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INVESTING ESG FEATURE
MARK HAEFELE Chief Investment Officer, UBS Global Wealth Management
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28 February 2019
Investors keen on putting more money into ESG causes
nvestors are keen to put more money to work in that the bank is taking steps to widen its lead in support of environmental, social and governance sustainable investing. (ESG) causes but only if financial firms promote “Clients clearly care about the social and highly personalised choices that allow clients to environmental impact of their investments, and leave their mark, Swiss multinational investment they shouldn’t have to compromise in their pursuit bank UBS says. In a major step toward personalising of financial returns to achieve their objectives. sustainable investing, UBS has announced the Now we’re making it easier for them to choose the launch of a pilot program in the first quarter of this investments that best support their priorities.” year that matches what clients care most about with The UBS paper is the third in-depth analysis investments that perform best against their values. to be unveiled at Davos, offering policymakers, Specifically, the pilot will allow investors to rate investors and the financial sector detailed solutions how much they care about individual ESG factors, for meeting the SDGs. These include simplifying such as climate change or water, express their and standardising definitions and measurements, preference in a personalised sustainability score, and and customising investments to appeal to people’s compare their score against more than 20 000 ESGpersonal passions. They also include ramping up rated stocks and bonds to find the best match. public awareness that individual investors can “This marks a further departure from a onemake a difference by putting their savings to work size-fits-all approach to sustainable investing by profitably in support of good causes. scoring each security against seven ESG criteria, “While there has been progress, it’s become clear which allows for a more granular view of how that the traditional approach to environmental and investment instruments are performing against social investment isn’t sufficient,” says Mark Haefele, the sustainability criteria their Chief Investment Officer at UBS Global potential buyers hold dear.” Wealth Management. “People care The United Nations has less about generic topics than specific PEOPLE CARE called for an increase in private causes they hold dear. They want the LESS ABOUT sector funding in support of its chance to leave their mark on issues GENERIC TOPICS they are passionate about, whether Sustainable Development Goals (SDGs), designed to address that’s eradicating poverty, achieving THAN SPECIFIC humanity’s and the environment’s gender equality, or any of the other CAUSES THEY biggest problems by 2030. SDGs that are close to their hearts. This HOLD DEAR However, the world is likely is why we’re proposing new solutions to to fall short of the estimated specific problems.” additional $2-7tn needed annually to solve these The UBS white paper has won broad support issues, UBS says in a white paper entitled Awareness, from leading figures in finance, philanthropy and simplification, and contribution, that simultaneously business, including Robert Kapito, President and calls for more concerted efforts among financial co-founder of BlackRock, Paul Polman, former institutions toward mobilising private wealth for the CEO of Unilever, and Sunny Varkey, founder of public good. GEMS Education and the $1m per annum Global The paper was presented at last month’s World Teacher Prize. Economic Forum Annual Meeting in Davos by Axel “We need to provide our clients with the clearest Weber, Chairman of UBS. possible picture of the impact of sustainable “At UBS, we believe that only by offering investing. That is why we believe we need increased solutions that raise awareness and channel personal disclosures to help investors make more informed preferences for investing sustainably can the global decisions and why we are focused on enhancing community achieve the UN SDGs,” Weber states. data for investors to better understand how and why Sergio P Ermotti, Group CEO of UBS, adds sustainability factors effect returns,” Kapito says.
Following its commitment made in 2017 to raise $5bn in impact investments over five years, UBS points out that it has pioneered examples of new sustainable and impact investment solutions, such as working with Solactive to develop fixed-income benchmarks that define financial return, risk and sustainability parameters; the launch of Align172, an innovative digital platform that efficiently connects private wealth investors to impact investment opportunities; multiple mainstream private-market impact fundraisers that have already contributed several millions of US dollars to good causes, including academic research; and the world’s first 100% sustainable investment cross-asset solution. Launched for the bank’s private clients in 2018, this solution has already attracted CHF3.9bn in investments, despite a difficult environment for financial assets over the past year. “When someone tries to find an investment that helps solve some of the issues they care most about, they are often presented with a confusing and conflicting array of data, definitions and terms,” says Simon Smiles, Chief Investment Officer UHNW at UBS Global Wealth Management. “We need to make it easier by simplifying and standardising sustainability criteria on a global level.” The key solutions outlined in the paper presented at Davos last month are: • To align investments with personal sustainability interests, helping investors who seek to achieve their financial goals and to tackle the particular social and environmental causes they care most about. • To simplify and standardise corporate sustainability data reporting. The paper endorses the World Economic Forum’s initiative to Build an Effective Ecosystem for ESG as a first step toward common, minimal disclosure levels to increase the transparency of sustainability reporting. • To define impact investment and measurement coherently and consistently. UBS believes the International Finance Corporation’s work on common impact management standards is bestplaced to fulfil this role. UBS calls on the World Bank Group to officially endorse these criteria as their own and name them accordingly. • To name sustainable investing strategies in a clear, consistent manner so they can be universally understood and adopted. • To use publicly traded strategies in traditional portfolios, focusing on market-rate performance and having an actual positive social and environmental impact. • To adopt a truly 100% sustainable investing asset allocation that seeks to deliver attractive returns and have verifiable positive impact. A 100% sustainable cross-asset portfolio lays the groundwork that may enable foundations not currently invested sustainably to align their activities to their values. • To make philanthropy more collective and collaborative rather than competitive, an objective strongly supported and promoted by the UBS Optimus Foundation. • To use awareness campaigns to increase public knowledge of the UN SDGs.
