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Our Global Wealth Management clients’ SDG-related impact commitments and invested assets reached 10.1USD billion.
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We voted upon climate-related resolutions at companies 160.
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Our Investment Bank organized investor conferences featuring ESG content 25.
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Our Global Wealth Management clients’ discretionary assets aligned to SI Strategic Asset Allocation reached 22.9USD billion.
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Our Global Wealth Management clients could invest in new private market impact vehicles aligned with the SDGs 6 largest manager of open-ended funds and ETFs by SI AuM using Morningstar’s classifi cation1 3rd of net new investment products in Personal Banking were sustainable 70%
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Our corporate engagements on climate topics achieved 67% progress against preset objectives.
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Our SI AuM within Asset Management reached 178USD billion.
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Our SI share of assets under custody in Personal Banking reached 48%
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We produced 201 research reports with ESG icon.
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ESG Environmental Social Governance 1 © 2023 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and / or its content providers; (2) may not be copied, adapted or distributed; (3) is not warranted to be accurate, complete or timely; and (4) do not constitute advice of any kind, whether investment, tax, legal or otherwise. User is solely responsible for ensuring that it complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past performance is no guarantee of future results.
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14
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Sustainability Report 2022 | Strategy 15.
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As of 31 December 2022, UBS’s SI AuM were USD 268 billion, compared with USD 251 billion at year-end 2021. This represents an increase of 6.5% year on year. SI AuM account for 6.8% of UBS’s total invested AuM at yearend 2022, compared with 5.5% at year-end 2021. Impact investing assets decreased to USD 21 billion from USD 29 billion, reflecting negative market performance and foreign currency effects, as well as methodology changes.
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Sustainable investments.
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For the year ended % change from USD billion, except where indicated 31.12.22 31.12.21 31.12.20 31.12.21 SSustainable investments1.
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Sustainability focus2 246.9 222.7 127.7 10.9.
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Impact investing3 20.7 28.5 13.1 (27.4)
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TTotal sustainable investments4,5 267.6 251.2 140.8 6.5.
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SI proportion of total invested assets (%) 6.8 5.5 3.4.
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UBS total invested assets 33,957.2 4,596.2 4,187.2 (13.9) 1 We focus our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention. 2 Strategies that have explicit sustainable intentions or objectives that drive the strategy. Underlying investments may contribute to positive sustainability outcomes through products / services / use of proceeds. Examples include Global Wealth Management’s discretionary Manage SI mandate solutions and Asset Management’s strategies such as its Global Sustainable Equities product. 3 Strategies that have explicit intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and/or contributions. Examples include Global Wealth Management’s Oncology Impact funds and Asset Management’s UBS Engage for Impact or UBS Climate Action funds. 4 In 2022, UBS converted funds to the sustainability focus and impact investing categories, in line with corresponding changes to the funds’ underlying investment policies. The main impact was on sustainability focus and impact investing strategies in Asset Management of USD 33 billion. Further, we aligned the Global Wealth Management and Personal & Corporate Banking reporting of UBS funds and mandates products to the Asset Management categorization with an impact on sustainable investments of USD 20 billion. 5 In 2022, methodology changes related to the application of the Group SI Framework resulted in a decrease in invested assets of USD 10 billion across total sustainable investments.
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Sustainable investing for our clients.
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In 2022, we made progress on a number of important investment product initiatives relevant to a broad spectrum of clients across our business areas. For example: – We made it easier for private clients to access sustainable investment products and services, suited to their individual preferences, e.g., through expanded access to our Advice SI and separately managed account (SMA) solutions, and new targeted sustainability and impact offerings. In line with EU regulations for clients in scope, UBS systematically captures clients’ preferences when it comes to SI.
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– We expanded the range of sustainability and impact funds in public and private markets and exchange-traded funds (ETFs) available to private, institutional, and corporate clients.
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– We continued to provide customized, tailored, and structured investment solutions for private and institutional investors.
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Launching innovative sustainable investing products Transition and impact are key focus areas for our clients and the financial industry in general. In response, we launched several dedicated investment strategies supporting the allocation of capital to thematic areas such as decarbonization or energy storage.
