Going green

>> Thank you, Yuan and Chris. What a fabulous day, good afternoon to everyone and thank you sincerely for taking time out of your day to join us. I'm really excited about the lineup that you have today. We've picked across the whole of asset management and beyond some really great sustainable capabilities, so I think you're going to get a great mix today of the different capabilities that sit across UBS when it comes to sustainable investment. You heard from Chris about our commitments as a group, and we really do want to mobilize capital towards the sustainable development goals, and we look at this as part of our purpose through three different lenses: planet, which is taking climate action and supporting towards a net-zero economy, people, shaping a diverse, equitable and inclusive society and partnerships, working with thought leaders, working with collaborative groups to achieve impact on a truly global scale. Now what I think is different and stands out at UBS ... I joined in January ... is the senior commitments from the board all the way down. This is shaping everything we do across the UBS Group, and I've observed many organizations over many years and how they embrace sustainability, and when you get that super-purpose-led senior commitments, that's a real game-changer for how an organization lives and breathes and the type of capability that sits within, so that makes me very excited about the future for what UBS is going to continue to do in an area that I think has been incredible pedigree in sustainability. What I have on this slide is a few milestones that we're very proud of. Indeed, if we put all of them in, we get too crowded on this slide, but back in 1997 we launched the first ... That was our first sustainability-related fund, so this is not new for UBS. We've been doing this for a long time. We understand sustainability. In 2017 we launched our first impact Strategies and climate-aware strategies, and in 2020 we were a founding signatory to the Net Zero Asset Manager Initiative so combining the planners and partnerships to make sure that we're moving forward in the right direction towards the transition as an organization. Last year we made our commitments to net zero by 2050 with an interim 2030 target, and we've got a lot of work to do to reach those targets as a society, as an economy and indeed as an organization ourselves, and we want to be there beside our clients helping them achieve those commitments as they see fit for their own organization. People are everything to what we can bring to the table on sustainability, and as I mentioned, you've got a great panel. You've got a great lineup here today, but I wanted to give you a flavor for how we organize ourselves within the sustainable investing and impact team across asset management. We have folks sitting in integration so working alongside fundamental analysts to integrate ESG into the investment decision-making process. We have a top-down approach to corporate engagement where we pick specific teams, and we engage with corporates. We do research on these teams. We've got a climate program. We have a social program, and we use that research to engage with corporates and really look for change. We have a stewardship group, and they look more from a bottom-up perspective at the idiosyncratic issues that show up at an individual company, and indeed a huge part of what they do is executing the proxy voting, so they will be looking at things like remuneration, independence on the board among many other things. We also have a team of sustainability specialists, and they have global presence, which is very important to us because it's very important to us to understand individual client needs and what clients are looking for so please use the chat. We're really looking forward to hearing from you today on questions you have, things that are on your mind. What's important for you? And we want to make sure that we can answer those for you and at least share our thoughts on where the direction of travel is for some of these things that haven't yet been settled across our industry in terms of sustainability. I wanted to also make sure that you heard about our quantitative evidence and data science team because I really love what this brings to our sustainability offering. So we have a team of data scientists who use their firepower to understand the ESG data more thoroughly. We have multiple different feeds, so an example of one of the things they do instead of just taking carbon emissions from one provider, they take a blend of carbon emissions, so we have a proprietary carbon score, which we think is more robust and gives us more insightful data on what's happening in company emissions across the globe. We're supported across our team by analytics and modeling, regulatory management. As many of you would be aware, the regulatory landscape is changing fast and looking different in many different regions, so we want to make sure we can bring that to the table for clients, and we also have a Group Chief Sustainability Office, and that's at a group level and supports the business divisions in the multiple areas of things we look at so supporting us with research, making sure we're all aware of regulatory changes, looking at different methodologies. There's a huge amount of know-how and capability that fits within that team that we think we could bring to our clients from an asset management perspective. And of course we collaborate across the investment teams with the fundamental analysts that sit across the multi-asset classes, and I think this is something quite unique that we bring to the table because we often hear back from corporates when we're engaging with them how much they value the fact that we may have an equity fundamental analyst, a fixed income credit analyst and indeed a sustainability analyst all at the same table for engagement. We get the full picture of the company, and it leads to some really constructive dialogue that can shift and change for the better. I mentioned that sustainability is changing quickly in many different ways, and indeed often I hear from different people about, how do you keep up? Because the benchmark keeps getting reset every single year and what best practice looks like, and we believe one of the strengths we have is being able to bring these trends together for clients, being able to help clients navigate what that best practice looks like. So what I thought I could do is give you an insight into what some of these trends are and how we're thinking about them within UBS. So we've seen over the last few years the emphasis shift from exclusions to thinking about impact. Historically when people thought about sustainability portfolios, they often thought about what they don't want to be associated with. We now see a lot of emphasis on people thinking about, okay, what does my capital contribute to? What are those sustainability outcomes? How can I understand what they are? How can I target them ahead of time? We have also seen a trend within our industry more broadly, not just sustainability, moving from clients want less off the shelf and more customization, and we're really proud that's something we can do, particularly in rules-based index-type strategies, bringing that data science knowledge, the fundamental and active side of the business to bear on creating proprietary or index-based strategies that really meet the sustainability preferences