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UBS Asset Management

PRI reporting framework 2019

Export Public Responses

You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

Implementation processes

FI 01. Incorporation strategies applied

Indicate (1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and (2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.
SSA
0 Screening alone
0 Thematic alone
0 Integration alone
40 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
60 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
100 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
0 Integration alone
40 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
60 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

UBS AM sees the advantages of incorporating ESG considerations in fixed income as:

  • Providing a more holistic and comprehensive view on credit risk
  • Deepening the understanding of issuer quality, with a specific focus on the governance as well as environmental and social risks.
  • Increasing visibility that helps to confirm our views on credit risk, or identify trends or events that may lead to increased default risks and spread widening among certain issuers and in certain market environments.
  • An understanding of the dynamics of sustainability issues and trends that may lead to broader pressures on credit quality.

At UBS-AM we have taken the decision that ESG integration is strongest when the credit analysts sit at the heart of it. UBS-AM's fixed income team includes over 25 credit analysts with on average over 16 years of industry experience covering Investment Grade, Sovereigns, High Yield and Emerging Markets. This team is located in various centres including Chicago, Zurich, London, Singapore and Sydney.

01.3. Additional information [Optional].

UBS AM's ESG Integration efforts across our Fixed Income platform:

At UBS Asset Management our aim is to achieve the systematic integration of ESG into our proprietary credit research process. We believe that material ESG factors are best assessed as part of the company fundamental research process.

UBS AM's 25+ credit analysts provide research coverage for more than 1,600 issuers globally across 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 have integrated ESG considerations throughout our credit research process including investment grade and high yield credit assessments. This requires 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. In order to quickly capture the outcomes of the credit analyst's ESG analysis, we have developed an internal ESG Credit Score. In addition, credit analysts will flag where their ESG analysis leads to a change in the credit opinion.

Implementation of ESG across the UBS AM fixed income platform is grounded on the collaboration between our credit analysts and our Sustainable and Impact Investing team. We have established protocols which guide how we address issuers which we cover, how to make use of external ESG ratings information, and how to address gaps in coverage. Our credit analysts are responsible for the ESG analysis of issuers within their coverage, supported by UBS AM's sustainability investment research team.. Through these dialogues, we are able to address questions about the materiality of an issue, the quality of an issuer's management of its risks, and how to balance different levels of materiality or the timing of how ESG issues are expected to develop. We use various data sources to gather information, including external ESG ratings providers, to inform our analysis of individual issuers and to help us with cross-sectoral and peer comparisons.

We view the value of our ESG analysis as deepening our understanding of the connection between issuers and the key sustainability trends that are material to their activities. To help with communication to portfolio managers, we encapsulate this in the UBS ESG Credit Score which comprises from 1 to 5 (best to worst). We supplement the UBS ESG Credit Scores with data from external rating providers for purposes of comparison within and across portfolios. We have also established approaches in which we reference the sustainability profile of issuers (and in some cases individual issues) in our consideration of sovereign, mortgage-backed/securitised, and municipal bonds investments.


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]


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