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SI solutions for private clients – addressing individual preferences – Private market impact vehicles: We made available six private market funds providing investment opportunities aligned with the SDGs available to clients.
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– Personalized Sustainable Investing (PSI) SMAs: Launched by our Global Wealth Management business division in the US, managed by our Asset Management teams and powered by our Chief Investment Office (CIO), it addresses demand for customization by allowing clients to personalize specific strategies to align with their individual sustainability preferences.
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– Inclusive Investing: Launched by Global Wealth Management in the US, the offering aims to address investor preferences for strategies that support diversity, equity and inclusion and amplify the CIO longer-term investment theme on diversity and equality. Over time, the focus will be on enhancing capabilities and educating financial advisors and clients on the offering.
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– Sustainability-focused hedge fund: Our advisory clients can benefit from an expanding platform of alternative SI products. In 2022, we have onboarded a hedge fund aiming to invest in sustainability themes and short businesses facing potential disruption from sustainability-related trends.
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Customization for institutional investing clients – Aon Transition and SDG fund: We joined forces with Aon in March 2022 to co-develop and launch the UBS Global Equity Climate Transition Fund. The Aon MasterTrust and Group Personal Pension Plan seeded the fund with more than GBP 700 million. This collaboration brings together our award-winning proprietary Climate Aware Framework and our global stewardship program to help companies such as Aon transition towards a lower-carbon future while also meeting their broader sustainability preferences.
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15
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Sustainability Report 2022 | Strategy 16 – Innovation fund: We launched this fund in August 2022 to invest in leaders across four key areas: planet / climate, people / health, digitalization and additional diversifiers. We know these issues are continually evolving. Some of the sleeves provide exposure to important sustainability themes and high conviction strategies. One example is the UBS Healthy Living strategy, a mix of established companies with long-term experience in healthy living, and fast-growing market players.
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– Energy storage: Our Asset Management business division acquired five standalone, development-stage energy storage projects in Texas from Black Mountain Energy Storage (BMES). This acquisition forms part of the strategic expansion of Asset Management’s infrastructure business, providing clients with further sustainable investing opportunities in the alternatives space. It marks an important milestone following the establishment of the Energy Storage Infrastructure team in 2021. The projects will provide flexibility, responsiveness and dispatchability to the Electric Reliability Council of Texas (ERCOT) grid once it becomes operational in 2024. These capabilities make energy storage a critical component of grid reliability and a key technology for the energy transition, helping ERCOT and the Texas consumers it serves benefit from innovation and more economic sources of energy.
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– UK life sciences fund: We raised GBP 400 million in the first closing of a UK life sciences fund which aims to develop research and development and advanced manufacturing facilities for the sector in the UK. These facilities are required in order to facilitate the growth of life sciences and the advancement of novel healthcare products. They also create significant skilled employment opportunities for local economies and population.
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– Transition fund: We collaborated with Essex Pension Fund and Hymans Robertson to launch an investment fund specifically tailored to meet Essex Pension Fund’s objectives to invest in companies leading the transition to a low-carbon economy. In addition, the investment fund makes a positive social contribution by favoring companies that align with five of the SDGs.
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Structured products and solutions for institutional and private clients – Carbon emissions: Our clients continued to allocate to solutions linked to the recently launched UBS CMCI (Constant Maturity Commodity Index) Emissions Index or carbon emissions futures directly.
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– Bespoke ESG portfolio: Bespoke investment methodology offerings with a custom ESG screening and a climate change focus.
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– Actively Managed Certificates: Portfolio certificates linked to a range of sustainability and climate investment themes actively managed by private banks.
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Actively driving the sustainability transition in Asset Management We believe active ownership has an important role to play in helping to drive the sustainability transition. So, we engage with companies, issuers and standard setters to help make a demonstrable contribution to portfolios and sustainability outcomes. Collaboration with like-minded investors, as well as our ongoing partnership with clients, are key to achieving impact on a global scale.
