An interview with Michael Baldinger
Head of Sustainable and Impact Investing
UBS Asset Management and Responsible Investor asked institutional investors globally what they want from sustainable investing. Find out what they told us.
There is no question that climate will remain an urgent priority for our clients across the board.
For sure. There is no question that climate will remain an urgent priority for our clients across the board.
Earlier this year, in collaboration with Responsible Investor, we completed a global survey of institutional investors representing EUR 19.02 trillion1—a substantial part of the global asset owner community. And what they told us, loud and clear, was that environmental factors were a key reason for integrating Environmental Social and Governance (ESG) analysis into their investment processes. In Europe, asset owners went further still. The majority said that within the next five years environmental factors could become even more important than financial factors when analyzing companies. Looking out beyond the institutional market and at the Ultra High Net Worth (UHNW) segment, a similar pattern emerges. 'Return on Values', a survey carried out by our Wealth Management division in 2018, revealed that UHNW investors similarly prioritize environmental impact. So, client demand is clearly strong.
How could the story develop? One area where I expect there to be a strong focus in 2020 is Stewardship—including engagement, proxy voting and working towards resolutions that lead to sustainability goals—and the role it can play in companies' transition to lower-carbon business models.
During 2019, we saw the strength of investor coalitions such as Climate Action 100+, of which we are a member. The group has been a powerful voice, engaging with companies to inform and motivate their shift towards lower-carbon business models. Their dialogues have resulted in some significant outcomes. For example, a global energy company committed to take significant additional action on climate change as a direct result of investor engagement led by UBS Asset Management, HSBC Global Asset Management and Storebrand Asset Management as part of Climate Action 100+.
Alongside engagement, asset managers' proxy voting records have come under close scrutiny and I would certainly expect that to continue into 2020. There are growing calls for firms' proxy voting activities to align with their public statements, particularly around climate change. What is becoming apparent in some cases is a quite marked mismatch between the two.
Our view and expectation is that companies need to have a well-articulated strategy for reducing greenhouse gas emissions, to be clear about goals, and to report on progress. Our voting record reflects this. We have always recognized that voting is an important part of our fiduciary duty to our clients and is integral to both our investment process and our overall stewardship approach.
That's why we were very gratified when Shareaction ranked UBS Asset Management as the most progressive manager when it came to voting on climate resolution, read the announcement here.
Asia, and Japan in particular, hold great growth potential in our view. This trend has been led in no small part by Hiro Mizuno, CIO of the Japanese Government Pension Investment Fund, which also happens to be the largest pension fund in the world.
Mizuno is a vocal advocate for ESG integration. In a Bloomberg interview earlier this year2, he was described as "a change agent for ESG in Japan, galvanizing broad public and private sector support for ESG integration and investing."
From our survey results, we saw more asset owners in Asia, Oceania and Africa intending to integrate ESG into their investment processes going forward, while in Japan, almost one in three respondents classified themselves as an ESG adopter.
Globally, organizations such Climate Action 100+ continue to support investor engagement, using the combined weight of more than 370 global investors and over USD35 trillion of assets under management. Together we have achieved significant progress across a range of industries including the most challenging to decarbonize, with a number of major global companies making substantial net zero commitments to date. We will continue to work with the 25 coalitions we are actively involved in, particularly the five in which we are the lead, to press the world’s largest companies to take the necessary actions on climate change.
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