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Ubs Group Ag (UBS) SEC Filing 6-K Foreign Issuer Report for the period ending Friday, December 31, 2021

Ubs Group Ag

CIK: 1610520 Ticker: UBS

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

 

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

Date: March 11, 2022

 

UBS Group AG

Commission File Number: 1-36764

 

UBS AG

Commission File Number: 1-15060

 

 

(Registrants' Name)

 

Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

 

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

 

Form 20-F                         Form 40-F 

 


 

This Form 6-K consists of UBS Sustainability Report 2021, which appears immediately following this page.

 

 

 


 

 


 

 


 

 


 

 


 

 


 

Why sustainability is important to UBS

 

Our Chairman and CEO explain why UBS strives to extend its
leadership in sustainability and how we intend to achieve it.

In 2021, UBS put more emphasis on sustainability than ever before. What was the reasoning behind this?

AW: We adopted sustainable thinking early on and have, for many years, been committed to creating long-term value for clients, employees, investors and society. This proved more relevant than ever as the pandemic has clearly demonstrated the need to prepare for known future crises – such as climate change. The pandemic has sharpened clients’ and investors’ focus on sustainability further.

RH: We have been working with many clients in the sustainability space for decades. As awareness has grown, especially in the past few years, it has become ever more important from both a business and client perspective. Because of that experience, we are a leader in this area. We also know that we can’t stand still if we are to remain relevant for clients and ensure future profitability. That means continuing to expand our client offering to provide them with the solutions they need to meet their sustainability goals, and proactively supporting them in their transition toward sustainable ways of doing business. It also means aspiring to lead by example in our own transition journey.

 

How ambitious are we as a firm regarding sustainability?

RH: The short answer – very ambitious. Our purpose is to reimagine the power of investing and connect people for a better world. And when we say “a better world,” we mean for everyone: a more prosperous economy, a fairer society and a healthier environment. To help maximize impact and direct capital to where it’s needed most, we focus on three areas. (i) Planet, where we’re making climate a clear priority as we shift toward a lower-carbon future; (ii) People, where we take actions, both within our own workplace and within wider society, to promote a diverse, equitable and inclusive society; and (iii) Partnerships, where we unite with others and bring people together around common goals to achieve greater impact.

 

Looking back across your ten-year tenure as Chairman of UBS, which key developments in sustainability at our firm stand out for you? Where do you see UBS positioned in our sustainability ambitions?

AW: Over the years, UBS has established itself as one of the recognized leaders for sustainability in the financial sector. Recent ratings have confirmed that once more. We are among the industry leaders in the Dow Jones Sustainability Index and our approach to climate has once again received the top A List ranking from CDP. Our culture journey has been key. Being sustainable as a firm, thinking and acting with the long term in mind, requires the right culture. This is why we’ve put so much effort into establishing our three keys to success – and integrating them into all our processes. Cultural change is driven by the Corporate Culture and Responsibility Committee (the CCRC) of the Board of Directors (the BoD). From meeting twice a year in the 2000s, the committee now meets at every BoD meeting. In 2021, we advanced further with the establishment of our Group Sustainability and Impact organization, including the Sustainability and Impact Institute, as well as our commitment to net zero. But we must not be complacent, as our competitors are intensifying their efforts. To stay ahead, we need to continue our investments and focus, for instance by further expanding our shelf of innovative sustainable finance products and services.

 

What were the key developments and achievements in 2021?

RH: Let me highlight three achievements. First, we have made sustainability a priority for the Group Executive Board (the GEB), with Suni Harford leading our efforts on sustainability and impact and all GEB members having environmental, social and governance (ESG)-related objectives. Second, we’ve anticipated the ever-increasing demand in sustainable investments by making these the preferred solution for our private clients investing globally, and continuing to broaden our offerings. Overall, sustainability-focus and impact investments at UBS increased significantly in 2021, reaching USD 251 billion, up from USD 141 billion a year ago. Third, we have announced, and are implementing, our ambition to achieve net-zero greenhouse gas emissions across all our operations by 2050.

 

With the strong emphasis on long-term targets, notably net zero by 2050, how do you view the relevance of short- and mid-term targets to ensure were not just postponing our actions to a later point?

AW: We developed and have transparently disclosed a climate roadmap with intermediate targets for 2025, 2030 and 2035. The “say-on-climate” vote at the upcoming Annual General Meeting is a key milestone on our journey to net zero. We know that to reach our long-term goal it’s crucial to identify and deliver on critical targets along the way. These are ambitious plans that will require us to act decisively. Furthermore, we are working on the development of relevant methodologies and data. This is why we strongly believe in cross-company collaboration, notably – on net zero – the Net Zero Asset Managers initiative and the Net-Zero Banking Alliance. In both cases, we are founding members.

 

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Axel A. Weber

Chairman of the Board of Directors

 

How do you view concerns that sustainable investing is tainted by greenwashing?

RH: Over the past few years, sustainability has been moving into the mainstream, driven by increased transparency, regulation and investor demand. In part, concerns around greenwashing arise because markets and regulatory standards are continuously evolving. But it’s also because there are many different definitions of sustainability, meaning there’s no one global standard or approach. We see banks and investors playing an important role in promoting common standards to address these concerns. And we believe that client confidence will grow as reporting standards improve and definitions become more comparable. We take our role here very seriously, including when it comes to our own disclosures.

 

What are the specific challenges that UBS is facing in the regulatory environment pertaining to sustainability and finance?

AW: We are operating against a complex and rapidly evolving backdrop and face an ever-expanding set of rules, taxonomies and standards. I see an urgent need for international coordination and alignment of standards, in particular climate risk disclosure standards for corporate issuers, financial institutions and financial products. Also, we must be vigilant in fighting against turning sustainable finance into only a compliance exercise. This is why we remain strong backers of pertinent industry discussions – notably by supporting the Institute of International Finance in launching the new global Wolfsberg Forum for Sustainable Finance (WFSF) in 2022.

 


 

Ralph Hamers

Group Chief Executive Officer

 

Beyond net zero on climate, where do you see UBS’s focus and ambitions going forward?

RH: With the publication of our Net Zero and Beyond statement early in 2021, our focus last year was on establishing our baseline and defining our climate roadmap, including our ambitions and interim targets. With work well underway to execute on our plans and progress on our targets, we are now bringing the People pillar of our sustainability strategy to the forefront. This encompasses a broad range of initiatives to foster inclusive growth, which we believe is the key to decreasing wealth inequality. We have a multi-faceted plan, including our approach to diversity, equity and inclusion (DE&I) in our own organization, our interactions with our suppliers, the products and services we provide to our clients, and our philanthropic efforts. “Impact” is a word you are going to hear a lot from us in 2022. When we speak about “Reimagining the power of investing” this includes rethinking the impact that the mobilization of capital can have on society. As a leading financial institution serving some of the world’s wealthiest individuals, we believe that we have a responsibility to help build a more equitable world. We are focusing our efforts on health and education as root causes for many of the issues we face today. We are leveraging our Banking for Impact partnership, and expanding our efforts across our own philanthropic initiatives, where we manage over 400 programs that work with marginalized communities. We are expanding employee-led community activities in these areas and intensifying our efforts to help our clients mobilize their philanthropic capital, leveraging our ecosystem to bring them together with other clients, organizations and governments to drive change on a global scale. By 2025, our goals are to raise USD 1 billion in donations, reaching 26 million beneficiaries through community investment and client philanthropy.

          

Axel A. Weber                                   Ralph Hamers

Chairman of the                                Group Chief Executive Officer

Board of Directors

 

UBS was among the 43 companies that first signed the UN Global Compact in 2000 and is also a member of the UN Global Compact Network Switzerland, meaning we are committed to its principles on human rights, labor standards, the environment and anti-corruption. As reflected in detail in this report, we have a comprehensive set of goals and activities in place pertaining to the principles of the UN Global Compact.

 

  

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Why

 

Why we drive sustainability      

10

A firm driven by purpose

11

Our commitment to sustainability

13

Our targets and progress

 

  

 


Sustainability Report 2021 | Why 

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Our commitment to sustainability

Our ambition is to be the financial provider of choice for clients who wish to mobilize capital toward the achievement of the
17 Sustainable Development Goals and the orderly transition to
a low-carbon economy.

 

Our commitment to sustainability starts with our purpose. We know finance has a powerful influence on the world. That is why we partner with our clients to help them mobilize their capital toward a more sustainable world. It is why we have put sustainability at the heart of our own business, too. To help us maximize our impact and direct capital to where it is needed most, we are focusing on three key areas to drive the sustainability transition: planet, people, partnerships

We are advancing toward 2030, the designated deadline to reach the 17 United Nations (the UN) Sustainable Development Goals (the SDGs). The SDGs focus on issues like climate change, equality and healthcare – major challenges for our world today and tomorrow. According to UN estimates, the annual funding gap for achieving the SDGs by 2030 is between USD 2.5 to USD 3 trillion;1 some experts put this number even higher.

As a global financial institution we have a role to play in tackling the SDGs, by directing capital to where it is needed the most.

 

The world economy needs
a market-based system where social and environmental impacts are just as transparent as financial profit metrics.

Ralph Hamers, Group CEO

 


Why planet?

According to the Intergovernmental Panel on Climate Change (the IPCC), average annual investments of USD 3.5 trillion must be mobilized between 2016 and 2050 to transform the world’s energy systems and meet the 1.5°C target.2

As we shift toward a lower carbon future, climate is a clear focus for us. We have committed to achieving net-zero greenhouse gas emissions resulting from all aspects of our business by 2050.

To ensure we make progress we have set intermediate milestones, the first set of which we disclose in this report. We are also committed to directing capital toward the low-carbon transition: through investments, by helping our financing clients achieve their climate targets, and by identifying and investing in credible, innovative, carbon removal projects.

    Refer to the “What” section of this report for more information about our strategy on climate

 

 

 

 

 

 

 

 

 

 

 

 

1 UN Roadmap for Financing the 2030 Agenda for Sustainable Development

2 IPCC, IPCC Special Report: Global Warming of 1.5º C, 2019

 

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Sustainability Report 2021 | Why 

Why people?

A 2015 study found that advancing women’s equality could add USD 12 trillion to global GDP by 2025. That number reaches USD 28 trillion in a scenario where women participate in the economy identically to men.3

We believe in a diverse, equitable and inclusive society. Not just because it is fairer, but because we believe it can promote viable, long-term economic and social development and in so doing, further help to reduce inequalities. We are taking action to get there, in our own workplace and beyond.

For our firm, we continue to shape a diverse and inclusive organization; one which is innovative, provides outstanding service to our clients, offers equitable opportunities and is a great place to work for everyone. We take a broad approach that encompasses gender, race and ethnicity, LGBTQ+, disability, veterans, mental health, and other considerations.

Through our interactions with society at large, we’re working to address wealth inequality. We’re sharpening the focus of our client and corporate philanthropy, as well as our employee-led community impact activities centered on health and education.

 

We strive to move from an economic model designed to maximize only shareholder
value to one that maximizes value for shareholders,
people and planet.

Phyllis Costanza, Head of Social Impact

 

    Refer to the “What” section of this report for more information about our employees and about our client and corporate philanthropy


Why partnerships?

Through working in partnership with other thought leaders and standard setters, our goal is to create change and achieve impact on a truly global scale. We realize that all of us need to unite around common goals. That is why we engage with regulators, policymakers, and others to create standards and support research and development across the financial sector. We have also created the Sustainability and Impact Institute to drive thought leadership in this space. By calling on key stakeholders to work together – other large investors, our clients, peers, and standard setters, as well as our communities and employees – we can achieve a real impact on a truly global scale.

    Refer to the “How” section of this report for more information about our approach to partnerships

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 McKinsey Global Institute, The power of parity: how advancing women’s equality can add USD 12 trillion to global growth, in UBS CIO GWM, Longer Term Investments: Diversity and Equality, 2021

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Our targets and progress

Our priorities

Our targets

Our progress in 2021

Planet,
people,
partnerships

USD 400 billion invested assets in sustainable investments
by 2025.

Increased invested assets in sustainable investments to
USD 251 billon (compared with USD 141 billion in 2020).

Planet

 

Set decarbonization targets for 2030 for financing of the fossil fuels, power generation and real estate sectors (from 2020 levels):

      reduce absolute financed emissions associated with UBS loans to fossil fuel companies by 71%;

      reduce emissions intensity associated with UBS loans to power generation companies by 49%;

      reduce emissions intensity of UBS’s commercial real estate lending portfolio by 44%; and

     reduce emissions intensity of UBS’s residential real estate lending portfolio by 42%.

Estimated baselines and development of net-zero-aligned pathways for the fossil fuel, power generation and real estate (commercial and residential) sectors.

Align USD 235 billion of invested assets to net zero by 2030 (Asset Management).

Established Asset Management baseline covering the weighted average carbon intensity of the respective benchmark for each strategy and fund included in our target.

Achieve net-zero emissions across discretionary client portfolios by 2050.

Expanded discretionary offering with climate transition-focused solutions and built more detailed carbon footprint data into our research and reporting toolkits.

Achieve net-zero energy emissions resulting from our own operations (scopes 1 and 2) by 2025; cut energy consumption by 15% by 2025 (compared with 2020).

Reduced net greenhouse gas footprint for scope 1 and 2 emissions by 75% and energy consumption by 5% (compared with 2020); continued implementation of the replacement of fossil fuel heating systems and investing in credible carbon removal projects; maintained 100% renewable electricity coverage.

Offset historical emissions back to the year 2000 by sourcing carbon offsets (by end 2021) and by offsetting credit delivery and full retirement in registry (by end 2025).

Completed the sourcing process for a portfolio of transparent carbon offsets from the voluntary carbon market across a range of project types and geographies.

Engage with key vendors on targeting net zero by 2035.

Commenced working on understanding and quantifying the scope 3 emissions in our supply chain.

People

 

30% global female representation at Director level and
above by 2025.

Increased to 26.7% (2020: 26.0%) female representation at Director level and above.

26% US ethnic minority representation at Director level and above by 2025.

Increased to 20.1% (2020: 19.5%) ethnic minority representation at Director level and above in the US.

26% UK ethnic minority representation at Director level and above by 2025.

Increased to 21.3% (2020: 20.7%) ethnic minority representation at Director level and above in the UK.

Raise USD 1 billion in donations to our client philanthropy foundations and funds and reach 25 million beneficiaries
by 2025 (cumulative for years 2021–2025).

Achieved UBS Optimus Foundation donations volume of USD 161 million (including UBS matching contributions) and reached 4.6 million beneficiaries.

Support one million beneficiaries through our community impact activities by 2025 (cumulative for years 2020–2024).

Reached 1.199 million beneficiaries through strategic community impact activities cumulatively during 2020 and 2021, surpassing our 2025 target in two years.

Partnerships

 

Establish UBS as a leading facilitator of discussion, debate
and idea generation.