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– Climate opportunities: We joined the Energy Storage Solutions Consortium to pioneer methods of assessing and maximizing the greenhouse gas emissions benefits of stored energy usage. The goal is to create an open-source, third party-verified methodology to quantify the emissions benefits of certain energy storage projects and provide guidance on maximum emissions reduction benefits through stored energy.
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– Stewardship: In our voting at annual shareholder meetings we require, as of 2022, 30% gender diversity at board level for large cap companies in developed markets, including markets generally lagging in this regard, such as Japan. In addition, we withheld support for the election of board directors responsible for the nomination process at 441 Japanese companies (up from 204 in 2021), 49 Swiss (up from 25 in 2021), and 389 US companies (up from 32 in 2021) due to lack of gender diversity.
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– Thematic engagement: Through our dedicated program, we engaged with companies on climate change, for the fourth year running. During this time, we have raised our expectations for companies significantly, including enhanced disclosure of climate risks, and a greater focus on decarbonization ambitions and actions companies are taking towards a net-zero future. We continue to use collaborative engagement as a lever to scale our impact, in addition to our direct engagement, through our membership of Climate Action 100+. As of end of 2022, via Climate Action 100+, we co-led on five company engagements and participated in 20 company engagements.
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16
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Sustainability Report 2022 | Strategy 17 – Social engagement programs: We launched our Social Thematic Engagement Program in 2022, focusing on three key themes: Human Rights, Human Capital, and Health (Nutrition and Medicine). These three themes were identified as key enablers for the social transformation towards inclusive growth and important contributors to the SDGs. As part of our program, we joined two collaborative engagement initiatives, the Investor Alliance for Human Rights, and Access to Nutrition. We also continued with our participation in Access to Medicines. In relation to our focus on nutrition, we became a member of the Investor Coalition on UK Food Policy and participated in the developments in the UK focusing on the introduction of mandatory reporting of nutrition and sustainability metrics for food sector companies above a certain size. During the year we successfully implemented our program. For example, on nutrition, we saw key outcomes with companies strengthening their nutrition strategy by improving practices, adopting policies, introducing targets to increase the healthiness of their portfolio and enhancing transparency. › Refer to the report’s Supplementary Information document for more on our partnerships.
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Leading by example.
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In 2022, our Group Treasury continued to invest its high-quality liquid assets (HQLA) portfolios under a dedicated Treasury ESG Investment Framework, which integrates ESG considerations in the investment process alongside more traditional economic and risk dimensions. It supports investments in ESG-labelled securities that have a direct link to sustainable projects. More holistically, it promotes investments in issuers with positive ESG characteristics and flags potential risks. At year-end 2022, Group Treasury held more than USD 6.7 billion of green, social and sustainability bonds in its HQLA portfolios, a growth of 97% year on year, in contrast to declining global ESG bond issuance in 2022.
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Financing a sustainable future.
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We develop financing solutions to help our clients transition to a more sustainable future. These solutions can be on-balance sheet (e.g., green or sustainable loans and mortgages) or off-balance sheet (such as access to debt and equity capital markets), and also included transaction structuring.
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Our Investment Bank facilitated USD 48 billion of GSSS bonds financing through 77 bond deals for our clients, with a market-leading share of the Swiss franc GSSS bond market. Among our most notable transactions during 2022 were a UK Debt Management Office (DMO) Green Gilt transaction, as well as an inaugural green bond issuance for New Zealand Debt Management. In addition, UBS was the sustainability structuring advisor for the Republic of Philippines’ inaugural sustainability bond. These were pivotal for financing part of the respective governments’ plans for tackling climate change and other environmental challenges. They also funded much-needed infrastructure investment and created green jobs.
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In our Swiss home market, we have been developing new and innovative real estate financing solutions to support our clients in the transition to a low-carbon economy. Key examples include: – UBS Mortgage Energy for private clients:1 We launched this offering to encourage clients to invest in more sustainable energy and heating systems, such as through replacing fossil fuel heating with a more sustainable alternative or by installing a photovoltaic system. In doing so, clients benefit from attractive interest rates and lower long-term energy costs.
