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UBS Asset Management

PRI reporting framework 2019

Export Public Responses

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(B) Implementation: Thematic

LEI 07. Types of sustainability thematic funds/mandates

07.1. Indicate the type of sustainability thematic funds or mandates your organisation manages.

07.2. Describe your organisation’s processes relating to sustainability themed funds. [Optional]

Our dedicated Global Sustainable Equities team manages a range of strategies that integrate material sustainability factors with a rigorous fundamental investment process. This team actively looks for companies that appear attractively valued and can benefit from secular themes, such as energy and water conservation, health care, demographics and other long-term trends.

The Global Sustainable Equities team manages the Long-Term Themes Fund, a strategy launched in 2016 in partnership with UBS Wealth Management (UBS WM). Population growth, urbanization and an ageing society are three global and inexorable trends that continue to reshape society and the economy. Given the persistence of these trends, the Chief Investment Officer of UBS WM has identified 20 enduring long term investment themes connected to these mega trends.  These themes include water scarcity, healthcare in Emerging Markets, waste management and oncology. The UBS Long Term Themes Equity Fund invests in companies that have solutions to the challenges these trends represent to our societies.

In addition, the Global Sustainable Equities team is working with leading scientists from Harvard, City University of New York (CUNY), and the University of Wageningen to develop a robust impact measurement framework. The proprietary framework seeks to measure the impact of public companies on society and the environment on four selected themes: climate, water, food security & health. These themes touch on multiple UN SDGs, e.g. clean water and sanitation, clean energy, health and well-being, climate action and life on land. These models rely on publicly available data from companies, regulators and scientific publications along with UBS AM analytical resources. Partnering with academics is core to UBS Asset Management's philosophy to identify robust, credible and user-friendly impact metrics. This research partnership also includes a key pension fund client. The Global Sustainable Equities team is  leveraging this research for the stock selection and management of the Global Impact Equity Strategy, launched in October 2017.

In the passive space, UBS AM's Systematic and Indexing team manages a rules-based equity investment strategy focused on climate -related risks and opportunities. The team identifies and underweights companies exposed to climate risks through large GHG emissions, high GHG intensity, negative emissions reduction trends, as well as power generators dependent on coal, and extractive industries companies with large fossil fuel reserves. The team also identifies and overweights companies exposed to climate risks especially through their generation of renewable energy or support of renewable energy generation. The strategy's investments are selected using a transparent, rules-based and optimised portfolio construction methodology. This includes proprietary calculation of a Glide Path Probability which assesses how individual companies compare to peers in their convergence on a two degree scenario. Within the constraint of the risk budget we are currently able to re-distribute around 15% of the total investment, effected through a series of factor-tilts. Three of the factor-tilts are risk-reducing and two are opportunity-seeking.