Launched the UBS Sustainability and Impact Institute, with the objective of delivering original, best-in-class sustainability and impact thought leadership.

Drive standards, research and development, and product development through partnerships across the financial ecosystem.

Continued implementation of the Principles for Responsible Banking by expanding the scope of our impact analyses and improving upon our existing methodologies in partnership with the UN Environment Program and peers.

  

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What

Our sustainability track record

What we do for our clients

18

Our approach to sustainable finance

18

Our clients’ needs

19

Sustainable investment

20

Our offering to clients

21

Financing solutions

21

Advisory work

21

Research and insights

22

Leading by example

23

Addressing sustainability challenges through philanthropy

25

Key achievements in 2021

What we do for our employees

27

Our purpose drives our strategy

30

Our employees have a voice

31

Our commitment to diversity, equity and inclusion

32

Practices that help us remain an employer of choice

33

ESG considerations in the compensation
determination process

33

Attracting, developing and retaining the best talent

34

Benefits that count

Taking action on a net-zero future
– our climate report

36

From words to action

37

Our climate journey

38

Key climate-related activities

39

Climate governance

39

Climate strategy

43

Our strategic resilience to climate change

48

Managing climate risk

61

Expanding climate-related opportunities

63

Metrics and targets

What we do for societies and
the environment

72

Governance and frameworks

74

Reducing our environmental footprint

75

Managing our supply chain responsibly

75

Engaging in sustainable technology

76

UBSs charitable contributions

  

 


Sustainability Report 2021 | What 

Our sustainability track record

 

UBS is not new to sustainability: we started on this path decades ago
and there have been many important milestones along the way.

 

    

 

 

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Sustainability Report 2021 | What 

What we do for our clients

Our approach to sustainable finance

Broadening opportunities in sustainable finance

Sustainable finance has long been a firm-wide topic. The term refers to any form of financial service aiming to achieve positive sustainability outcomes, including through the integration of environmental, social and governance (ESG) criteria into business or investment decisions. This encompasses sustainable investing and sustainable financing solutions.

 

Our clients’ needs

We regularly carry out surveys across our client segments. These clearly show a growing demand across all client types for investments that integrate material ESG factors and / or that focus on making an impact on the environment and society. According to the global UBS Investor Sentiment survey,1 66% of investors see sustainable investing as highly important to their portfolio strategy. Furthermore, 61% of business owners believe sustainability could generate more revenue, 57% believe it could improve client relationships and 55% believe it could do the same for relationships with employees.


A similar picture emerged when we spoke to companies in Switzerland. Our 2021 survey2 “Sustainability in companies”  found that the overwhelming majority of firms pay close attention to sustainability issues in relation to their activities in Switzerland and abroad. Nine out of ten companies said that sustainability is either important or very important to them. A global survey of institutional clients, published in 2021 in “Resetting the agenda; How ESG is shaping the future,”3 further underscored these views. Three-quarters of respondents agreed that the COVID-19 pandemic will accelerate general interest in ESG and capital inflows into sustainable investments over the next three to five years. Of those surveyed, 65% plan to integrate ESG into at least 25% of their assets under management (AuM) over the next 12 months. Importantly, almost three-quarters of survey respondents agreed that investments integrating ESG factors performed better financially than equivalent traditional investments in the three years prior to 2020.

These surveys across all our client segments are not just about gathering evidence to support trends. They also tell us what matters most to our clients, which, in turn, helps us make sure we are supporting them in the right way.

 

Source: UBS Investor Sentiment survey, Q3 2021

 

 

 

1 About the survey: UBS surveyed 3,004 investors and 1,202 business owners with at least USD 1 million in investable assets (for investors) or at least USD 1 million in annual revenue and at least one employee other than themselves (for business owners), between 28 September and 18 October 2021. The global sample was split across 15 locations: Argentina, Brazil, Mainland China, France, Germany, Hong Kong SAR, Italy, Japan, Mexico, Russia, Singapore, Switzerland, the UAE, the UK, and the US.

2 The survey was conducted by UBS Chief Investment Office (CIO) and published in the UBS Outlook May 2021; 2,502 Swiss companies were questioned in cooperation with market research institute Intervista between 22 February and 10 March 2021.

3 The survey was conducted by the Economist Intelligence Unit (EIU) and commissioned by UBS and surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds, and reinsurers in North America, Europe and Asia Pacific.

 

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For instance, from one such survey, we identified five themes that are important to private and corporate clients: climate change; healthcare / healthtech; clean water and sanitation; smart mobility4; and waste management and recycling.

These insights help us make sure we are supporting clients in the right way, focusing on the themes and concerns that matter most to them, as well as providing the relevant research insights and transparent reporting they need to assess whether their investments are having the effects they want

Sustainability is high on our clients’ agendas and we want to help them on this journey. 

Suni Harford, GEB lead for sustainability and impact

Sustainable investment

Sustainable investment (SI) focuses on investment decisions that seek to make a difference while generating competitive financial returns. The aim is better risk management of portfolios in line with 21st-century challenges and / or the alignment of investments with investors’ sustainability values, while also targeting improved portfolio risk and return characteristics.

We recognize that clients and other stakeholders need transparency about the sustainability objectives of our various investment products. During 2021, the European Union’s Sustainable Finance Disclosure Regulation (the SFDR) provided
the first formal, comprehensive legislative framework establishing an important marker for the industry’s efforts in this area. Consequently, we have further evolved our own definitions of sustainable investments, which include the following two categories.

     Sustainability focus: strategies that have explicit sustainable intentions or objectives that drive the strategy.5 Underlying investments may contribute to positive sustainability outcomes through products / services / use of proceeds.


     Impact investing: investment strategies that have an explicit intention to generate measurable, verifiable, positive sustainability outcomes. Impact generated is attributable to investor action and / or contribution.6

ESG integration and exclusion

We also identify two approaches that consider ESG factors in the investment process to varying degrees, but which on their own are not considered sustainable investment.

     ESG integration: considers ESG factors alongside traditional financial metrics to assess the risk-return profile in the investment process. This approach is rapidly becoming an industry standard, as the inclusion of such factors has been shown to benefit overall investment risk-return considerations.

     Exclusion: when individual companies or entire industries are excluded from portfolios because their activities do not meet certain ESG criteria and / or do not align with the values of clients and / or UBS.

 

In addition, for our Asset Management business division, stewardship is an integral part of our investment process. We firmly believe that engagement is a two-way dialogue through which we can work to influence a company’s behavior. We prioritize corporate engagement based on an assessment of financial exposure, high ESG risks, poor performance on thematic issues of concern and the presence of controversies. Alongside engagement, proxy voting is also considered integral to the investment process and our overall stewardship approach. We regard it as an important element of our fiduciary duty and have been voting on a discretionary basis on our clients’ behalf since 1995, both across active and passive strategies. Our first voting policy was implemented in 1998.

    For more details refer to the UBS Asset Management Stewardship Report 2021, available at ubs.com/gri 

 

 

4 Using modes of transportation alongside or instead of owning a petrol- or diesel-powered vehicle, e.g., public transportation, ride or car sharing, public transportation, using a bicycle.

5 Examples are Global Wealth Management’s Discretionary Manage SI mandate solution or Asset Management’s strategies such as its Global Sustainable Equities product.

6 Examples include Global Wealth Management’s Oncology Impact funds or Asset Management’s Global Engage for Impact Equity funds.

 

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Sustainability Report 2021 | What 

Our offering to clients

Our sustainable investing offering

Our private clients benefit from fully diversified sustainable portfolios, as well as advisory options.

In 2021, our flagship SI mandates – based on our Chief Investment Office’s (CIO) dedicated SI strategic asset allocation – exceeded USD 30 billion in invested assets.

In 2020, we made sustainable investments the preferred solution for private clients investing globally. In July 2021 we expanded our sustainable investing offering with a new advisory solution that enables clients to align their investments to their personal preferences. They can receive advice tailored to six SI topics: climate change, water, pollution and waste, people, products and services, and governance. We also enhanced our flagship SI mandates in 2021 with the addition of an innovative emerging markets sustainable finance exposure in collaboration with currency manager Record plc, which seeks to improve development finance flow and financing in illiquid markets.

With regard to impact investing, our partnership with MPM Capital on the Oncology Impact Fund 2 (which invests in private and public companies developing innovative treatments for cancer) raised a total of USD 850 million, USD 650 million of which was invested by UBS clients. When it closed in late 2021, it was the largest dedicated impact investment fund in biotech history. We also cooperated with a leading real estate investment firm on a fund, which invests to preserve workforce and affordable housing for communities throughout the US. This fund further seeks to improve quality of life for tenants by implementing community and social programs through alliances with service providers.

In 2021, we continued to build on our position as a leading provider of sustainable exchange-traded funds (ETFs), launching 17 new sustainable ETFs, including a full suite of benchmarks aligned with the Paris Agreement. We have also enhanced our

MSCI SRI ETFs to reduce carbon intensity by 50% across the entire range, in line with our commitment to develop innovative low-carbon investment strategies. We are Europe’s second-largest sustainable ETF provider with an SI asset base of USD 40 billion. For clients wishing to engage in the transition to a low-carbon economy, we aim to provide actionable tools and techniques for allocating capital to help drive this transition
.  

Our Climate Aware framework is designed to help clients align portfolios to their chosen climate glidepath by reducing the carbon footprint of their investments. Based on that, we have developed a suite of dedicated products across asset classes to provide solutions for different climate investment needs.

    Refer to the section “Taking action on a net-zero future – our climate report” below for more information about our climate strategy and activities

Interest in SI solutions among our Swiss retail clients continued to be strong in 2021. UBS Manage SI represented almost 70% of Personal Banking’s mandate sales. In addition, almost 47% of total custody assets in Personal Banking are composed of sustainable investments

We added a passive solution to our UBS Vitainvest product family in Switzerland, enabling clients to invest sustainably for their Pillar 3a7 and vested benefits accounts. In the second half of 2021 we also began rolling out replacements to our credit and debit cards with a sustainable alternative, more than 80% of which is made of PLA (a biodegradable plastic made of renewable raw corn material).

Globally, we offer institutional investors certificates and other structures linked to thematic portfolios such as the food revolution and climate change, through a third-party private bank.

SI assets (sustainability focus and impact investing) grew to USD 251.2 billion to reach 5.5% of invested assets, up from 3.4% (USD 140.8 billion) in 2020. Assets subject to ESG integration and to exclusion approaches grew to USD 813.2 billion to reach 17.7% of invested assets, up from 15.4% (USD 645 billion) in 2020.

This growth was driven by client demand, our focus on advancing sustainable solutions, converting traditional to sustainable funds and generally supportive markets.

UBS total invested assets1,2

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended

 

% change from

USD billion, except where indicated

 

GRI

 

31.12.2021

31.12.20

31.12.19

 

31.12.20

Sustainable investments

 

 

 

 

 

 

 

 

Sustainability focus3

 

FS11

 

222.7

127.7

46.4

 

74.4

Impact investing4

 

FS11

 

28.5

13.1

9.1

 

117.1

Total sustainable investments5

 

 

 

251.2

140.8

55.5

 

78.4

SI proportion of total invested assets (%)

 

 

 

5.5

3.4

1.5

 

 

ESG integration6

 

FS11

 

558.0

512.8

372.3

 

8.8

Exclusion7

 

FS11

 

255.1

132.2

52.2

 

93.0

Total ESG integration and exclusion

 

FS11

 

813.2

645.0

424.5

 

26.1

ESG integration and exclusion proportion of total invested assets (%)

 

FS11

 

17.7

15.4

11.8

 

 

UBS total invested assets

 

 

 

4,596.2

4,187.2

3,606.6

 

9.8

1 We are refocusing our sustainable investment reporting on those investment strategies exhibiting an explicit sustainability intention. ESG integration and exclusion approaches, although considering ESG aspects in the investment process, are in and of themselves not considered sustainable investment strategies.    2 FS represents the performance indicators defined in the Financial Services Sector Supplement of the Global Reporting Initiative (GRI) reporting framework.    3 Strategies that have explicit sustainable intentions or objectives that drive the strategy. Underlying investments may contribute to positive sustainability outcomes through products / services / use of proceeds. Examples include Global Wealth Management’s Discretionary Manage SI mandate solution and Asset Management’s strategies such as its Global Sustainable Equities product.     4 Strategies that have explicit intentions of generating measurable, verifiable and positive sustainability outcomes. Impact generated is attributable to investor action and / or contributions. Examples include Global Wealth Management’s Oncology Impact funds and Asset Management’s Global Engage for Impact Equity funds.    In 2021, UBS converted funds to the sustainability focus and impact investment categories, in line with corresponding changes to the funds’ underlying investment policies. The main impact was on sustainability focus and impact strategies in Asset Management of USD 38 billion and sustainability focus fund conversions in Global Wealth Management.    6 Strategies that integrate ESG factors into the fundamental financial analysis to improve risk / return.    7 Strategies that avoid investments in companies that do not meet certain ESG criteria and / or do not align with the values of clients and / or UBS. The enhancement of the UBS ESG exclusion policy to include a broader set of exclusions in the third quarter of 2021 was the main driver (>50%) of the increase in exclusion assets in 2021.

7 Pension account in Switzerland: regular deposits to a 3a account enable customers to save taxes and at the same time build up capital for their retirement.

 

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Financing solutions

Sustainable financing

We offer products and solutions to clients looking to finance assets that demonstrate sustainability characteristics and / or support the transition to a low-carbon economy. This includes access to capital markets.

 

The capital markets are the most powerful transmission mechanism for promoting corporate sustainability.

 

Michael Baldinger, Chief Sustainability Officer

 

Financing activities can be on-balance sheet (e.g., loans and mortgages) or off-balance sheet (such as access to debt and equity capital markets). We also provide advice on ESG factors (both financial and non-financial). One example is integrated disclosure requirements.

Where available, we use regulatory and market standards. For instance, in debt capital markets we refer to the International Capital Market Association (ICMA) Green, Social or Sustainability-Linked Bond Principles. Where such guidelines or standards are not available, we aim to align with market practices, as is the case in equity capital markets activities, for instance.

Our established sustainability and climate risk (SCR) framework is used to analyze potential transactions and client relationships in order to limit any negative impact on the environment and society. Moreover, we are in a privileged position to leverage the experience gained from our Climate Aware framework, established in 2019 in our Asset Management business, to the benefit of our financing clients.

    Refer to “Key sustainable finance products and services” in Appendix 2 to this report

 

Globally, our corporate clients benefit from a range of financing and advisory solutions at all stages on their sustainability journey. In 2021, our Investment Bank’s (IB) Global Banking team set up an ESG advisory team. Their role is to help established corporate clients with the integration of ESG risks and opportunities into their strategy, operations and financing related decisions, thereby supporting their positioning in the financial markets. They also help young, ESG-driven companies to raise private and / or public financing.