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– UBS Loan Energy for energy-efficient investment properties:1 Our clients benefit from attractive interest rates and comprehensive advice for their low-energy properties. In addition, they can discuss sustainability matters with a Switzerland-wide network of real estate experts. › Refer to the “Environment” section of this report to learn more about our climate roadmap.
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Driving the debate.
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In a year of fundamental change, our priority has continued to be providing our clients with timely and targeted ESG content, strategic insights and advice. Through these we also aim to raise awareness, distil inherent complexities and further the debate around key sustainability topics as they grow in importance in the collective consciousness of companies, clients and the broader public. We deliver our views and insights through a variety of channels, including our dedicated research and advisory services for corporate clients, institutions and private clients, as well as our specialist sales teams. In addition to focused ESG research, we also provide sustainabilityrelated thought leadership and insights at industry conferences and through broader thematic publications.
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1 In December of 2022, UBS adopted guidelines providing an internal global standard for all our products in the categories of sustainable lending, sustainable bonds and GHG emissions trading. During the course of 2023, UBS expects to (re-)assess all its products against these guidelines.
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17
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Sustainability Report 2022 | Strategy 18.
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ESG content and research We address the question most frequently addressed to our sell side research team of how ESG factors connect to the markets, sectors and companies under coverage in a number of ways: – We flag ESG-relevant content with our ESG icon. In 2022, the number of reports carrying the icon rose by 50%. Our flagship ESG content is the ESG Radar series, developed in collaboration with sector analysts over years. By the end of 2022, UBS sector analysts had lead-authored a cumulative total of over 90 ESG Sector Radars. In July 2022, we launched the ESG Company Radar series (over 30 published by year end).
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– We explore debates of interest to our clients through thematic and cross-sectoral collaborations.
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– In 2022 we gained global depth through an expansion of the team, now present in London, New York, Hong Kong, Tokyo and Sydney.
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– Some of the research pieces which resonated most with institutional clients in 2022 included “Global Sustainability: Inflation Reduction Act,” “EU Sustainability Regulation: It’s Complicated,” “State of the Global Energy Transition 2022,” and “Future of Food: Have plant-based protein sales peaked?”.
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Our CIO continues to provide guidance to private clients on incorporating sustainability into investments, particularly in a diversified portfolio context. Our research and investment views, together with a differentiated sustainable investing asset allocation, enable clients to gain exposure to diversified cross-asset portfolios using building blocks with explicit sustainability objectives. In 2022, CIO expanded its guidance to include hedge funds and structured products, which enabled Global Wealth Management to expand its sustainable investing offering. We also provided clients with timely guidance on implications for sustainability in the context of the Russia–Ukraine war, as well as other topics including “Sustainable Investing in an Energy Crisis” and the “Renaissance of Nuclear Energy.”
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Social topics such as human capital and diversity and inclusion were another increased focus of CIO research. CIO also continued to provide actionable investment ideas to clients via its monthly Sustainable Investing Perspectives publication and podcast series, complementing its quarterly Sustainable InSIghts report series which provides regular updates on the state of the SI market, a running list of answers to frequently asked questions, and educational content on making sense of ESG data and scores.
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ESG Advisory Our Global ESG Advisory team in Global Banking provides strategic advisory and capital-raising services by specifically accounting for the structural shift in investor preferences towards ESG investment opportunities. To do so, we have been building the capabilities to assess a corporate’s sustainability profile and to link that profile to ESG investor demand. We expect this approach to underpin all Global Banking transactions over time.
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In 2022, we developed tools to aid corporate clients in their ESG profiling, such as ESG key performance indicator (KPI) benchmarking analysis, ESG ratings interpretation and ESG valuation levers, amongst others. In addition, we implemented internal tracking systems for our senior bankers to record ESG-related client interactions. This tracking aims to capture the progress we are making with clients in integrating ESG considerations into all aspects of our services. These interactions can range from discussions around ESG regulatory developments to ESG–focused strategic opportunities in mergers & acquisitions (M&A).
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Thought leadership Our UBS Sustainability & Impact Institute (SII) has brought together a collective of sustainability thought leaders from across UBS to engage on current and future topics. Over 2022, the SII gathered their insights and published white papers, opening up key topics such as systems thinking and natural capital, and decarbonization for wider discussion.
