The world's largest wealth manager says investors need more precise tools to put their specific ESG goals into action. It warns more must be done to steer private wealth into these fields than is currently the case.
Investors want to put more money into environmental, social and governance causes, but only if financial firms promote highly personalized choices that allow clients to leave their mark, according to a report by UBS. The bank warns that without change the world will miss projected demand for an added $2-$7 trillion of investment to fix issues such as poverty and environmental damage.
UBS - which also issued its fourth-quarter and full-year financial results today - has also launched a project to match investors’ ESG priorities with investments that are most ideally matched with those values.
The pilot program allows investors to rate how much they care about individual ESG factors, such as climate change or water, express their preference in a personalised sustainability score, and compare their score against more than 20,000 ESG-rated stocks and bonds to find the best match. UBS said that this approach goes away from a cookie-cutter approach to sustainable investing by scoring each security against seven ESG criteria, so that they can adopt a far more targeted approach. The program starts in the first quarter of this year.
The Zurich-listed bank unveiled its programme and ideas while attending the annual World Economic Forum meeting of opinion leaders, business chiefs and policymakers in Davos, Switzerland. UBS, along with some of its peers, has made much of its commitment to help clients put their values into financial action. The growth of ESG approaches is also a way for firms to connect with the rising generation of younger high net worth clients.
The bank and wealth manager referred to how the United Nations has called for an increase in private sector funding in support of its Sustainable Development Goals (SDGs), designed to address humanity's and the environment's biggest problems by 2030.
However, the bank said that on current trends the world will fall short of what it needs to fix these problems and said financial organizations should do more to mobilise private capital.
"UBS is taking steps to widen our lead in sustainable investing. Clients clearly care about the social and environmental impact of their investments, and they shouldn't have to compromise in their pursuit of financial returns to achieve their objectives. Now we're making it easier for them to choose the investments that best support their priorities,” Sergio Ermotti, group chief executive at UBS, said.
"While there has been progress, it's become clear that the traditional approach to environmental and social investment isn't sufficient," Mark Haefele, chief investment officer at UBS Global Wealth Management, said. "People care less about generic topics than specific causes they hold dear. They want the chance to leave their mark on issues they are passionate about, whether that's eradicating poverty, achieving gender equality, or any of the other SDGs that are close to their hearts. This is why we're proposing new solutions to specific problems."