We continue to support the issuance of green, social, sustainability and sustainability-linked bonds – and the raising of capital in international capital markets. We also extend green and sustainable loans in line with the Loan Market Association.

For our Swiss corporate and institutional clients, supplier and producer transactions in commodity trade finance are monitored according to our sustainability and climate risk standards. Our sustainable finance advice also extends to the strategic positioning of business models, disclosure practices and benchmarking.


Since 2021, we have been supporting our corporate and institutional clients on their journey toward a more sustainable future with Green Mortgages brokered via the key4  platform. This is the first Swiss platform offering sustainable mortgages for investment properties located in Switzerland. For self-occupied real estate, we also offer a UBS Renovation Mortgage that provides preferential interest rates for renovations and energy-efficient construction measures.

Advisory work

SI advisory work forms an integral part of our dialogue with clients. Our UBS Sustainability Analytics offering screens institutional clients’ portfolios in relation to sustainability factors, thereby enhancing their transparency. 

In Switzerland we are helping small and medium-sized enterprises (SMEs) to save energy and make the low-carbon transition. For example, SMEs can benefit from a variety of initiatives, including energy check-ups (an efficiency bonus for an energy reduction plan) and the UBS industry bonus (a financial contribution toward the financing of production machinery with enhanced environmental performance). Additionally, we support Swiss start-ups in developing innovative circular economy solutions  and have partnered with other Swiss financial institutions, insurance firms and a renowned educational institute to create a reporting tool for SMEs, providing them with transparency around their ESG efforts and opportunities.

Through our stewardship and engagement approach, outlined in the preceding pages, institutional clients can ensure that how we manage their assets aligns with their own investment beliefs, policies and guidelines.

Research and insights

An important aspect of our offering to clients is our broad research capability.

Our global CIO provides research, asset allocation and strategic advice to guide clients on incorporating sustainability into diversified investment portfolios and across asset classes and strategies. In 2021, CIO reports highlighted the portfolio benefits of new SI fixed income opportunities in emerging markets sustainable finance, as well as in expanded green, social and sustainable bond exposure. CIO analysts also covered long-term thematic opportunities ranging from the Future of Earth to clean air and carbon reduction, diversity and equality, and smart mobility, in addition to producing SI-focused whitepapers and a monthly “Sustainable Investing Perspectives” review of topical sustainability issues. We continue to integrate key sustainability topics such as the net-zero transition into our flagship House View publications, together with associated investment solutions for all of this content.

Our Investment Bank’s Global ESG Research teams work closely with sector analysts skilled in ESG Integration and thematic research. In 2021, ESG Research delivered thematic reports on topics ranging from fast fashion, plastics, the energy transition, carbon investing, blue hydrogen and natural gas.

 

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As well as highlighting SI opportunities, our research teams also help clients manage their investment risk. ESG Research has long held the view that ESG factors can help identify risks that traditional fundamental analysis alone may not uncover. In 2020, we launched the UBS ESG Risk Radar, a sectorial research product that considers impact and materiality of ESG risks and opportunities. In 2021, we published 47 ESG Risk Radar reports, covering sectors such as Japanese food and beverage, Latin American oil and gas, North American power and utilities, Chinese automobiles, and European banks. Our Global Markets advisory teams in the Investment Bank use these reports to help develop trade ideas and focus attention on companies prioritizing the transition to greener business models or improving their own processes and products.

ESG Research is further supported by UBS Evidence Lab, which provides data-driven insights across a wide range of subject matter to help answer ESG-relevant questions. Specifically, UBS  Evidence Lab identified the following six themes favored by family offices in relation to impact investment:8 education; climate change; healthcare; economic development and poverty alleviation; agriculture; alternative food sources, and clean water and sanitation.

Investors’ key market-related ESG questions are identified through UBS Question Bank, the largest global database of market-related questions asked by professional investors. Our Knowledge Network provides institutional clients with curated sales and trading views on key ESG topics, including extensive coverage around COP26, all accessible through UBS Neo, our cross-asset banking and trading platform. We also engage with clients through a growing number of events and conferences, where ESG-relevant content is integrated into agendas.

We use interaction, feedback and survey responses from these and other sources to develop focused products within the Investment Bank’s Global Markets business.

In early 2021, our Quant Evidence & Data Science (QED) team assumed additional responsibility for data related to sustainable investing in our Asset Management business division. As a dedicated data science team, QED ensures investment teams have industry-leading data at hand, accompanied by systematic insights. QED uses the team’s deep machine-learning expertise to enhance data and address data challenges. Natural language processing is used in the universe creation process to drive thematic, often SDG-related investment strategies. The team makes faster idea generation and efficient assessment of investment value possible, providing scientific justification for investment decisions, leading to more sustainable outcomes.

    The above section highlights individual additions to or developments in our product and service offerings. For a comprehensive list, refer to “Key sustainable finance products and services” in Appendix 2 to this report

    Refer to the section “Taking action on a net-zero future – our climate report” below for more information on our activities and targets to support the transition to a low-carbon future

    Refer to the sustainable investments table above


Leading by example

In 2021, Group Treasury developed and implemented a comprehensive ESG Investment Framework for its high-quality liquid assets portfolios as described in our firm’s net-zero commitment. This framework integrates ESG considerations in the investment process alongside more traditional economic and risk dimensions.  It supports investments in ESG-labelled securities that have a direct link to sustainable projects and more holistically, promotes investments in issuers with positive ESG characteristics and flags potential risks. At year-end 2021, Group Treasury held more than USD 3.4 billion of green, social and sustainability bonds in its high-quality liquid assets portfolios, a growth of 87% year-on-year.

 

 

 

8 UBS Global Family Office (GFO) Report 2021

 

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Addressing sustainability challenges
through philanthropy

We believe that by working collectively, philanthropists, public and private organizations have the potential to create lasting change and maximize positive impact for people and the planet.

Climate change and the increased frequency of extreme weather events are creating economic shocks that need support and investment. At the same time, COVID-19 is expanding the inequality gap and affecting daily lives.9 Guided by our firm’s purpose, we are strengthening our commitment to address the most pressing social and environmental issues associated with wealth inequality through our philanthropic programs and long-term community partnerships.

Reimagining client philanthropy

With nearly 70 philanthropy experts worldwide, we support clients in maximizing their impact locally, nationally and globally, whatever their objectives. For over two decades we have partnered with clients and their families, using an investment-based approach to maximize their impact and connect them to an international network of expertise and support.

Our approach is based on three core pillars: (i) Advice – such as advising clients who are considering establishing their first charitable fund and guiding them on how to maximize their charitable giving; (ii) Insights – connecting our clients to a global network of experts, both within UBS and beyond (e.g., through insight trips, publications, events with fellow philanthropists, thought leaders and social entrepreneurs, such as UBS Global Visionaries); (iii) Execution – providing clients with flexible options for managing their philanthropic giving, including structures such as our Donor-Advised Funds (DAFs), our new UBS Collectives giving circles, or supporting curated programs through UBS Optimus Foundation.

Donor-Advised Funds

A DAF offers clients an easy, flexible and efficient alternative to setting up their own foundation, and can be managed in line with their usual investment approach. Their charitable donations can be invested within parameters which they select, such as capital, growth or income, so they can grow their fund to make grants at a later date. UBS has offered DAF services in the US for some time, and in 2014 we established a DAF in the UK, which had seen more than GBP 450 million in donations by the end of 2021.

In 2020, the UBS Philanthropy Foundation was launched in Switzerland. In 2021 – its first full year of operations – it raised over USD 10 million in donations and launched its first thematic fund dedicated to the environment. It also received approval from the relevant tax authority to provide grants to environmental projects in developed countries –  a significant milestone.


UBS Optimus Foundation

UBS Optimus Foundation connects clients with entrepreneurs, new technologies and proven models aiming to make measurable, long-term impacts on the most serious and enduring social and environmental problems. Its track record spans over two decades and it is recognized globally, both as a philanthropic thought leader and as a pioneer in the social finance space.

UBS Optimus Foundation takes an evidence-based approach, focusing on programs with the potential to be transformative, scalable and sustainable.

It conducts extensive due diligence and only recommends what it considers to be the most innovative programs, capable of achieving long-term, measurable impact and systemic change. In some cases, UBS also makes matching contributions to the Foundation, to help our clients’ donations go even further. These are charitable contributions by UBS which are added on top of donations from our clients.

In 2021, we raised USD 161 million in donations, which includes UBS matching contributions of USD 14.7 million, and committed USD 108 million grants by UBS Optimus Foundation. Donations and grants committed decreased by 4%, respectively 29%. This decrease was due to the elevated funding related to COVID-19 in 2020. In September 2021, UBS Optimus Foundation India was launched, enabling us to further drive our philanthropic goals by capitalizing on local corporate social responsibility regulations and the increasing number of high-net-worth individual philanthropists in India.

Continued innovation in philanthropy

In 2021, UBS Collectives were launched. Members10 have pledged USD 21 million toward strategic collective impact programs, which bring together philanthropists wishing to pool their funds, share expertise and achieve sustainable long-term impact. Members have embarked on a three-year learning journey.

UBS Optimus Foundation has partnered with an outcomes specialist to create and launch a pioneering initiative which aims to invest USD 100 million in 15 to 20 SDG-aligned outcomes-based programs, working with governments and philanthropic donors to design and invest in projects that support vulnerable children and adults in developing countries in areas such as education, health, employment and the environment. Investors will receive returns based on verified social and environmental impact, and the initiative will use an innovative blended finance structure with 20% of philanthropic first-loss funding to unlock additional socially motivated private capital. This approach enables investors to achieve impact at scale, while improving financial return and lowering risk.

UBS Optimus Foundation has launched the SDG Impact Finance Initiative (SIFI) in partnership with two agencies of the Swiss government: the State Secretariat for Economic Affairs (the SECO) and the Swiss Agency for Development and Cooperation
 

 

9 For more information, refer to the International Monetary Fund reports about inequality in the time of COVID-19.

10 UBS Collectives members are generally UBS clients but in exceptional cases could be non-clients with an established relationship with UBS Optimus Foundation. Members can choose to have a family member accompany them as a guest.

 

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Sustainability Report 2021 | What 

(the SDC), along with the Credit Suisse Foundation. The SIFI was publicly announced and launched at the “Building Bridges“ conference in Geneva in December 2021 and aims to raise CHF 100 million catalytic capital to mobilize CHF 1 billion in private investments to reach the SDGs by 2030. Its goal is to act as a hub for learning, developing shared standards, reducing investment risks, and building a better market for investors, further establishing Switzerland as a leading center for impact investing. Moreover, it aims to help foster investable, high impact programs.

UBS Optimus Foundation reached another important milestone as a partner of the Child Learning and Education Facility (CLEF), a public–private partnership with the Government of Ivory Coast, the Jacobs Foundation and 15 cacao companies. CLEF aims to mobilize up to CHF 110 million to build additional schools and enhance the quality of education for children in cocoa-growing regions. UBS Optimus Foundation contributes CHF 3.5 million and acts as the convening platform for all private contributions to CLEF.

Strengthening the focus on climate and the environment

Since 2020, UBS Optimus Foundation has further strengthened its focus on climate and the environment. Thanks to a systematic approach that helps them assess where to invest philanthropically, and how best to contribute to accelerating environmental and climate action, clients can maximize their impact of their philanthropic efforts. Clients interested in this space can now get involved in (i) sustainable land use, by contributing to land restoration, conservation, climate-resilient agriculture, and agroforestry; and (ii) coastal and marine ecosystems, by contributing to wetland restoration and conservation and sustainable fisheries, as well as reduction of ocean waste and pollution.

Through the UBS Climate Collective, clients are able to fund, develop and implement strategies that target climate change.

Examples include the sequestration of carbon emissions by using nature-based solutions;11 supporting local community development and improving biodiversity in Southeast Asia and elsewhere. The focus is on initiatives that will protect and restore ecosystems such as mangroves, coastal wetlands and rural communities in the lower Mekong delta in Vietnam.


UBS Global Visionaries

Recognizing the crucial role of the private sector in tackling some of the world’s most pressing problems, we launched the UBS Global Visionaries program in 2016, with two main goals: (i) creating opportunities for clients and prospective clients to connect in person (or virtually) with leading social entrepreneurs; and (ii) helping our UBS Global Visionaries scale their positive change by expanding their global network, building capacity, and raising awareness about their work. Each of these entrepreneurs will be in the program for two years.

Since the program started, we have supported 63 entrepreneurs across the globe, all working toward achieving a variety of the SDGs. At the end of 2021, 20 were actively engaged in the program,12 over 60 prospects and clients were connected directly with our Global Visionaries and 80 events were hosted with the latter as featured speakers. Over 29,000 stakeholders (such as prospects, clients and employees) participated in these events.

Client feedback has been positive. Many are increasingly putting purpose at the heart of their business and personal priorities and are excited to engage with inspiring changemakers. In return, our Global Visionaries say they benefit from our clients sharing their skills, experience and contacts.

 

 

 

 

 

 

 

 

 

 

 

 

11 Nature-based solutions holistically support the achieving of climate change targets through global carbon mitigation while producing wider benefits for local communities and biodiversity.

12 Examples are an entrepreneur who re-invents farming supply chains or an entrepreneur who provides a natural carbon capture solution that is essential for climate change.

 

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Sustainability Report 2021 | What 

What we do for our employees

We are dedicated to being a world-class employer where our people can leverage their diverse skills and partner with clients and colleagues on solutions that make a real difference. And, with nearly 73,000 employees working in 50 countries and representing 145 nationalities, we have the global presence, experience and range of business activities to create a better world for our clients, employees, communities and society.

Our employees are key to executing our business strategy and, ultimately, our client promise.


We therefore aim to attract, develop and retain employees who have the capabilities and diverse backgrounds to help us achieve those aims. Our people leadership approach is closely aligned to our strategy and purpose to ensure that the firm and its employees are acting with the same goals in mind. We are committed to improving the representation of women and ethnic minorities at senior management levels and take a multi-pronged approach in our strategy. Additionally, sustainability and good corporate citizenship principles are embedded into our practices as an employer, for example in how we market the firm to candidates, in our learning and development activities, and in our philanthropy and volunteering activities.

    Refer to ”Workforce by the numbers” in Appendix 3 to this report for supplementary information regarding this subsection

 

 

 

 

 

 

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Our purpose drives our strategy and culture and is the basis for our sustainable success

Our purpose articulates why we do what we do, and why it matters. Our culture impacts how we do things, and it is firmly grounded in our three keys to success: our Pillars, Principles and Behaviors. For the past decade, those keys have defined how we work together and what we stand for, as a firm and as individuals. They continue to drive daily business decisions and are integrated into our people management processes, including hiring, performance management, compensation, promotion, talent development, training and succession planning. Specific expectations to uphold these values, individually and as a firm, help ensure we are fostering the excellent work and behavior that we expect from all employees. To assure that our culture advances our strategic goals, we updated our three keys to success in 2021 to reflect our purpose, client promise and strategic imperatives.

