UBS company survey: Ecology yes, but not regulated

Ecological sustainability in Swiss companies was the focus of the six-monthly company survey from UBS. The survey included 2,500 entrepreneurs and individuals in leading management positions. The results show that around four out of five companies classify ecologically sustainable business practices as important or very important. Companies see the most significant environmental pollution in electricity and energy consumption, but environmental pollution in other areas such as plastic waste, air and soil contamination was also frequently cited. Approximately more than half of the companies have already countered these forms of environmental pollution by reducing their consumption of electricity and resources and by reducing waste, and they plan to take further steps in the future to achieve improved ecological sustainability.

Entrepreneurial aspects drive environmentally-aware activity

With regard to various stakeholder groups, companies feel committed to greater ecological awareness primarily because of their employees and clients. In a highly competitive market for talent and clients, companies might well hope for competitive advantages from this. Thereby, companies often choose on their own initiative to pay more attention to environmental aspects. To the extent that legislation prescribes ecological action by means of regulations, it only comes third in the survey results as a trigger for improvements. In the case of the direct benefits of ecological business practices, entrepreneurial aspects such as cost reductions and reputation enhancement are also by far the most frequently mentioned factors.

When it comes to achieving environmental targets, companies also prefer instruments such as training, education and communication, as successfully achieved in Switzerland, for example, in the field of recycling of materials such as aluminum. Voluntary cooperative arrangements and environmental target agreements between companies are also frequently cited as preferred instruments. State interventions are most likely to be supported if they are implemented in the form of market-based instruments such as an incentive tax. Only a small proportion of companies consider subsidies and direct state interventions, such as regulations in the form of directives and bans, to be suitable for achieving ecological targets

Mixed prospects for the Swiss economy

UBS economists expect the Swiss economy to cool significantly this year and foresee GDP growth around 0.9 percent. The stronger Swiss franc in comparison to 2018 and the weaker global economy are holding back exports and investment. However, the domestic economy is supporting growth and preventing a hard landing.

If the European economy recovers in the second half of the year and US economic growth remains stable, the European Central Bank could well undertake an initial interest rate hike at the start of next year. This would also give the Swiss National Bank the opportunity to increase its prime rates. The UBS economists do not foresee positive prime rates in Switzerland before 2021.

However, if the European economy does not recover as well as expected or if the US Federal Reserve reduces its interest rates, Swiss prime rates could remain negative over a much longer period. This does not represent the baseline scenario of UBS, but even so, investors must not ignore the possibility of such a development.

In developing the UBS CIO GWM economic forecasts, UBS CIO GWM economists worked in collaboration with economists employed by UBS Investment Research. Forecasts and estimates are current only as of the date of this publication and may change without notice.

UBS Switzerland AG