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UBS to Clients: Consider Sustainable Investing First

By Alex Padalka September 11, 2020

UBS  has made it a policy to recommend sustainable investments over traditional products to clients of its $2.6 trillion global wealth management business.

With around $488 billion in core sustainable assets, according to a 2019 UBS Sustainability Report, UBS says it is the first major global financial institution to make this recommendation. UBS adds that it has a sustainable investing track record of nearly 25 years and "was the first to develop fully diversified sustainable portfolios for private clients, which have now been tested through both bull and bear markets."

“The shift in preferences toward sustainable products and services is only just beginning,” Iqbal Khan, co-president of UBS Global Wealth Management, says in a statement. “We believe sustainable investments will prove to be one of the most exciting and durable opportunities for private clients in the years and decades ahead.”

The Covid-19 pandemic is partly responsible for the new policy.

“Covid-19 has put the exclamation point on one of the most important shifts in financial services in a generation,” Tom Naratil, co-president of UBS Global Wealth Management and president of UBS Americas, says in a statement. “The pandemic has brought the vulnerability and interconnected nature of our societies and industries to the forefront of investors’ minds and shown that sustainability considerations cannot be ignored.”

Tom Naratil
UBS will leave the ultimate decision on investment selection up to the client, but will advise its clients around the world “to consider sustainable solutions as a first option,” Andrew Lee, UBS Global Wealth Management’s head of sustainable and impact investing, tells  FA-IQ sister publication FundFire. 

UBS’ new approach will apply to UBS advisor recommendations to clients and to discretionary sustainable portfolios the company manages in-house, according to Lee.

UBS doesn’t plan to get rid of traditional investments entirely, viewing them as the best option in certain cases.

"While traditional investments will remain most suitable in some circumstances, UBS believes a 100% sustainable portfolio can deliver similar or potentially higher returns compared to traditional investment portfolios and offer strong diversification for clients investing globally. Year-to-date, major sustainable indices have performed better than traditional equivalents," UBS says in an announcement.

Sustainable funds did better than traditional funds in the first quarter of the year and have performed in line with traditional strategies during the second quarter, according to a Morningstar report cited by FundFire. 

UBS has been moving in this direction for some time now. In 2017, the firm appointed a long-time UBS economist to head the Sustainable Investment Solutions unit at UBS Wealth Management Americas, which has since merged with the global wealth management unit. In 2018, UBS began piloting its own environmental, social and governance funds with its U.S. Wealth Management clients. And at the end of 2018, UBS began evaluating the asset managers on its platform based on how well they incorporate ESG factors in their investment processes, according to FundFire. 

“Sustainable finance is a firm-wide priority for UBS and our aim is to help clients take advantage of new opportunities and manage 21st century risks more smartly,” Huw van Steenis, chair of UBS’s Sustainable Finance Committee and senior advisor to the CEO, says in a statement. “As sustainable finance has moved into the mainstream, it is a critical component for clients and a strategic growth opportunity for UBS.”

UBS’ most recent move comes a little over two months after the Department of Labor proposed a rule that would require retirement plans to justify their selection of ESG funds over traditional options. The rule has been met with resistance from various groups in the industry. Separately, RIAs have been the target of DOL information requests about ESG allocations.

Do you have a news tip you’d like to share with FA-IQ? Email us at editorial@financialadvisoriq.com.  

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Tags:  Finding and winning new clients , Client retention , Investment strategies , Portfolio management , Morningstar , U.S. Wealth Management , UBS Wealth Management Americas , UBS

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