We promote culture-building behavior through various divisional, regional and Group-wide initiatives. Among these is our Group Franchise Awards (GFA) program, which recognizes and

rewards employees for cross-divisional collaboration and innovation. An integrated idea-sharing site enables employees to cooperate on solutions for operational, client service, sustainability and technology challenges. Almost 6,000 ideas have been submitted since 2016, with approximately 450 implemented or supported for future implementation.

A peer-to-peer appreciation program instituted in late 2020 that encourages employees to acknowledge colleagues’ exemplary behavior also started as a GFA submission. Called Kudos, the initiative brings teams together, fosters continuous improvement, and increases motivation, engagement and employee satisfaction. Approximately 420,000 messages of recognition have been given since launch, with a 78% employee participation rate across the firm.

    Refer to the foldout pages of the UBS Annual Report 2021 for more information about our Pillars, Principles and Behaviors and our purpose

    Refer to “UBS's charitable contributions” in this section and “Charitable contributions” in Appendix 5 to this report for a discussion of our community impact and employee volunteering activities

 

 

 

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Sustainability Report 2021 | What 

Our hybrid working model
and focus on agile practices enable us to attract and
retain highly qualified and diverse talent, positioning
us for sustainable success.

Stefan Seiler, Group Head Human Resources

Toward a more agile and flexible future

Driven by our strategic imperatives and in response to evolving client needs, we continued to accelerate new ways of working together across the firm in 2021. In particular, agile working practices, and agile teams where this makes sense, will help us be more responsive, adaptive and innovative in everything we do. Flexible, multi-disciplinary teams working across the firm will create better outcomes for clients and improve our employees’ work experience.

In 2021, we launched a first wave of the Agile@UBS program ahead of a broader implementation in 2022. Currently, we have 10,000 employees transitioning to the new Agile@UBS ways of working by the end of the first quarter of 2022, and we are on track to have over 20,000 employees working in Agile@UBS by the end of 2022. Participants’  experiences, along with coaching and specialized training delivered through the Agile Academy within UBS University, will support us in rolling out Agile@UBS, which will transform the way we work and increase our speed in finding and delivering solutions for our clients.


Besides encouraging agile working practices, we provided supportive measures for employees as the pandemic persisted throughout 2021. For example, we continued to enable the large majority of our workforce to work from home as needed and offered extra flexibility and support to help employees balance work and personal commitments.

With flexible working in particular, what began as a temporary pandemic-related necessity became a valued working practice for our employees and a competitive advantage for us as an employer.

Internal surveys conducted in late 2020 and early 2021 showed that employees were just as productive, if not more so, while working from home, and they valued the flexibility that home-working offered.

Further global analysis that considered factors such as regulation, risk and individual roles determined that approximately 75% of our employees could be eligible to work in a hybrid set-up. As a result, hybrid working (a mix of working from home and in the office) has become the norm for many employees across the firm and a key element in our workplace culture.

As well as benefiting employees, a hybrid model makes us a more attractive employer to a larger and more diverse pool of applicants, such as early-career talent, working parents and those in continuing education. The emphasis on technology and virtual collaboration also sparks innovative thinking that will make us more agile and further improve the client experience.

 

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Leadership and culture

Leadership drives our unique corporate culture, which in turn encourages greater sustainability by supporting positive change for our clients, employees and wider society. Connecting people with transformative ideas and becoming a more agile organization are both sparked by strong leadership. In 2021, we updated our House View on Leadership to reflect the behavior that we expect every leader to demonstrate toward employees, clients and business activities. Key concepts are embedded in bespoke training, leadership development programs, performance management and senior management recruitment processes. All of our leaders are expected to foster empowerment and individual accountability within their teams to support our ongoing transformation; firm-wide metrics help ensure continuous improvement. Our leadership development programs aim to build skills and inspire and promote agility, inclusive leadership and innovative thinking among current and future leaders. Our Leadership Summit, for example, is a forum in which our senior leaders discuss – and debate – what is needed to create a sustainable, responsive and successful firm in the future. Our Senior Leadership Program helps leaders drive digital transformation within their teams and accelerate growth in complex and ever-changing markets.

In addition to training, our structured talent management process helps us identify and invest in future leaders, ensure business continuity for critical roles and proactively manage both workforce resources and individual employee development.

 

 

 

 

 

 

 

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Sustainability Report 2021 | What 

Our employees have a voice

Our employees want to have an impact and are engaged in shaping the firm’s identity, direction and daily work life. As such, we provide numerous opportunities for employees to share their views on topics ranging from engagement, work environment and talent management, through to health and well-being, and diversity. Our new employee listening strategy, launched in 2021, is designed to adapt to changing organizational priorities and business-specific needs, to capture feedback in a timely way, and above all, to drive meaningful improvements to the employee experience. It uses Group-wide surveys to measure cultural indicators such as line manager effectiveness, and in-depth bespoke research to solve specific business issues. We will soon roll out on-demand tools to foster continuous improvement within business areas and teams. Our overarching goal is to create an environment where all employees feel a sense of belonging and are able to perform at their best, for us and for our clients.

We also use surveys to measure and support change on a firm-wide basis. For example, we conducted a Group-wide Organizational Health Index survey in January 2021. We used it to compare ourselves with an external benchmark and other best-in-class companies, and to assess alignment on strategic goals, working practices and adaptability. Employee responses directly influenced the development of our purpose, our new performance management approach and our increased focus on innovation, sustainability and impact.

 

 

In addition to all-staff initiatives, we conducted surveys among targeted groups of employees in 2021 particularly to support employee health and well-being.

Regular “pulse” surveys gauged employees’ views on remote work, stress, communication and other aspects. Resources to support holistic well-being featured a bespoke e-learning curriculum, physical and mental health initiatives, volunteering opportunities, increased benefits offerings in certain locations and financial education events. Enhanced people analytics for a number of workforce indicators allow us to gather timely insight, track trends and take action at critical moments. Employees are informed of Group-wide survey scores, as well as divisional, regional and business area results, as applicable. In 2021, 70% of employees were satisfied with our talent management practices

and 83% recognized our positive work environment. Both of these measures were above the norm for financial services companies, with talent management also above the norm for high-performing companies. Our ongoing ambition is to have a highly motivated workforce that models the firm’s expected behaviors in their daily work; we therefore use survey results to create future culture-building initiatives. We strive to be the clear employer of choice in the financial services sector and to maintain a good employee Net Promoter Score (eNPS). Both ambitions were achieved in 2021.

Engaging with our employees

We connect with employees through channels such as our intranet news and information sites, UBS Connections (our internal social network), UBS TV, and directly, via individual and team meetings, emails, town halls and feedback tools.

Throughout 2021, employees in all businesses and regions attended numerous virtual town halls and small group meetings to discuss relevant issues directly with senior management. Regular “Join me on the Journey” CEO videos and “Open mic with Ralph” events, along with “Live with the GEB” strategy discussions, allowed employees to learn about (and in many cases, ask questions about) topics such as the firm’s strategy and direction. These events are communicated via internal articles or broadcast on UBS TV and are available via replay any time.

Our employee networks are another avenue to listen to, and engage with, employees to influence the firm’s future. Sponsored by business leaders, these groups help employees build cross-business relationships and support an open and inclusive workplace. In 2021, there were 48 employee networks globally, focused on culture, gender, ethnicity, family, mental health, Pride / LGBTQ+, disability and veterans. Each of our networks plays an important role in helping UBS evolve its culture of belonging and provides networking and a forum to advance the learning, experience, connectivity and voice of its members.

Employee representation

We maintain an open dialogue with our formal employee representation groups, all of which are in Europe, as part of our commitment to be a responsible employer. We have two pan-European forums: the UBS Employee Forum (our European works council) and the UBS Europe SE Works Council. These groups represent 17 countries and consider issues that may affect our performance, operations and prospects. Local and regional work councils, such as the Employee Representation Committee in Switzerland, discuss topics such as business transfers, pensions, workplace conditions, health and safety, and redundancies. Collectively, these groups represent approximately 49% of our global workforce.

 

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Our commitment to diversity, equity and inclusion (DE&I)

Ensuring fair treatment and strengthening our commitment to DE&I are vital to our sustainable business success. We find diverse teams better understand and relate to the needs of our equally diverse clients. Through the diversity of our employees’ backgrounds and experiences, we drive innovation and better decision making.

Our aim, therefore, is to shape a diverse and inclusive organization that is innovative, provides outstanding service to our clients and offers equitable opportunities so that every employee can thrive.

UBS is a strong supporter of the UN Standards of Conduct for Business anti-discrimination guidelines. Additionally, we are signatories to the UN-backed Women’s Empowerment Principles, the UK’s Women in Finance Charter and Race at Work Charter, and the Corporate Call to Action in the US. Philosophically, we take a broad approach to DE&I, focusing on a range of aspects, including inclusive leadership, age, gender, race and ethnicity, LGBTQ+, disability, and veterans. Building inclusive leadership skills, increasing gender and ethnic diversity, and equitable policies and practices were our leading priorities in 2021.

Gender diversity is a key priority for the firm. We are particularly focused on increasing the representation of women at senior management levels. We take a multi-pronged approach in this respect, analyzing and adapting various factors that support the hiring, development and retention of women at all levels. For example, our interviews for open roles are expected to include qualified diverse candidates, and our interview questions seek to gauge inclusive leadership competencies for executive roles. To ensure we are making progress, we hold ourselves and our leaders accountable. For example, in early 2020 we publicly stated our aspiration to have 30% of all Director and above roles held by women by 2025. At the end of 2021, that figure stood at 26.7%, up from 26.0% in 2020. As of 31 December 2021, 25% of GEB members were female and we expect to increase this ratio to 33% in early 2022 after the designated Group Chief Financial Officer joins the firm. In addition, 27% of senior managers who reported directly to the Group Executive Board (the GEB) in 2021 were female.

 

 

 

One of the enablers in this effort is our global UBS Career Comeback program. Launched in Switzerland in 2016, and a global program since 2019, Career Comeback continues to help us increase our pipeline of female leaders. Professionals looking to return to corporate jobs after a career break are hired for permanent roles and supported throughout their transition. To date, Career Comeback has helped 196 women and 19 men relaunch their careers

A concerted focus on ethnic diversity

Increasing the ethnic minority diversity of our workforce, and a related commitment to support underrepresented talent and communities, is also a top priority across all business divisions and regions.

We focus on four areas: accountability and transparency; investing in our talent; improving our culture; and leveraging our business strengths in underrepresented communities.

We take a country-by-country approach, in close collaboration with relevant business and jurisdictional entities. This is because legislation, legal requirements and progress toward racial and ethnic equality vary significantly across the locations in which we do business. In the short term, the largest share of our efforts is focused on Switzerland, the US and UK. In Switzerland, we began collecting ethnicity data on a voluntary basis in 2021 aimed at understanding the current representation within our local workforce. Our 2025 aspiration is to achieve a 26% representation of ethnic minorities at Director level and above in the UK and the US. As of the end of 2021, our representation was 20.1% in the US and 21.3% in the UK.

Our employee networks are strong partners in our ethnic diversity strategy. Throughout 2021, our ethnicity-focused MOSAIC networks globally facilitated numerous events for staff in every region to increase awareness and personal accountability along with specialized educational sessions for network members.

 

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Sustainability Report 2021 | What 

In addition, a community of more than 480 Diversity and Inclusion Ambassadors acts as a resource for employee advice and coaching on conversations about various diversity and inclusion-related topics.

Promoting greater understanding and inclusiveness across the firm

Along with strategic initiatives, each year we sponsor numerous activities to promote inclusion and belonging. Employee volunteers regularly host educational events and initiatives focused on gender, age, culture, ethnicity, LGBTQ+ / Pride, disability, veterans, parenting, elder care and other topics.

Among these, disability is a key area of focus. As such, the firm became a member of the Valuable 500 in 2021, committing us to make disability inclusion part of the firm’s business leadership agenda.

    Refer to our Americas Diversity, Equity and Inclusion Impact Report, available at ubs.com/diversity, for more details

    Refer to our UK Gender Pay Gap Report, available at ubs.com/uk/en/gender-pay-report for more details

Equal opportunity, grievances and whistleblowing protections

We are committed to ensuring a workplace where employees are fairly treated, with equitable employment and advancement opportunities for all. We do not tolerate harassment of any kind, including sexual harassment, and we take measures to prevent all forms of harassment, bullying, victimization and retaliation. Our policies, procedures, employee and line manager education, and awareness materials all encourage employees to raise concerns, which they may do openly or anonymously. An internal anti-harassment officer appointed by the Group Head Human Resources provides an independent view of the firm’s various processes and procedures to prevent harassment and sexual misconduct.

When there are concerns, defined procedures and specially trained people in every region help us resolve them. Employees are strongly encouraged to speak with their line manager or HR about any workplace concerns and reminded regularly to immediately report any potential violations of our Code of Conduct and Ethics (the Code) to their line manager or local compliance officer. In addition, our global whistleblowing procedures offer multiple channels (including a confidential whistleblowing and sexual misconduct hotline) for staff to raise concerns about any suspected breaches of laws, regulations, rules or other legal requirements, policies or professional standards, sexual misconduct or harassment, or any violation of the Code. UBS prohibits retaliation against any employee who reports a concern that they reasonably believe is a breach or violation.


Practices that help us remain an employer of choice

Fair and effective people management processes are key for our long-term success. Our global performance management approach underwent a comprehensive review in 2021 as a part of the firm’s larger strategic repositioning. That review included gathering feedback from employees across the firm. As a result, we implemented changes to our year-end review, objective-setting and employee feedback processes that aim to support our strategic priorities, reinforce our culture, and be simpler and more transparent. We removed performance ratings to focus on descriptive categories of impact and outcome that make it easier to determine and justify how an employee has performed. Different descriptions for the “what” (Contribution) and the ”how” (Behaviors) together assess the individual’s impact.

Transparent Group-wide expectations for performance will fuel engagement and reflect our high-performing culture. Line manager and peer discussions of performance reviews will help ensure fairness and consistency across teams. We also implemented avenues to support regular two-way and coaching-oriented feedback, and we ensured more differentiation among employees to better support the link between performance and reward. One thing that has not changed is our emphasis on both performance and behavior. We remain committed to furthering our culture by assessing and rewarding how well the firm’s expected behaviors are demonstrated in employees’ daily work. For 2021, 99% of eligible employees received a performance review.

