Investors are keen to put more money to work in support of environmental, social and governance (ESG) causes but only if financial firms promote highly personalized choices that allow clients to leave their mark, UBS, the world's largest wealth manager, said today. In a major step toward personalizing sustainable investing, UBS announced the launch of a pilot program that matches what clients care most about with investments that perform best against their values.
Specifically, the pilot will allow investors to rate how much they care about individual ESG factors, such as climate change or water, express their preference in a personalized sustainability score, and compare their score against more than 20,000 ESG-rated stocks and bonds to find the best match. This marks a further departure from a one-size-fits-all approach to sustainable investing by scoring each security against seven ESG criteria, which allows for a more granular view of how investment instruments are performing against the sustainability criteria their potential buyers hold dear. The pilot will be introduced in the first quarter of 2019.
The United Nations has called for an increase in private sector funding in support of its Sustainable Development Goals (SDGs), designed to address humanity's and the environment's biggest problems by 2030. However, the world is likely to fall short of the estimated additional USD 2-7trn needed annually to solve these issues, UBS said in a white paper entitled "Awareness, simplification, and contribution" launched today, which simultaneously calls for more concerted efforts among financial institutions toward mobilizing private wealth for the public good.
Presenting the paper at the World Economic Forum Annual Meeting in Davos, Axel Weber, Chairman of UBS, said: "At UBS, we believe that only by offering solutions that raise awareness and channel personal preferences for investing sustainably can the global community achieve the UN SDGs."
Sergio P. Ermotti, Group CEO of UBS, said: "UBS is taking steps to widen our lead in sustainable investing. Clients clearly care about the social and environmental impact of their investments, and they shouldn't have to compromise in their pursuit of financial returns to achieve their objectives. Now we're making it easier for them to choose the investments that best support their priorities."
The UBS paper is the third in-depth analysis unveiled at Davos offering policymakers, investors and the financial sector detailed solutions for meeting the SDGs. Those include simplifying and standardizing definitions and measurements, and customizing investments to appeal to people's personal passions. They also include ramping up public awareness that individual investors can make a difference by putting their savings to work profitably in support of good causes.
"While there has been progress, it's become clear that the traditional approach to environmental and social investment isn't sufficient," said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. "People care less about generic topics than specific causes they hold dear. They want the chance to leave their mark on issues they are passionate about, whether that's eradicating poverty, achieving gender equality, or any of the other SDGs that are close to their hearts. This is why we're proposing new solutions to specific problems."
The UBS white paper has won broad support from leading figures in finance, philanthropy and business. Jim Yong Kim, President of the World Bank Group, Robert Kapito, President and Co-Founder of BlackRock, Paul Polman, former CEO of Unilever, and Sunny Varkey, Founder of GEMS Education and the USD 1m per annum Global Teacher Prize, echoed the call for UN SDG awareness and common standards in individual contributions included in the paper.
Robert Kapito of BlackRock stated in his contribution: "We need to provide our clients with the clearest possible picture of the impact of sustainable investing. That is why we believe we need increased disclosures to help investors make more informed decisions and why we are focused on enhancing data for investors to better understand how and why sustainability factors affect returns."
Following its commitment made in 2017 to raise USD 5bn in impact investments over five years, UBS 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 fund raises that have already contributed several USD millions to good causes including academic research; and the world's first 100% sustainable investment cross-asset solution. Launched for private clients in 2018, this solution has already attracted CHF 3.9 bn 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," said Simon Smiles, Chief Investment Officer UHNW at UBS Global Wealth Management, who was also recognized as a World Economic Forum Young Global Leader. "We need to make it easier by simplifying and standardizing sustainability criteria on a global level."
The key solutions outlined in the paper (available in full at ubs.com/wef2019) are:
1. 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.
2. Simplifying and standardizing 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.
3. Defining impact investment and measurement coherently and consistently. UBS believes the International Finance Corporation's (IFC) work on common impact management standards is best-placed to fulfil this role. UBS calls on the World Bank Group to officially endorse these criteria as their own and name them accordingly.
4. Naming sustainable investing strategies in a clear, consistent manner so they can be universally understood and adopted.
5. Using publicly traded strategies in traditional portfolios, focusing on market-rate performance and having an actual positive social and environmental impact.
6. Adopting 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.
7. Making philanthropy more collective and collaborative rather than competitive, an objective strongly supported and promoted by UBS Optimus Foundation.
8. Using awareness campaigns to increase public knowledge of the UN SDGs.
Press release by UBS
Publié le 28 janvier 2019