our Global Visionaries' network with clients that share their passion about social entrepreneurship can deepen client relationships.

Last year has taught us how we can support sustainable investing. From smaller steps such as defining a common terminology, to larger undertakings, such as creating 100% sustainable investment strategies, we are committed to doing our part in fulfilling the United Nations Sustainable Development Goal number 17.

Social entrepreneurs are important stakeholders for large firms.

UBS Chairman Axel Weber at the WEF on CNBC

Last year has taught us how we can support sustainable investing. From smaller steps such as defining a common terminology, to larger undertakings, such as creating 100% sustainable investment strategies, we are committed to doing our part in fulfilling the United Nations Sustainable Development Goal number 17.

Meet two fascinating social entrepreneurs:

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