Fair pay and pay for performance

Compensating employees fairly and consistently is key to ensuring equal opportunities. We pay for performance, and we take pay equity seriously. A strong commitment to both is embedded in our compensation policies, and we conduct both internal reviews and independent external audits as quality checks. If we uncover any gaps that cannot be explained by business and appropriate personal factors such as experience, role, responsibility, performance, or location, we explore the root causes of those gaps and address them. Additionally, our regular monitoring and review processes also allow us to maintain our certification status with the EQUALSALARY Foundation for our equal pay practices in Switzerland, the US, the UK, Hong Kong SAR and Singapore. The firm also successfully completed an equal pay analysis in Switzerland in 2020, as required by the Swiss Federal Act on Gender Equality. The results of the analysis confirmed that we are fully compliant with Swiss equal pay standards. These holistic certifications are a testament to our well-established equal opportunity environment and the strength of our human resources practices, including performance and reward. In 2021, we continued to monitor pay fairness and addressed any unexplained gaps to ensure that all employees are paid fairly.

    Refer to the UBS Compensation Report 2021 at ubs.com/annualreporting 

 

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Environmental, social and governance (ESG) considerations in the compensation determination process

ESG objectives are considered in the compensation determination process in objective setting, performance award pool funding, performance evaluation and compensation decisions.

ESG-related objectives have been embedded in our Pillars and Principles since they were established in 2011. In 2021, we revised the Group CEO and GEB scorecards and further enhanced the link between ESG and compensation by introducing explicit sustainability objectives under “Strategic & Growth” in the non-financial goal category. These sustainability objectives are linked to our priorities, and their progress is measured via robust quantitative metrics and qualitative criteria. Sustainability objectives are individually assessed for each member and consequently directly impact their performance assessments and compensation decisions.

In addition, in the performance award pool funding across the Group, ESG is also reflected through an assessment of progress made against targets linked to our focus areas of Planet (Climate), People (Wealth Inequality, Health and Education) – including progress made against our diversity ambitions – and Partnerships, alongside other key dimensions. Therefore, ESG is taken into consideration when the Compensation Committee assesses not only what results were achieved but also how they were achieved.

    Refer to “GEB performance assessments“ in the UBS Compensation Report 2021 for more information about the GEB performance measurement process

    Refer to “Our focus on sustainability and climate,” “Employees” and “Social impact” in the “How we create value for our stakeholders” section of the UBS Annual Report 2021 for more information

    Refer to ubs.com/gri  for more information about ESG-related topics

 


Attracting, developing and retaining the best talent

Fostering an agile and connected workforce is a near-term priority. As such, we need to have processes in place to ensure that we have the best people, in the right roles, at the right time. Comprehensive workforce data dashboards help us analyze all aspects of the employee lifecycle, including recruitment, performance management, reward, training, internal mobility and attrition. These tools help HR representatives and line managers identify trends quickly and make fact-based decisions based on relevant HR data.

Throughout 2021, we recruited new talent where necessary to launch or expand businesses and to fill gaps in our workforce. We hired a total of 9,363 external candidates in 2021, adding more than 1,700 graduates and other trainees, apprentices and interns through our various junior talent programs. We recruit for potential and cultural fit, hiring beyond immediately relevant skills to include the person’s experience, competencies and digital aptitude. We also invest in young talent in every region; for example, supporting national apprenticeship programs in Switzerland and the UK and a summer internship program in the US. In Singapore, UBS worked with the local government to set up a program to support ongoing employability during the pandemic and to increase the resilience of regional banking infrastructure.

Our approach has garnered numerous external accolades, including a ranking in the top 50 of the world’s most attractive employers by employer-branding expert Universum for the 13th consecutive year in 2021.

Reflecting our integrated workforce strategy, we continued selective insourcing and hiring activities in 2021, primarily focusing on our Business Solutions Centers in China, India, Poland, Switzerland and the US, while reducing external resources.

    Refer to Appendix 7 to this report for more information about our employer ratings and recognition

 

Key to our talent management strategy is offering employees opportunities to build interesting careers. Our innovative digital Career Navigator platform, which now features short-term rotation opportunities, promotes internal mobility across teams, functions and business divisions. Employees can explore career paths, search for jobs and subject matter experts, and connect with colleagues while allowing our recruiters to more easily source internal talent. The tool also identifies potential competency gaps and recommends appropriate training. In 2021, Career Navigator helped 47,600 employees search for short-term job opportunities or find internal experts, discover possible career paths and match themselves to open roles. More than 160,000 skills have been added to our employee skills-sharing platform.

Our in-house UBS University plays a central role in helping employees build skills for use now, as well as capabilities for the future. Our offering includes line manager and leadership development, advisory and sales training, industry-leading certification for client advisors, data literacy, agile working, and health and well-being topics.

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Sustainability Report 2021 | What 

Throughout 2021, we continued to emphasize future skills development and new ways of working, for example, by helping employees develop digital and data literacy skills, and embrace agile methodologies.

We invested more than USD 71 million in training in 2021; altogether, our permanent employees completed more than 1,425,000 learning activities, including mandatory training on compliance, business and other topics. This is an average of more than two training days per employee.

Internal mobility remains a priority. In 2021, 38% of all our open roles were filled by internal candidates, 1,506 employees changed business divisions, and 331 changed regions. In addition, more than 80% of the positions at one level below the GEB were filled with internal candidates, underlining the strength of our internal talent bench.


Benefits that count

All employees have access to our competitive benefits, including offerings covering insurance, retirement and personal leave. Benefits are aligned with local markets, often going beyond legal requirements or market practice. We actively support flexible working arrangements, part-time roles, job sharing and partial retirement.

A wide range of resources are available to help employees balance work and home-life demands. For example, our global Employee Assistance Programs offer support for various life challenges such as illness, conflict, bereavement, mental health issues, and caring for elderly family members. In Switzerland, this support is provided by our in-house social counseling unit. In 2021, our global workforce recorded an absentee rate of 1.8% of total scheduled days, according to the number of absences due to illness or accident recorded in our self-service HR tool.

Furthermore, should such circumstances arise, we have clear policies and processes for handling redundancies in all businesses and regions, and we offer redeployment and outplacement services to help employees find new roles. As an example, when restructurings in the Swiss labor market lead to job losses, we offer affected employees access to a COACH process that supports them in finding a new position within or outside UBS.

Health and well-being

The health and well-being of our workforce is very important to us. As we have expanded our support during the pandemic, we continue to see the benefits of our efforts.

We continued to provide an extended health and well-being offering to employees in 2021. This included a suite of programs, benefits and workplace resources, along with a curriculum featuring topics such as team building in a virtual setup, relieving stress and preventing burnout.

We also sponsored firm-wide activities such as a virtual fitness challenge and mental health initiatives, along with a specialized mindfulness app. Regular internal survey results highlight the positive impact of well-being initiatives on our employees across the firm. A health and well-being dashboard helps to identify and respond to trends early on.

 

34 


 

A spotlight on parental leave

At UBS, all new parents can take paid time off after the birth or adoption of a child. Our parental leave policies meet the legal standards in all locations and exceed them in most. For example, in Switzerland, new mothers are entitled to 180 or 210 calendar days of paid maternity leave, depending on years of service. New fathers can take up to 20 business days of paid paternity leave and then take unpaid leave or reduce their level of employment to 80% for one to six months. Our adoption leave has also been aligned closely with these guidelines.

In the US, eligible employees are provided up to twenty weeks of paid leave following the birth, adoption or foster care placement of a child. Upon returning to work, these employees may choose to work three days a week for two weeks while being paid at 100% before returning to a full workweek.


In the UK, employees have a range of available parental leave options. For example, eligible employees can take up to 52 weeks of maternity / adoption leave; the first 26 weeks of maternity leave are fully paid, as are two weeks of paternity leave. Additionally, shared parental leave gives eligible parents more flexibility in sharing the care of their new child, and they can receive up to 26 weeks full pay.

Parental leave in our Asia Pacific locations is aligned to, or exceeds, local legal requirements and market practice. In general, employees are entitled to at least 16 weeks of paid maternity leave or two weeks of paid paternity leave.

    Refer to the Health and Safety statement in Appendix 6 to this report

    Find out more about topics of interest to employees and potential employees at ubs.com/employees  or ubs.com/careers 

  

35 


Sustainability Report 2021 | What 

Taking action on a net-zero future – our climate report

From words to action

2021 marked a pivotal year in climate pledges and commitments by companies and governments. The global community voiced a clear need for focused action and solutions. Notably, the mobilization of finance for the low-carbon transition in order to reach net-zero emissions by no later than 2050 and achieve the Paris goal of limiting global warming to 1.5°C above pre-industrial levels.

The impacts of climate change are already upon us. This is highlighted by the sixth report by the Intergovernmental Panel for Climate Change (the IPCC). We have growing evidence that human activity is a significant contributor to increasing global temperature averages. These, in turn, can intensify extreme weather events such as heatwaves, droughts and cyclones. The Glasgow Climate Pact at the 2021 United Nations Climate Change Conference (COP 26) acknowledged that unless we act urgently, global temperatures will rise above the 1.5°C limit, and by 2100, the planet will be warmer than at any other time in human history.

We have a window of opportunity to turn things around. As a leading global bank, we recognize our unique position and ability to contribute to that turnaround by mobilizing capital and supporting our clients, employees, investors and society in the transition to a net-zero economy.

In 2021, UBS once again received external recognition for our climate action by maintaining the leading score across the environmental dimension of the Dow Jones Sustainability Indices.

Out of nearly 12,000 companies ranked by the global environmental non-profit CDP, we were one of only 200 that were
A-listed for environmental transparency and action to cut emissions, mitigate climate risks and develop the low-carbon economy.


We also took part in the Global Association of Risk Professionals (GARP) Climate Risk questionnaire and were recognized as one of the firms currently providing leading practice in climate risk management.

Why does UBS see climate change as a strategic topic? Aside from it being the right thing to do for the planet, we believe it is the right thing to do for our business.

Protecting our clients’ assets and those of our firm from the devastating effects of climate change, while also seizing the opportunities from the low-carbon transition, is vital to maintaining our leading approach on climate.

UBS became a founding member of both the Net Zero Asset Managers initiative (NZAMi) in 2020 and the Net-Zero Banking Alliance (NZBA) in 2021. We also published our firm’s commitment to net zero in April 2021, reinforcing our dedication to climate action.

In the following pages, we highlight the key signposts on the journey toward our net-zero goal, including steps we’re already taking, as well as our ambitions for the future.

The time to move from words to action
is now.

 

 

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Our climate journey – 15 years of continuous strategic development

 

 

37 


Sustainability Report 2021 | What 

Key climate-related activities – 2021 at a glance

Key thematic areas

Progress in 2021

Governance and strategy

      Appointed the Group Executive Board (the GEB) lead for sustainability and impact to steer our efforts on sustainability (including climate).

      Oversaw climate strategy and activities at the highest level of our firm.

      Assigned environmental, social and governance (ESG-)related goals for all GEB members.

      Became founding member of the NZBA and Glasgow Financial Alliance for Net Zero (GFANZ).

Risk management

      Further developed a transition risk heatmap methodology and introduced a novel physical risk heatmap to inform our climate risk management.

      Launched an engagement program focused on 46 companies from high-carbon intensity sectors and engaged with a total of 140 companies across all sectors.

      Supported 70 climate-related resolutions.

      Developed a UBS climate materiality assessment that maps out material climate-related risks and opportunities.

Metrics and targets

      Set decarbonization targets for 2030 for financing of fossil fuels, power generation and real estate sectors.

      Reduced own greenhouse gas (GHG) emissions by 92% against 2004 baseline.

      Disclosed net-zero 2030 interim targets for Asset Management.

      Further aligned climate-related risk metrics with the updated recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) (for carbon-related assets).

External recognition

      Awarded top ratings and rankings by industry experts:

-       CDP: Climate A List;

-       Dow Jones Sustainability Index: leading in the environmental dimension;

-      GARP: providing leading practice in climate risk management.

 

 

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Climate governance

Embedding our approach to climate

The Corporate Culture and Responsibility Committee (the CCRC) of UBS Group AG’s Board of Directors (the BoD) oversees UBS’s climate strategy. This is set by our firm’s Group Executive Board (the GEB), and includes our appetite for climate-related risks. In its six annual meetings, the CCRC regularly reviews the GEB’s activities in executing UBS’s climate strategy and, jointly with the BoD’s Risk Committee, evaluates the progress of the firm’s climate risk program.

As part of its annual approval of UBS’s sustainability and impact objectives, the CCRC considers our firm’s climate-related objectives, as set by the GEB. The committee also reviews the alignment of our climate disclosures with the recommendations of the TCFD. We manage these annual plans and goals through our ISO 14001-certified environmental management system (the EMS) and management accountabilities across UBS Group AG. The EMS helps us reduce environmental risks, seize market opportunities and continually improve our environmental, climate and resource-efficiency performance.

In 2021, we established a net-zero task force to help ensure we become a net-zero firm by 2050.

The GEB lead for sustainability and impact chairs the task force. Senior stakeholders from across our business attend the task force’s monthly meetings, including senior leaders from risk and finance.

    Refer to ”Governance on sustainability” in the “How” section of this report


Climate strategy

We launched our first climate strategy 15 years ago. In the 2010s, we expanded our focus beyond our own operations, to encompass the protection of our assets and those of our clients, together with the mobilization of capital to tackle climate concerns. We refined our strategy by including, and disclosing, a growing number of climate-related metrics. As we move into the 2020s, we are taking steps to advance further.

Currently, no bank can perfectly quantify its climate risks. Emissions figures are a blend of official data, expert views and information shared between organizations. But we aim to lead by example – by continuously developing and refining our sustainable products and services, by focusing on climate risks in our company-wide risk management framework and operations, and by sharing best practice with stakeholders, such as authorities, central banks, policymakers, academia and peers.

Strengthening our commitment

In April 2021, we published our ambition to reach net-zero GHG emissions across our entire operations by 2050 (scope 1, 2 and 3 emissions). We committed to developing a comprehensive and ambitious climate roadmap.

While we recognize the critical relevance of climate action, we also know the world’s problems extend further, encompassing many challenging issues such as inequality, poverty or access to clean water, as reflected by the UN Sustainable Development Goals (the SDGs).

 

 

 

39 


Sustainability Report 2021 | What 

Our climate roadmap

In 2021, we extended our long-standing climate strategy with a commitment to reach net zero resulting from
all aspects (scopes 1, 2 and 3) of our business by 2050.

 

 

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Our four strategic pillars

Our climate strategy covers two main areas: managing climate-related
financial risks, and taking action on
a net-zero future.

Underpinning these two main areas are four strategic pillars.

    Refer to the diagram below for a visual description of the two main areas and four strategic pillars of our climate strategy

1. Protecting our clients’ assets

As a global financial institution, it is our responsibility to help clients navigate through the challenges of the transition to a low-carbon economy. We help our clients assess, manage and protect their assets from climate-related risks by offering innovative products and services in investment, financing and research.

We work collaboratively across our industry and with our clients, ensuring they have access to best practice, robust science-based approaches, standardized methodologies, and quality data for measuring and mitigating climate risks. Our activities include engaging on climate topics with the companies we invest in. For example, our Asset Management business division has implemented an engagement program with 46 companies from the following sectors: oil and gas, electric and other utilities, metals and mining, construction materials, chemicals, and automotive. During 2021, we also supported 70 climate-related resolutions.

