Roughly one-third of UBS’ assets are in sustainable or impact investments as the global firm has made a major push in this space.
“If you look at what we’ve achieved in the [sustainable and impact investing] space, it’s quite impressive,” Sergio Ermotti, group CEO at UBS, said during a press conference. “As of the end of 2016, we had $976 billion of assets — so representing something like a third of our asset base that we manage or have under custody or advisory. And at the end of the first half of this year, we hit the $1 trillion mark for the first time.”
UBS recently held a Sustainable & Impact Investing press conference that was conducted in person and via live video stream across Zurich, London and New York. The same day, UBS was confirmed as the industry group leader in the Diversified Financials Group by Dow Jones Sustainability Index (DJSI).
“It’s quite clear this is no longer a niche anymore,” Ermotti said during the press conference. “It is an important business driver and more importantly, it is a business driver because clients want it.”
Stephen Freedman, head of sustainable investing of UBS Wealth Management Americas, and Michael Nelskyla, head of structured solutions Americas of UBS Investment Bank, discussed what UBS is doing strategically on this front in the Americas.
According to Freedman, the Wealth Management Americas division views sustainable and impact investing as a “strategic imperative.”
“The key business case here has to do with the massive intergenerational wealth transfer that we’re expecting over the next decade,” he explained. “We’re talking tens of trillions of dollars. And we know from many surveys the people on the receiving end of this wealth — whether it’s young generations or in many cases women — are more interested in sustainable and impact [investing] than the people holding the wealth right now.”
On the impact investing front, the Rise Fund has achieved “tremendous success” in the U.S., according to Freedman.
Reuters reported in July that UBS had raised $325 million for the private equity impact investment fund.
Also this year, UBS announced a partnership with Rethink Impact, a venture capital investment fund with a gender lens overlay. In March, UBS Wealth Management Americas said it had raised more than $110 million, more than half of which came from UBS clients, for the closing of Rethink Impact.
Rethink Impact is an impact investing venture capital fund investing in gender diverse, tech-enabled companies working to solve the world's biggest challenges based on the UN Sustainable Development Goals.
Another achievement was the launch of the Long-Term Themes Portfolios, a separately managed account strategy in the U.S. managed by UBS Asset Management.
“We were very excited about this because it allowed us to fill a gap in the offering,” Freedman said. “In sustainable investing, often you have thematic solutions that are very narrow ... and not very diversified. Here we were able to provide something which was thematic … and at the same time it’s diversified and is going to be a good solution for clients to have.”
Looking to the future, Freedman said Wealth Management Americas’ goal is to be able to provide sustainable solutions across all asset classes so that a client looking for sustainable and impact investments can essentially plug in a portfolio that is “just as diversified [and] as well-structured” as what a client would get from a more standard approach.
“Right now in terms of what’s available in the industry, we’re not quite there yet. We’re pretty close,” he said. “In the next year or two, we’ll be at the point where sustainable portfolios really are just as robust in every sense of the term as if a client were coming in with regular types of needs.”
Another priority if providing guidance to financial advisors on how to build sustainable and impact portfolios.
“We have to help advisors help their clients find the solutions that are important to them. This will require investment in financial advisor education,” Freedman said.
On the Investment Bank side of things, Nelskyla explained where they’re focusing. A big focus is working on building indices that track certain themes and impact and sustainability investments, such as a Veterans Impact Index or a social equality LGBTQ investment, he said.
“Those types of indices arise from demand for specific themes like that,” Nelskyla explained. “In the Investment Bank, we’re trying to get products like that to be able to linked to other products even outside of UBS. Those would be products, for example, in the asset management space or the retirement or the annuity space.”
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