UBS Life Climate Aware World Equity Fund

Delivering a forward thinking, cost-effective solution

It is generally accepted that the world's climate is changing due to rising man made emissions of greenhouse gases (GHGs).

Many investors are looking to mitigate the risk of climate change, including the transition to a low-carbon economy, to their portfolios. The challenge is how can carbon risk be managed without compromising long-term performance.

Many existing solutions take the straight-forward approach of offering strategies that overweight the stocks of companies that are less dependent on fossil fuels relative to higher carbon-emitting peers. We believe this approach has some important limitations.

The UBS Life Climate Aware World Equity Fund

  • An innovative, cost-effective, rules-based equity solution
  • Designed to capitalize on the long-term transition to a low Green House Gas emissions economy
  • Flexibility to increase or decrease exposures to constituents of the index based on their expected contributions towards climate change
  • An innovative approach with four key building blocks combining a multi-dimensional group of metrics

Our Climate Aware model – Four key building blocks

Our model is constructed based on four core elements, or building blocks. By combining this multi-dimensional group of metrics, we guide portfolio construction towards a set of exposures aiming at reflecting the low GHG emission economy and the 2ᵒC scenario. Our approach is innovative - it is both forward-looking and uses a probabilistic framework to capture the inherent uncertainty surrounding carbon data. The four building blocks are:

Glide path probability

We build a quantitative model that compares the company's carbon footprint trend with the required emission reduction implied by the 2ᵒC scenario. This approach allow us to estimate the probability a company will achieve those glide path targets.

Qualitative overlay

We improve the estimates of our quantitative model with a qualitative framework that incorporates information about the company:Whether carbon emission is reported under the Carbon Disclosure Program (CDP) or The company's disclosure related to implementation of policies, objectives and/or initiatives related to carbon efficiency.

Carbon intensity and Renewable Energy

The third building block relates to current information about direct and indirect carbon footprint (measured as intensity levels). Furthermore, in order to partially capture the substitution of energy sources under 2ᵒC scenario towards clean energy, we incorporate information related to both production of renewable energy and companies proving technology to that sector.

Fossil Fuel Reserves and Energy produced

This elements allows the underweighting of companies generating electricity from coal power stations. We also allow the portfolio to reduce exposure on companies that currently hold proven reserves in coal, oil and gas.


A forward thinking, climate aware solution

Watch this short video of Mark Fawcett, CIO of NEST, Ian Ashment, Head of Systematic & Index Investments and Malcolm Gordon, Head of UK Institutional discuss UBS Asset Management's new Climate Aware solution.

If you require further information please get in touch.