of individual clients. The third trend I have up here is around ESG from risk management moving to ESG for alpha opportunities. There was a period of time where ESG was seen as good risk management. If you incorporated it into the portfolio, you may avoid the left tail risk, or indeed you might end up with a better-quality portfolio over time, but I think we are starting to see the industry shift and understand that there are many, many opportunities that come from understanding sustainability themes, too, and you'll hear a little bit more about that later, and we're excited about some of the alpha opportunities that we think sustainability brings. And the last trend I have here is around stewardship, so stewardship for us is really moving from company-level active ownership to system-level or ecosystem-active ownership, and what I mean by that is, we engage with corporates individually, and we look for change, but we also recognize that in a net-zero world or in a low-carbon economy, it's the whole system that has to change, so for us, it's really important to be involved in industry organizations, talking to the exchanges, making sure we're close to the index providers and feeding back our insights and what we're finding on the data. All of these things that we think makes the whole system more robust and effectively lifts the beta of the overall market, which we think is to the benefit of all of our clients. Now that's not to say we're leaving behind ESG for risk management or leaving behind company-level active ownership. That continues to be a huge part of what we do, but we're conscious and aware of some of these other areas that the industry is moving towards and is a big part of where we are orientated as well. So how do we bring these trends together for clients? We're proud about what we can do in rules-based strategies so applying screening and tilts to reflect sustainability preferences using ESG metrics. We also have a selection of great active Strategies across different asset classes that reflect some of the sustainability themes, and the stewardship is the last layer on top where we think we really bring a lot to the table with the thought leadership, the senior-level firm commitment to sustainability and the global scale across asset class breadth. It gives us a seat at many tables. It gives us a degree of influence to change for more sustainable outcomes. We're very proud of that. This is really a slide to give you a selection and an insight into the wide variety of index or rules-based type strategies that we can affect for clients, so these are real examples of how we have tailored with individual clients to meet their needs. As you can see across this page, we've got multifactor low-carbon. We've got custom ESG tilts that look at tilting towards human capital. We've got the UN SDGs. We've got climate-aware and net-zero-aligned, so there's multiple ways that we can slice and dice to make sure that portfolios are meeting both the risk-return, the individual tracking error or factor-based exposures that clients are looking for as well as layering on the sustainability preferences that are important. I mentioned that we're excited about multiple alpha opportunities across asset classes. We have global equity impact in the active equity side. On the private side we have a number of exciting strategies In private credit, life sciences, cold storage, so there's a breadth of opportunities that sit across the asset management sphere. I talked about stewardship being really important, and I'd just like to dig in here a little bit. What I wanted to lay out was some of the key features of our approach, but also why does it matter? Why does it matter for your portfolio if you're with UBS? So some of the features of our approach is our focus on outcomes. We see a lot across the industry, a lot of focus on the number of meetings that people do, the number of votes that people do. We want to talk about the outcomes. We want to talk about what was the value add for the portfolio? And you'll find that in our most recent stewardship report. We've got a ton of case studies that demonstrate the change that's happened across companies and how we were involved in that dialogue. The second feature of our approach is taking both a top-down, as I mentioned, from a thematic and the bottom-up, and we think that combination is really powerful for understanding what's actually going on in portfolios but also addressing those system-level risks like climate, like social themes that we think are very important for driving overall returns over the long-term across multi-asset-class portfolios. I talked already about the company issue and ecosystem engagement. UBS is very privileged to sit on many different important bodies such as the TCFD, the TNFD, which is the Taskforce for Natural Capital and many others in local areas, industry organizations where we get a seat at the table to help shape the new methodologies, to help shape what self-regulation looks like. In our stewardship approach, we bring capability from the fundamental side, the cross-asset-class side and the sustainability analyst side to the table and what we do in stewardship, and we think the combination of these diverse capabilities really does bring a holistic perspective to how we think about how sustainability might impact individual corporates and indeed what they can contribute to sustainability. We are very proud that our research is used to set the engagement objectives, so we had some really super research last year looking at the potential carbon abatement cost curves for certain industries where things like cement aluminum where we know we need these industries for the transition, but we also know they're heavily carbon-intensive right now, so what is the cost for those companies to transition? And what's the right time for them to spend that capex? And we believe that there are more advantageous points in time for them to do that and looking at those cost curves to use that to engage with those decision-makers, with those companies within those industries to encourage that change, and we think that really is a catalyst to help unlock value for our clients, and the last part is really important. Our stewardship is more than just talk. It has a feedback loop right into portfolio construction, so if we've been engaging for corporate for a period of time, and we don't see progress on a risk that we think is important, that has led to divestments so particularly on our climate program. We reviewed the progress after 3 years of how companies were doing, and that led to the divestments from portfolios of some individual names. Now that's not to say those names won't come back in over time should they start to progress. It's not a blanket exclusion, per se, but it is a point in time to say we're not seeing enough progress, and this is the decision we're going to make, so we think it gives us teeth to what we're doing, and we think that's really important to have that as our last-resort lever for progress. I am going to stop there with giving you hopefully a whirlwind tour through some of the things we're doing around sustainability across asset management. You are in very good hands for the next few panels. I think you're really going to enjoy some of the insights that my colleagues are going to bring to you, We would love to hear what's on your mind and really thank you for taking time out of your day to join us.