2. Protecting our own assets

We seek to protect our assets by limiting our risk appetite for carbon-related assets. We use scenario-based stress-testing approaches and other forward-looking portfolio analyses to estimate our vulnerability to climate-related risks. As of 31 December 2021, we had reduced our lending exposure to carbon-related assets to 9.9% (USD 45.6 billion) of our total customer lending exposure. This is down from 10.4% at the end of 2020 and 10.7% at the end of 2019.

Carbon-related assets are defined as significant concentrations of credit exposure to assets tied to the four non-financial groups as defined by the TCFD (using Global Industry Classification Standard, GICS). These four groups are (i) energy; (ii) transportation; (iii) materials and buildings; and (iv) agriculture, food and forest products. Recognizing that the term carbon-related assets is currently not well defined, the TCFD encourages banks to use a consistent definition to support comparability. We continue to collaborate with the industry to drive further consistency.


3. Reducing our climate impact

We are committed to achieving net-zero emissions in our own operations (scopes 1 and 2) by 2025. We will do this by replacing fossil fuel heating systems, maintaining our 100% renewable electricity coverage and investing in credible carbon removal projects (including negative emissions technology). We are compensating our historical scopes 1 and 2 emissions back to the year 2000 and have sourced credible and clear carbon offsets and investments in nature-based solutions. Furthermore, we are currently working to understand and quantify the scope 3 emissions in our supply chain. We are engaging with our key vendors on targeting net zero by 2035.1

Many of our climate impacts are indirect, arising from emissions in our financing, lending and assets under management. As such, we plan to align these activities toward our net-zero goal. As set out in this report, we have already started to quantify our indirect climate impacts, which will enable us to improve our performance in this area.

4. Mobilizing capital

We mobilize private and institutional capital through investments that help the world mitigate and adapt to climate change.

We were the first major global financial institution to have made sustainable investments the preferred solution for our private clients wishing to invest globally.  We also support our goal of mobilizing capital as a lender and as an arranger, underwriter and / or structurer of securities. For corporate clients, we support the issuance of green, social, sustainability and sustainability-linked bonds – as well as the raising of capital in international capital markets – in line with recognized market guidelines, such as the ICMA Green Bond Principles and, in relation to green and sustainable loans, the Loan Market Association Sustainability Principles. In 2021, we began offering borrowers Green Mortgages via our key4  platform, the first Swiss real estate platform for investment properties that promotes sustainable mortgages.

Detailed data accounting of our financed emissions helps us to identify climate-related opportunities requiring capital, and to improve and tailor our sustainable product range for clients. Additionally, such insights help UBS, our partners and our clients in a number of ways. For instance, they reduce the risk of stranded assets.

    Refer to ”What we do for our clients,” ”Reducing our environmental footprint” and Appendix 4 to this report for more information about key activities pertaining to the four strategic pillars

 

 

 

 

 

 

 

 

 

1 A GHG key vendor is a top GHG scope 3 emitter relative to UBS’s overall scope 3 supply chain emissions and with whom UBS has a long-term ongoing relationship. Together our GHG key vendors contribute to a significant portion of UBS’s estimated supply chain scope 3 emissions.

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Sustainability Report 2021 | What 

 

42 


 

Our strategic resilience to climate change

UBS wants to be part of the solution to climate change while protecting our clients’ and our own assets. To do so, we embed climate change considerations in our strategic planning and processes. We observe the materiality of climate change impacts through a “double-materiality“-lens: (1) how UBS can best contribute to the transition to a net-zero world; and (2) how climate change can impact UBS and its strategy, business planning and processes.

To determine the materiality of key drivers of climate risks and opportunities, such as policy and regulatory developments, or climate investment opportunities, we have developed a UBS materiality assessment for climate risks and opportunities.

Our goal is to identify the time horizon and potential impact that these drivers may have on a bank’s business strategy (if materialized). We will further refine this approach over time, by reflecting new client data, climate scenario and business projections and enhanced methodologies to quantify risks and opportunities.

 

Time horizons for climate assessments

Short-term time horizon

0–3 years

Medium-term time horizon

3–10 years

Long-term time horizon

Beyond 10 years

 


Methodology for assessing climate risks

At UBS climate risks can arise either from changing climate conditions (physical risks) or from efforts to mitigate climate change (transition risks). Physical and transition risks contribute to a structural change across economies and consequently can affect banks and the financial sector through financial and non-financial impacts.

UBS takes a materiality-driven approach to assessing the potential impacts of climate risks, while considering the time horizon of these impacts. UBS defines short term as less than three years, medium term as three to ten years and long term as beyond ten years. For selected climate risk assessments, we use a time horizon of up to 2050 for transition risk and up to 2100 for both transition and physical risk. According to current understanding of the potential impacts of climate change, physical risks identified today are most commonly expected to materialize in the long term while transition risks can materialize in short-, medium- and long-term time horizons.

On an annual basis the sustainability and climate risk (SCR) unit coordinate a systematic materiality assessment of risks in accordance with the ISO 14001 standard.

The assessment covers all business divisions, as well as the products and services within them, to assess if and where products and services may have an impact on climate (and / or the environment) and / or pose a risk (e.g., financial, reputational, etc.) to UBS (rated on severity and frequency, where frequent and / or severe sustainability or climate risks are defined as having a substantive impact).

We prioritize risks and opportunities by focusing on the impact of climate change and on our exposure to the risk, considering factors such as the product, service, client base, etc. Each business division assesses and rates the potential for risks and / or opportunities arising in the products and services offered according to a step-by-step procedure of evaluation and ranking, review and approval, and documentation. Items rated as having a substantive impact are further referred to management.

For the climate risk materiality assessment, we applied two different criteria: We rated (i) potential financial risk to UBS (direct and indirect impact), and (ii) climate impact through UBS activity based on internal methodology, using as reference scientific and regulatory publications on climate risk. We subsequently added up these assessments to arrive at the overall materiality assessment on a relative basis.

 

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Transition risks

1.    Policy and regulatory: As a global financial services firm active in wealth management, asset management, investment banking, and the provision of services to corporate and institutional clients, our firm can be affected directly and indirectly by new carbon pricing regulation and energy transition policies. These measures can be designed to both constrain the impacts of climate change and / or promote an adaptive response to climate change impacts. They could impact UBS’s own operations, as well as the business operations of our corporate clients given that such clients rely on the bank to finance their activities across a range of sectors. We routinely assess the impact of current and emerging regulation, either directly affecting our operations or indirectly affecting those sectors where we have clients. Assessments and gap analysis exercises are conducted several times a year following a standardized identification process defined by the climate risk program. Additionally, regulatory developments are assessed for impacts via quarterly monitoring. We see the below potential risks emerging in the short term.

2.    Technological change: UBS, together with corporate clients that rely on the bank to finance their activities in a range of sectors, is both directly and indirectly exposed to technological changes. These changes, such as the rise of electric vehicle / battery technologies in the automotive sector or energy storage technology advancement impacts on the power utility sectors, are analyzed by UBS through scenario analysis approaches. We see these potential risks emerging in the short to medium term.

3.    Reputation: Climate-related methodologies and standards will continue to change in the coming years. Our reputation may be adversely affected if our climate-related actions and methods are not perceived as meeting existing or future industry standards and best practice. Examples of this would be allegations related to greenwashing or inadequate action on climate change. Increased reputational risks could lead to loss of business and may result in changes in regulations, which in turn could impact UBS’s business model. We see these potential risks emerging in the short term.

4.    Market and sentiment: We have made protecting our clients’ assets a strategic pillar in our firm’s climate approach. Amid a growing demand for climate-focused products and services, UBS needs to actively respond to market changes driven by the low-carbon transition and clients’ interest in managing climate-related risks. We address this potential risk through our comprehensive sustainability and climate-focused product and service offering. We see the potential risks arising from a failure to do so in the short term.


Physical risks

1.    Acute: Impacts from extreme weather events may affect the value of physical assets that UBS owns and finances. We address the risks to our own physical assets through our comprehensive business continuity planning and physical climate risk identification process.

2.    Chronic: Impacts from incremental climate change may affect the value of physical assets that UBS owns and finances. Incremental changes in climate (e.g., rising temperatures and changes in precipitation patterns) can exacerbate extreme events, making them more frequent and severe, which in turn affects economic output and productivity. Such events could reduce the value of properties held as collateral. We see these potential risks emerging in the long term.

 

While we put the necessary focus on identifying, assessing and managing climate-related risks, the transition to net zero opens new opportunities as well. Our approach to capturing and expanding such opportunities is elaborated below.

    Refer to “Climate scenario analysis” below for more details on how UBS performs scenario analyses and considers time horizons

 

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Methodology for assessing climate opportunities

Climate change has become integral to the way we conduct business at UBS.

Our materiality assessment starts with an in-depth analysis of the various products and services directly related to climate in our business divisions (Global Wealth Management, Personal & Corporate Banking, Asset Management, and the Investment Bank). In addition, a cross-divisional team of experts has identified those areas where the business divisions are planning new products and services with a direct link to climate.

The definitions of the time horizons are described above. A product is considered to have “a direct link to climate change” if it is intended to primarily contribute to one or more of the identified impact areas: climate mitigation, climate adaptation or climate transition.

Having identified the overall list of opportunities, we then classified them according to six categories recognized as major climate-related opportunities for the financial sector, based on insights from various relevant studies and publications. Using this list, we assessed the materiality according to the definition of the Global Reporting Initiative (the GRI). According to the GRI a topic is material if it has “a direct or indirect impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large.”

In the assessment matrix on the following page, the materiality of a given initiative combines both its business and its societal impact. We sounded and assessed the various expert inputs to create a standardized methodology for the overall materiality outcome of the different initiatives. These assessments are aggregated according to the main categories and presented on the following page.  

For the assessment, we used three different criteria: (i) overall revenue opportunities; (ii) strategic relevance of the opportunity for the business division; and (iii) potential impact that the opportunity can have on society. We subsequently added these assessments together to arrive at the overall materiality assessment on a relative basis.

    For more information on the GRI’s definition of materiality refer to globalreporting.org 


Climate-related client opportunities

The transition to a low-carbon world will be a significant catalyst for the overall allocation of capital. As a financial service provider UBS is at the center of this re-direction. As such, it is well placed to develop opportunities for offering innovative products and services to our client base.

We have categorized the various initiatives and opportunities identified within the business divisions into six groups:

1.    Advice on strategic climate opportunities: This includes advice to clients on strategic opportunities related to client investment opportunities, market sentiment and transactions insights, as well as engaging with corporates on environmental solutions.

2.    Carbon offsets: This includes supporting our clients on assessing and offsetting the overall carbon footprints of their investment portfolios. This can include digital solutions to assess carbon footprints for both private and institutional investment clients. Services can also include tools for assessing and offsetting carbon footprints for corporate clients, leveraging expertise in carbon-offsetting markets.

3.    Climate investment products: This includes further expanding our wide range of climate-focused investment products for our private and institutional clients. For example, we may use our experience in offering indexed solutions with a customized profile to develop climate-focused index-linked products. Non-traditional asset classes (e.g., hedge funds) may focus on specific climate investments relating to climate transition or climate adaptation.

4.    Climate investment advice: This includes opportunities to support our clients in directing capital to support climate goals, for example through education on sustainable finance, or the provision of meaningful climate metrics that can be used in supporting the goals of individual investors. In a broader sense this would also include products that highlight the effects of climate change topics on investment opportunities and risks.

5.    Facilitating climate-financing opportunities: This includes all opportunities within the bank to support clients, in particular our corporate clients, with advice and structuring of debt related to climate financing. This could for example be green, sustainability-linked and transition bonds. Additional opportunities may encompass advising and underwriting transactions (e.g., IPOs, follow-ons or private placements) for clients with products and services that are focused on climate innovations.   

6.    Financing climate opportunities: This includes financing opportunities for green projects and infrastructure (e.g., renewable energy) including the opportunity to generate positive externalities on other SDGs. Products and services that support our clients in lowering the carbon intensity of their real estate exposure also fall within this category.

 

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Sustainability Report 2021 | What 

46 


 

Key climate-related memberships and commitments (as of 31 December 2021)

 

Initiative

UBS role / activity

Key outcome of initiative in 2021

UBS contribution / commitment

Task Force on Climate-related Financial Disclosure (TCFD)

Member of the TCFD, which includes 32 individuals from financial and non-financial companies.

Updated TCFD recommendations, including guidance on disclosing metrics, targets, transition plans, and portfolio alignment metrics.

      Contributed to the updating of the TCFD recommendations.

UN Environment Programme Finance Initiative (UNEP FI)

Participant in in the UNEP FI’s second TCFD banking program, which includes 39 global financial institutions from six continents.

Further developed approaches to
help banks assess and disclose their exposures to climate-related risks and opportunities,
as envisioned by the TCFD.

      Participated in a year-long engagement, wherein we, along with other participating banks, worked together with climate risk experts to improve financial assessments of climate-transition risks.

Net Zero Asset Managers initiative (NZAMi)

Founding member of NZAMi, which includes 220 asset managers managing over USD 57 trillion of assets.

In November 2021, we were one of the largest and most diversified firms to set an interim 2030 target.

Published first progress report in November 2021 which contained interim targets from 43 asset managers. As per the progress report, signatories disclosed an average of 35% of total assets under management (AuM) as being managed in line with achieving net zero by 2050 (USD 4.2 trillion out of a possible USD 11.9 trillion).

      Work in partnership with asset owner clients on decarbonization goals, consistent with an ambition to reach net-zero emissions by 2050 or earlier across all AuM.

      Committed to align USD 235 billion AuM, equivalent to 35% of eligible assets and 20% of our total AuM.

      Will review interim target at least every five years, with a view to increasing the proportion of AuM covered until 100% of assets are included.

Net-Zero Banking Alliance (NZBA)

Founding member of NZBA.

Active participant in working groups on “Sectoral target-setting,” “Data and Methodologies,” “Financing and Engagement” and “Implementation.”

Developing guidelines, frameworks, methodologies, and timelines for net-zero implementation in the global banking sector. 

      Contributed to setting up the NZBA and actively involved in working groups.

      Work with member banks to develop necessary methodologies, frameworks and guidelines to reach net-zero emissions latest by 2050.

      Committed to publishing ambitious intermediate targets for priority sectors within 18 months of signing, and for all sectors within 36 months of signing, and to regularly review targets in line with NZBA guidelines.

Glasgow Financial Alliance for Net Zero (GFANZ)

 

Founding member of GFANZ.

Active participant in workstreams on “Financial institution transition plans,” “Portfolio alignment measurement” and “Policy call to action.”

Bringing together existing and new net-zero finance initiatives in one sector-wide coalition, GFANZ provides a forum for leading financial institutions to accelerate the transition to a net-zero global economy. 

      Active involvement in working groups.

