Integration:
We believe that fundamental, material ESG factors are best assessed as part of the company research process. These factors are fundamental in nature and need to be analysed as an integral part of the due diligence process, included in our estimation of cash flows and valuation metrics.
UBS AM's 25+ credit analysts provide research coverage for more than 2,000 non-government issuers globally across all fixed income sectors. The credit research process includes qualitative assessments of management strength, business strategy, market position, competitive environment, regulatory environment, and financial flexibility and quantitative assessments of historical operating results, calculation of various credit ratios and, most importantly, an expected future outlook. The analysts specialize in their sectors and build up valuable, in-depth knowledge over time to provide comprehensive credit review and analysis with emphasis on cash flow generation and sustainability.
We are currently working toward fully integrating ESG considerations throughout our credit research process including investment grade and high yield credit assessments. This will require all credit recommendations by our Credit Research teams to address the most material sustainability strengths and weaknesses and also to assess the material impact of sustainability considerations on their credit recommendations and how sustainability risk factors influence their credit recommendation either positively or negatively.
The impacts of sustainability factors in the company case should be included in the underlying financial assumptions, and analysts must explain the link between the sustainability performance and the future outlook on credit quality. Credit analysts will evaluate the current status and also provide a forward looking trajectory of the EGS risks of each credit. In order to do so, each credit's ESG profile will be rated on a proprietary rating scale to determine the materiality of ESG issues as well as the positive or negative material impact on their overall credit recommendations. Our credit research teams work in close collaboration with the Sustainable Investment Research team which provides guidance and quality control on the sustainable credit assessment process. This integration is pursued across all research recommendations and consequently will have an impact on all of our actively managed strategies.