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Progressing with data, platforms and analytics.
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We regard the availability of good data, analytics and technology capabilities as essential enablers for getting us to a more sustainable future. They will equally help our clients make informed sustainability-related investing and financing decisions. Through various entities, we offer solutions such as portfolio analytics, ESG scoring and reporting or design and development of platforms providing innovative ways to access markets.
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How we helped our clients in 2022 – esg2go: We became a partner and member of the strategic committee of esg2go, which provides small- and medium-sized enterprises (SMEs) with detailed insights into their sustainability performance, based on ESG criteria. This takes the form of a sustainability rating score for the SME and an accompanying report which the SME can pass on to its stakeholders.
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Sustainability Report 2022 | Strategy 19 – UBS key4 banking app: We provide a digital banking offering, which includes a sustainable savings account alongside a conventional personal account. Furthermore, for every UBS key4 banking account opened, UBS offsets 100 kg of CO2 emissions with a donation to myclimate.
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– key4 by UBS Green Mortgage (for self-occupied real estate): Our key4 by UBS mortgage platform allows investors to offer preferential mortgage terms if clients can demonstrate, via a certificate (e.g., Minergie), that the property they wish to finance meets certain environmental standards. This offer is targeted at private clients.
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– key4 by UBS Energy Check: In collaboration with experts from pom+, a real estate consulting company with proven expertise in sustainable properties, key4 by UBS is offering a free energy check to determine the potential energy and cost savings of an investment property. Interested prospects or customers can use the tool to receive a concrete plan of action. A key4 client advisor will then discuss the results with them.
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– UBS Sustainability Analytics: We support our Asset Servicing clients with this enhanced online tool to actively monitor, manage and improve the sustainability profile of their investment portfolios. The analysis provides insights on sustainability ratings, business activity checks and carbon emissions, and helps to reduce the carbon footprint of their portfolios and align it to their chosen climate glidepath.
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– Carbonplace: We co-founded Carbonplace, a technology platform for the voluntary carbon market that has the goal of creating a streamlined and transparent market for our clients. We have been working collaboratively to help deliver on this initiative and launched two pilot transactions in 2022. › Refer to the report’s Supplementary Information document for a list of our key sustainable products › Refer to the “Social” section of this report to learn more about our client philanthropy and social impact products and services 19
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Sustainability Report 2022 | Governance 20.
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Governance.
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Our sustainability governance.
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Board of Directors and Group Executive Board.
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Our firm’s sustainability and corporate culture activities are grounded in our Principles and Behaviors and overseen at the highest level of the organization. These principles are laid down in our Code of Conduct and Ethics.
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Our Board of Directors has ultimate responsibility for the strategy and the success of the Group and for delivering sustainable shareholder value. It oversees the overall direction, supervision and control of the Group and its management. It also supervises compliance with applicable laws, rules and regulations.
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Five committees support the Board of Directors of UBS Group AG (the BoD) in fulfilling its duty through the respective responsibilities and authority given to them. All BoD committees have specific responsibilities pertaining to environmental, social and governance (ESG) matters, e.g., the Compensation Committee is responsible for ESGrelated compensation topics, the Risk Committee supervises the integration of ESG in risk management, the Governance and Nominating Committee supports the Board in establishing best practices in corporate governance and the Audit Committee has oversight of the control framework underpinning ESG metrics.
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Our BoD’s Corporate Culture and Responsibility Committee (the CCRC) is the body primarily responsible for corporate culture, responsibility and sustainability.
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The CCRC oversees our Group-wide sustainability and impact strategy and key activities across environmental and social topics, including climate, nature and human rights. Annually, it considers and approves our firm’s sustainability and impact objectives.
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Board of Directors.
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Audit Committee Compensation Committee.
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Corporate Culture and Responsibility Committee Risk Committee.
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Group Executive Board (GEB Lead for Sustainability and Impact)
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Chief Risk Offi cer for Sustainability Head Social Impact Chief Sustainability Offi cer.
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