      Work with members institutions from across the financial services industry on supporting the economy-wide transition to net zero.

Institute of International Finance (IIF) Sustainable Finance Working Group (SFWG)

Chair of SFWG.

Produced a report titled “Navigating Climate Headwinds,” which summarized the experiences to date of more than twenty banks across eight jurisdictions with regulatory climate risk scenario analysis exercise; and provided recommendations to the Central Bank and Supervisory Network for Greening the Financial System (NGFS) and the Basel Committee on Banking Supervision’s (BCBS) Taskforce on Climate-related Financial Risks (TCFR) on how to take forward regulatory and supervisory activity.

      Committed to providing leadership for this key financial services industry forum.

      Worked with SFWG members from across the financial industry on identifying policy and regulatory frameworks and capital market solutions that support the development and growth of sustainable finance.

Note: In addition to the memberships listed above, UBS also joined the Partnership for Carbon Accounting Financials (PCAF) in 2022. We aim to disclose emissions in future reporting across our loan book based on PCAF standards, in accordance with PCAF’s expectations regarding implementation timelines.

    Refer to Appendix 7 to this report for more details about UBS memberships and commitments

47 


Sustainability Report 2021 | What 

Managing climate risks

At UBS, SCR is defined as the risk that UBS is negatively impacted by or negatively impacts climate change, loss of biodiversity, human rights infringements, and other environmental, social and governance factors.

    Refer to the “Risk management and control” section of the UBS Annual Report 2021 for the UBS risk categories

 

Sustainability and climate risks may manifest as credit, market, liquidity or operational risks, resulting in potential adverse financial or reputational impacts for UBS. They may also negatively impact the value of investments. Climate risks can arise from either changing climate conditions (physical risks) or from efforts to mitigate climate change (transition risks). Physical and transition risks from a changing climate contribute to a structural

change across economies and consequently can affect banks and the financial sector through financial and non-financial impacts. In March 2020, Group Risk Control established our firm’s climate risk program to further integrate climate risk in the firm’s risk management framework and standard processes. The program follows a multi-year roadmap to address current and emerging regulations and is engaging with stakeholders and experts both internally and externally to further develop climate risk methodologies, deliver on climate stress test exercises, and build capacity to respond to climate risk management expectations.

We currently identify and manage climate risks in our own operations, our balance sheet, client assets and the supply chain. To protect our clients’ and our own assets from climate-related risks, in 2021 we continued to drive the integration of climate-related risk into our standard risk management framework.

We further integrated climate risk in: (i) risk identification and measurement; (ii) risk monitoring and appetite setting; (iii) risk management and control; and (iv) risk reporting processes across the organization. Our Climate Risk Management Framework is described in more detail in the graph and text below. Implementation of the framework is in progress.

 

 

48 


 

Climate risk identification and measurement

UBS approaches climate risk identification through climate risk heatmaps, which enable us to take a materiality-driven approach to climate risk management.

Climate-related physical and transition risks are identified at divisional and cross-divisional level and integrated in the firm-wide risk identification process.

    Refer to our climate materiality assessment above

 

The heatmaps enable UBS to take a materiality-driven approach to further inform our climate risk management strategy by:

     helping us to identify concentrations of exposure with high climate risk vulnerability, which, in turn, enables resource prioritization for a detailed risk analysis and management action;

     supporting a client-centric strategy in order to best assist clients that may benefit from UBS products and services in support of their climate transition strategies; and by

     providing information to senior management to support decision making and the provision of external disclosure to stakeholders.

 

Our climate risk heatmaps rate cross-sectoral credit risk exposure to climate sensitivity, from high to low, through a risk segmentation process. These ratings are based on climate risk ratings determined by ratings agencies, regulators and expert consultants and have been further developed by UBS subject matter experts. Using the climate heatmaps, UBS defines “climate-sensitive” exposures, by examining exposures that are rated moderate and higher, under both the physical and transition risk methodologies.

The two methodologies are distinct in their approach and application. Counterparties may therefore appear in one or both of the heatmaps and are assigned a climate vulnerability rating based on the primary industry code (GICS) and risk domicile in UBS data systems.

Transition risk heatmap

The transition risk heatmap methodology is based on dividing economic sectors with similar risk characteristics into risk segments and rating those segments according to their vulnerability to climate policy, low-carbon technology risks, and revenue or demand shifts under an aggressive approach to meeting the well-below-2˚C Paris goal. As a result, the ratings in the heatmap reflect the levels of risk that would likely occur under an ambitious transition (in a short- to medium-term time horizon).

The current transition risk heatmap shows that UBS’s exposure to activities rated as having high, moderately high or moderate vulnerability to climate transition risks is relatively low.


Most fluctuations from 2020 to 2021 were driven by the combination of the 2020 COVID-19-related dip in energy demand and prices, followed by increased energy demand and higher energy prices in 2021. Despite these fluctuations, we have continued to reduce our exposure to climate-sensitive sectors since 2019.

Physical risk heatmap

We continued to innovate new methodologies in 2021, by developing a novel physical risk heatmap methodology.

The physical risk heatmap methodology groups corporate counterparties based on exposure to key physical risk factors, by rating sectoral, geographic, and value chain vulnerabilities in a climate change trajectory, in which no additional policy action is taken. A rating is applied based upon:

     the counterparty’s sectoral activity (e.g., primary energy extraction presents higher physical risks than banks);

     the counterparty’s geography (e.g., countries in Southeast Asia tend to be higher risk than those in western Europe, with some exceptions); and

     the potential disruption to a counterparty’s value chain, where relevant (both its supply chain, customer base and distribution channels).

 

UBS will continue to build upon the methodology in 2022, further enhancing our approach with relevant subject matter experts. The current physical risk heatmap shows that UBS has no exposure to high-risk activities, and relatively low exposure to activities rated as having moderately high or moderate vulnerability to physical climate risks.

Key concentrations of exposure include high volumes of lending collateralized by real estate in Switzerland. Most of our lending is to the financial sector, which is by nature lower risk, with the key exception of lending to property insurance companies or lending in particularly higher-risk regions, such as South Asia. Both transition and physical risk heatmap (as proof of concept) are presented on the next pages.

 

49 


Sustainability Report 2021 | What 

 

50 


 

  

 

51 


Sustainability Report 2021 | What 

Climate scenario analysis

Since 2014, we have been using scenario-based approaches to assess our exposure to physical and transition risks stemming from climate change.


Early in-house scenario analyses have been followed by a series of assessments performed through industry collaborations in order to harmonize approaches for addressing methodological and data gaps. We have performed both top-down balance sheet stress testing (across the firm), as well as targeted, bottom-up analysis of specific sector exposures covering short-, medium-, and long-term time horizons. In 2021, UBS began to participate in regulatory stress test exercises. The table below summarizes the UBS scenario assessments performed to date.

 

 

Assessment

Year

Scenarios used

Time horizon1

Outcomes

Regulatory stress
test exercises

 

Bank of England Climate Biennial Exploratory Scenario (CBES):

Financial risks from climate change

2021–2022

CBES scenarios (consistent with but not identical to NGFS scenarios):

      early action

      late action

      no additional action

Long-term
(LT)

Stress test exercise is ongoing (UBS is participating on a voluntary basis)

European Central Bank (ECB) climate risk stress test

2021–2022

Macro-financial scenarios based on NGFS scenarios

LT

Stress test exercise is ongoing

Swiss Financial Market Supervisory Authority (FINMA) / Swiss National Bank (SNB) climate risk assessment:

Focus on measurement of climate-related transition risks

2021

NGFS-based scenarios

LT

UBS participated in assessment in 2021

FINMA expected to publish conclusions in its Annual Report 2021 

Scenario analysis informed by industry collaboration

 

UNEP FI TCFD phase III project for banks and investors:

Deep dive on climate transition risks in real estate, portfolio alignment methods, and client-centric approaches for supporting transition strategies

2021

NGFS scenarios

Short-term
(ST)

Medium-term
(MT)

LT

Phase III informed internal projects, capacity building, training and further enhancement of climate materiality and heatmap methodologies

UNEP FI TCFD phase II project for banks:

Further development of climate scenarios, in line with the range of reference scenarios published by the NGFS

Development of a heatmap methodology

Pilot testing the credit analysis methodology on our oil and gas portfolio and physical risk analysis on our real estate mortgage portfolio

2020

Integrated Assessment Modeling Consortium (IAMC) scenarios (presented in the table below as part of NGFS scenarios)

Other academic research supporting scenario-aligned natural catastrophe analysis

ST

MT

LT

UBS has a very low exposure to economic activities with moderate to high transition risk

No significant credit loss from transition risks in orderly and disorderly 1.5°C scenarios

No significant losses expected from lending collateralized by real estate neither in Switzerland nor the United States

Paris Agreement Capital Transition Assessment (PACTA) 2020 climate alignment test:

Studying the climate alignment of Swiss mortgages, direct real estate investments and listed investments portfolios

2020

IEA2, B2DS3, SDS4, NPS5, CPS6

ST

MT

Listed investments results show that UBS has a relatively low exposure to power, automotive and fossil fuel sectors overall, compared with the aggregated results of all participating banks’ portfolios

PACTA:

Testing the alignment of UBS corporate lending portfolios with Paris Agreement benchmarks

2019–2020

IEA2, B2DS3, SDS4, NPS5, CPS6

ST

MT

UBS has a low lending exposure to high-carbon sectors

 

52 


 

 

Assessment

Year

Scenarios used

Time horizon1

Outcomes

 

UNEP FI TCFD phase | project for banks:

Development of a credit analysis methodology that uses integrated assessment modeling (IAM) climate scenarios; pilot testing the methodology on UBS power utilities credit portfolio

2018–2019

IAMC

ST

MT

No significant credit loss neither from transition risks in 2-degree scenarios, nor impacts from physical risks in 4- and 2-degree scenarios

Natural Capital Finance Alliance / United Nations Environment Programme Finance Initiative (UNEP FI):

Assessment of the impact of increased drought on productivity of borrowers in UBS energy credit portfolio

2017

Historic academic precipitation observations

ST

MT

No significant production impact from drought

In-house scenario analysis

 

Assessment of physical climate hazard impacts on mortgage portfolios secured by real estate

2015

Climate scenario developed in-house

ST

MT

Low financial impact due to insurance coverage and loan maturity profile

Assessment of climate transition risk impacts (changing oil, gas and coal prices, implying an increased carbon price) on oil, gas and electric utilities credit portfolios

2015

Climate scenario developed in-house

ST

MT

Low financial impact due to high quality and maturity profile of portfolio

UBS climate stress test to assess firm-wide vulnerability to climate change (impacts to balance sheet, operational income and physical assets)

2014

Climate scenario developed in-house

ST

MT

Moderate financial impact in line with other stress scenarios, such as those that foresee an oil shock

1 ST= short-term, 0–3 years; MT  = medium-term, 3–10 years; LT  = long-term, over 10 years.    International Energy Agency (IEA), World Energy Outlook.    Beyond 2-Degree Scenario    Sustainable Development Scenario    New Policies Scenario    Current Policies Scenario.

Note: Climate scenario analysis is a novel area of research, and we expect the methodologies, tools and availability of data to evolve and improve over time. This overview summarizes the key scenario assessments and pilots conducted at UBS since 2014. We will build upon these to deepen our understanding of climate risks and opportunities.

 

53 


Sustainability Report 2021 | What 

Climate scenarios used at UBS

 

Scenario name

Developed by

Temperature alignment

Type3

Carbon Dioxide Removal (CDR)4

Description (as provided by the developing organization)

Net Zero 2050 (2021)

NGFS1

1.5°

Orderly

Moderate reliance

Net Zero 2050 is an ambitious scenario that limits global warming to 1.5°C, with stringent climate policies and innovation, reaching net-zero CO₂ emissions around 2050. Some jurisdictions such as the US, EU and Japan reach net zero for all greenhouse gases by this point. This scenario assumes that ambitious climate policies are introduced immediately. CDR is used to accelerate the decarbonization but kept to the minimum possible and broadly in line with sustainable levels of bioenergy production. Net CO₂ emissions reach zero around 2050, giving at least a 50% chance of limiting global warming to below 1.5°C by the end of the century, with no or low overshoot (<0.1°C) of 1.5°C in earlier years. Physical risks are relatively low, but transition risks are high.

Below 2°C
(2021)

NGFS

1.8°

Orderly

Moderate reliance

Below 2°C gradually increases the stringency of climate policies, giving a 67% chance of limiting global warming to below 2°C. This scenario assumes that climate policies are introduced immediately and become gradually more stringent, though not as high as in Net Zero 2050. CDR is deployment is relatively low. Net-zero CO₂ emissions are achieved after 2070. Physical and transition risks are both relatively low.

Divergent Net Zero (2021)

NGFS

1.5°

Disorderly

Low reliance

Divergent Net Zero reaches net zero by 2050 but with higher costs due to divergent policies introduced across sectors and a quicker phase out of fossil fuels. This scenario differentiates itself from Net Zero 2050 by assuming that climate policies are more stringent in the transportation and building sectors. This mimics a situation where the failure to coordinate policy stringency across sectors results in a high burden on consumers, while decarbonization of energy supply and industry is less stringent. Furthermore, the availability of CDR technologies is assumed to be lower than in Net Zero 2050. Emissions are in line with a climate goal giving at least a 50% chance of limiting global warming to below 1.5°C by the end of the century, with no or low overshoot (<0.1°C) of 1.5°C in earlier years. This leads to considerably higher transition risks than Net Zero 2050 but overall the lowest physical risks of the six NGFS scenarios.

Delayed Transition (2021)

NGFS

1.8°

Disorderly

Low reliance

Delayed Transition assumes global annual emissions do not decrease until 2030. Strong policies are then needed to limit warming to below 2°C. Negative emissions are limited. This scenario assumes new climate policies are not introduced until 2030 and the level of action differs across countries and regions based on currently implemented policies, leading to a “fossil recovery” out of the economic crisis brought about by COVID-19. The availability of CDR technologies is assumed to be low, pushing carbon prices higher than in Net Zero 2050. As a result, emissions exceed the carbon budget temporarily and decline more rapidly than in well-below-2°C after 2030, to ensure a 67% chance of limiting global warming to below 2°C. This leads to both higher transition and physical risks than Net Zero 2050 and below 2°C scenarios.

Nationally Determined Contributions (2021)

NGFS

~2.5°

Hot house world

Low reliance

Nationally Determined Contributions (NDCs) includes all pledged policies even if not yet implemented. This scenario assumes that the moderate and heterogeneous climate ambition reflected in the NDCs at the beginning of 2021 continues over the course of the 21st century (low transition risks). Emissions decline but lead nonetheless to about 2.5°C of warming associated with moderate to severe physical risks. Transition risks are relatively low.

Current Policies (2021)

NGFS

+3.0°

Hot house world

Low reliance

Current Policies assumes that only currently implemented policies are preserved, leading to high physical risks. Emissions grow until 2080, leading to about 3°C of warming and severe physical risks. This includes irreversible changes, such as higher sea levels. This scenario can help central banks and supervisors consider the long-term physical risks to the economy and financial system if we continue on our current path to a “hot house world.”

Early Action

BoE - CBES 20212

1.8°

Orderly

Moderate reliance

The transition to a net-zero economy starts in 2021, so carbon taxes and other policies intensify relatively gradually over the scenario horizon. Global CO2 emissions are reduced to net zero by around 2050. Some sectors are more adversely affected by the transition than others, but the overall impact on GDP growth is muted, particularly in the latter half of the scenario once a significant portion of the required transition has occurred and the productivity benefits of green technology investments begin to be realized.

Late Action

BoE - CBES 20212

1.8°

Disorderly

Low reliance

The implementation of policy to drive the transition is delayed until 2031 and is then more sudden and disorderly. The more compressed nature of the reduction in emissions results in material short-term macroeconomic disruption. This affects the whole economy but is particularly concentrated in carbon-intensive sectors. Output contracts sharply in the UK and international economies. The rapid sectoral adjustment associated with the sharp fall in GDP reduces employment and leads to some businesses and households not being able to make full use of their assets, with knock-on consequences for demand and spending. Risk premia rise across multiple financial markets.

                     

 

54 


 

Scenario name

Developed by

Temperature alignment

Type3

Carbon Dioxide Removal (CDR)4

Description (as provided by the developing organization)

No Additional Action

BoE - CBES 20212

3.3°

Hot house world

Low reliance

Primarily explores physical risks from climate change. Here, there are no new climate policies introduced beyond those already implemented. A growing concentration of greenhouse gas emissions in the atmosphere and global temperature levels lead to chronic changes in precipitation, ecosystems and sea level. There is also a rise in the frequency and severity of extreme weather events such as heatwaves, droughts, wildfires, tropical cyclones and flooding. There are permanent impacts on living and working conditions, buildings and infrastructure, realized through GDP. Changes in physical hazards are unevenly distributed with tropical and sub-tropical regions affected more severely. Many of the impacts from physical risks are expected to become more severe later in the 21st century and some will become irreversible.

Representative Concentration Pathways (RCP) 6

IPCC / scientific community

3-4°C

Hot house world

Low reliance

The RCP 6.0 scenario uses a high greenhouse gas emission rate and is a stabilization scenario where total radiative forcing is stabilized after 2100 by employment of a range of technologies and strategies for reducing greenhouse gas emissions. Emissions peak around 2080, then decline.

Sustainable Development Scenario
(2021)

IEA

1.65°

Orderly

Moderate reliance

A “well-below-2°C” pathway, this scenario is a gateway to the outcomes targeted by the Paris Agreement. It is based on a surge in clean-energy policies and investment that puts the energy system on track for key SDGs. In this scenario, all current net-zero pledges are achieved in full and there are extensive efforts to realize near-term emissions reductions; advanced economies reach net-zero emissions by 2050, China around 2060, and all other countries by 2070 at the latest.

The Net-Zero Emissions by 2050 Scenario
(2021)

IEA

1.5°

Orderly

Moderate reliance

This is a normative IEA scenario that shows a narrow but achievable pathway for the global energy sector to achieve net-zero CO2 emissions by 2050, with advanced economies reaching net-zero emissions in advance of others. This scenario assumes stable and affordable energy supplies, providing universal energy access, and enabling robust economic growth, while minimizing costs.

Stated Policies Scenario
(2021)

IEA

2.6°

Hot house world

Low reliance

This scenario provides a more conservative benchmark for the future because it does not take for granted that governments will reach all the announced goals. Instead, it takes a more granular, sector-by-sector look at what has actually been put in place to reach these and other energy-related objectives, taking into account not only existing policies and measures but also those that are under development. The policies assessed in the Stated Policies Scenario cover a broad spectrum. These include NDCs under the Paris Agreement, and many others.

               

1 Network for Greening the Financial System.    2 Bank of England / Climate Biennial Exploratory Scenario 2021. The BoE built upon the reference scenarios published by the NGFS; UBS performed additional in-house expansion of BoE scenarios, to undertake the analysis across multiple regions and sectors.    3 Orderly: low transition risk and low physical risks; disorderly: higher transition risks and low physical risks; hot house world: low transition risks and high physical risks.    4 Carbon Dioxide Removal (CDR): indicates reliance on CDR policies and technologies, such as carbon capture and storage (CCS).

 

55 


Sustainability Report 2021 | What 

Regulatory scenario analysis and stress test exercises

In 2021, UBS began participating in regulatory scenario analysis and stress test exercises, namely the Bank of England (BoE) 2021 Climate Biennial Exploratory Scenario (CBES): Financial risks from climate change as well as the European Central Bank (ECB) climate stress test. In 2021, we also participated in a top-down climate risk assessment performed jointly by FINMA and the SNB in Switzerland.

For the 2021 CBES exercise, the BoE is using exploratory scenarios to investigate a range of climate risks stemming from climate change. While UBS was not formally required to participate, as we are not a UK-headquartered bank, we opted in to the exercise in order to learn from the effort and given our footprint in the UK.

UBS Europe SE is participating in the ECB supervisory climate risk stress test, which assesses how prepared banks are for dealing with financial and economic shocks stemming from climate risk. The exercise will be conducted in the first half of 2022, after which the ECB will publish aggregate results.

Throughout 2021, we have engaged with a range of regulatory surveys and other requests for information from supervisors around the globe. We contributed to the NGFS’s work exploring the potential for risk differentials among assets due to climate change. We also participated in industry efforts to evaluate regulatory exercises to date. This included the IIF report “Navigating Climate Headwinds,” which examined learnings from 20 global institutions on regulatory climate scenario analysis and stress test exercises. We will continue to leverage these learnings as it further enhances testing methodologies.

Scenario analysis informed by industry collaboration

In 2018, UBS began a multi-year collaboration with a broad peer group of banks, the UNEP FI, the IAMC and risk consultancy firms Oliver Wyman and Acclimatise. Now entering its fourth year, our objective is to develop analytical tools to help banks define and disclose climate-related risks and opportunities, as recommended by the TCFD. This includes developing and standardizing how we quantify climate-related risks, addressing data gaps in the process, including Paris-aligned scenarios, and further refining scenario-based stress-testing methodologies. These advancements aim for banks to more robustly identify and disclose exposure to climate-related risks and opportunities.

In addition to the UNEP FI TCFD working group for banks, between 2019 and 2020, UBS was one of the pilot banks testing the PACTA methodology. In the context of the PACTA for lending pilot, we studied the alignment of select climate-sensitive sectors in our corporate credit portfolio with Paris Agreement benchmarks. The methodology provides an assessment of a bank’s credit-financed activities in relation to the global shift to a low-carbon economy. We also participated in the PACTA 2020 climate alignment test, which focused on assessing listed investments, mortgage and direct real estate portfolios. On this occasion, the PACTA methodology was applied to listed investments portfolios and our results were compared with the aggregated results of all participating banks’ portfolios.


In-house scenario assessments

Our initial top-down approach in 2014 consisted of a scenario- based stress test to assess UBS’s balance sheet vulnerability across the firm. Leveraging our existing firm-wide, top-down stress-testing methodology, we developed a climate-change scenario. It assumed that severe weather events will result in governments worldwide agreeing to implement carbon-pricing mechanisms to assess the impact on financial assets, operational income and physical assets. The scenario envisioned that these mechanisms would prompt a shift away from coal and other fossil fuels to cleaner alternatives, adversely impacting markets and GDP.

Our subsequent bottom-up analyses in 2015 of loan portfolios involving oil and gas firms, as well as electric utilities, consisted of a forward-looking analysis to assess the impacts of a long-term low fossil fuel price scenario resulting from policies promoting greater use of renewables, enhancing efficiency standards and limiting emissions. We calculated the impact this scenario would have on companies’ probability of default and aggregated company-level results at the portfolio level to assess changes to expected loss. We also assessed the vulnerability of loan portfolios secured by real estate in Switzerland and the US to physical risk. We did this by mapping the location of collateral in more than 6,000 postal code areas against Swiss Re’s CatNet tool, which aggregates a large dataset of observed natural hazards such as wildfire, river and pluvial flooding, and tropical cyclones.

From both top-down and bottom-up approaches, our internal stress tests suggested no immediate threat to UBS’s balance sheet. However, we identified methodological challenges ranging from the suitability of climate scenarios for banking risk modeling to data availability.

Climate risk monitoring and risk appetite

In 2021, we further expanded our suite of climate risk metrics in response to the revised guidance on implementation of the TCFD recommendations. This includes the development of a physical risk heatmap methodology and expansion of the scope of climate-sensitive sectors and carbon-related assets metrics.

We further refined our ability to estimate the firm’s vulnerability to climate-related risks by developing a physical risk heatmap in addition to the transition risk heatmap, which was first published in our 2020 report.

    Refer to our transition and physical risk heatmaps under “Climate risk identification and measurement” above

 

The current inventory of UBS’s exposure to climate-sensitive activities (transition and physical risks) at the sector level is summarized in the tables below.

 

56 


 

UBS corporate lending to climate-sensitive sectors – transition risks

 

 

As of 31.12.21

 

 

As of 31.12.20

As of 31.12.19

USD million

 

Trend (%) 2019 to 2021

Gross exposure2

Share of total exposure2

Share of total exposure2

Share of total exposure2

Climate-sensitive sector1

 

 

 

 

 

 

Aerospace and defence

 

¯

831

0.18%

0.21%

0.56%

Automotive

 

¯

703

0.15%

0.22%

0.20%

Business services

 

 

 

 

 

 

Chemicals

 

¯

1,112

0.24%

0.46%

0.30%

Construction and materials

 

¯

3,637

0.79%

0.86%

0.86%

Consumer products and retail

 

®

355

0.08%

0.06%

0.08%

Entertainment, leisure and services

 

 

 

 

 

 

Food and beverage

 

®

2

0.00%

0.00%

0.00%

Industrial materials

 

¯

121

0.03%

0.03%

0.07%

Information technology

 

 

 

 

 

 

Machinery and equipment

 

­

1,040

0.23%

0.21%

0.16%

Medical equipment and services

 

 

 

 

 

 

Mining

 

¯

2,920

0.64%

0.64%

0.65%

Oil and gas

 

¯

5,823

1.27%

1.09%

1.42%

Pharmaceuticals / biotechnology

 

­

1,400

0.30%

0.34%

0.16%

Plastic and rubber

 

¯

299

0.07%

0.08%

0.08%

Primary materials

 

®

13

0.00%

0.00%

0.00%

Real estate management

 

¯

18,029

3.93%

4.05%

4.02%

Sovereigns and financials

 

 

 

 

 

 

Transportation and equipment

 

¯

849

0.18%

0.24%

0.29%

Utilities

 

¯

375

0.08%

0.08%

0.10%

Total exposure to climate-sensitive sectors3

 

¯

37,510

8.17%

8.57%

8.96%

Total exposure to all sectors

 

 

459,061

100%

437,777

373,239

1 Climate-sensitive sectors are defined as those business activities that are rated as having high, moderately high or moderate vulnerability to transition risks and physical risks. Methodology developed in collaboration with UNEP FI TCFD working group and disclosed in Phase II “From disclosure to action – a guide to implementing the TCFD framework within financial institutions” report. Climate risk analysis is a novel area of research, and as the methodologies, tools and data availability of data improve, we continue to further develop our risk identification and measurement approaches.    2 Includes total loans and advances to customers and guarantees as well as irrevocable loan commitments (within the scope of expected credit loss). Includes loans collateralized by real estate (residential and commercial), across Global Wealth Management, Personal & Corporate Banking , and the Investment Bank.    3  Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and advances to customers, and is excluded from the climate-sensitive sectors analysis in 2021.

 

57 


Sustainability Report 2021 | What 

UBS corporate lending to climate-sensitive sectors – physical risks

 

 

As of 31.12.21

 

 

As of 31.12.20

As of 31.12.19

USD million

 

Trend (%) 2019 to 2021

Gross exposure2

Share of total exposure2

Share of total exposure2

Share of total exposure2

Climate-sensitive sector1

 

 

 

 

 

 

Aerospace and defence

 

¯

338

0.07%

0.09%

0.48%

Automotive

 

¯

1,042

0.23%

0.31%

0.26%

Business services

 

¯

853

0.19%

0.24%

0.25%

Chemicals

 

¯

991

0.22%

0.44%

0.30%

Construction and materials

 

¯

302

0.07%

0.07%

0.08%

Consumer products and retail

 

­

650

0.14%

0.10%

0.07%

Entertainment, leisure and services

 

¯

1,308

0.28%

0.29%

0.36%

Food and beverage

 

­

1,334

0.29%

0.33%

0.25%

Industrial materials

 

¯

243

0.05%

0.06%

0.12%

Information technology

 

¯

274

0.06%

0.06%

0.14%

Machinery and equipment

 

­

2,732

0.60%

0.61%

0.54%

Medical equipment and services

 

­

408

0.09%

0.16%

0.08%

Mining

 

­

1,153

0.25%

0.21%

0.20%

Oil and gas

 

¯

5,538

1.21%

1.09%

1.38%

Pharmaceuticals / biotechnology

 

®

814

0.18%

0.13%

0.18%

Plastic and rubber

 

¯

280

0.06%

0.08%

0.07%

Primary materials

 

®

320

0.07%

0.07%

0.07%

Real estate management

 

­

528

0.12%

0.13%

0.02%

Sovereigns and financials

 

¯

4,371

0.95%

1.06%

1.46%

Transportation and equipment

 

¯

419

0.09%

0.17%

0.22%

Utilities

 

­

1,579

0.34%

0.29%

0.33%

Total exposure to climate-sensitive sectors3

 

¯

25,476

5.55%

5.99%

6.87%

Total exposure to all sectors

 

 

459,061

100%

437,777

373,239

1 Climate-sensitive sectors are defined as those business activities that are rated as having high, moderately high or moderate vulnerability to transition risks and physical risks. Climate risk analysis is a novel area of research, and as the methodologies, tools and data availability improve, we continue to further develop our risk identification and measurement approaches.    Includes total loans and advances to customers and guarantees as well as irrevocable loan commitments (within the scope of expected credit loss).  Physical risk number includes USD 4 billion in loans backed by real estate, in regions with elevated climate risks.    Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and advances to customers, and is excluded from the climate-sensitive sectors analysis in 2021.

 

58 


 

Climate risk appetite

UBS has a long-standing SCR policy that defines qualitative risk appetite for climate risk. Details of climate-related standards in the energy and utilities sectors can be found in the graph below.

    Refer to the SCR policy framework in appendix 6 to this report for further details about our SCR governance

 

 

Climate-related standards in the energy and utilities sectors

Coal

 

Coal-fired power  plants           

Not providing project-level finance to new coal-fired power plants globally.

Only supporting financing to transactions of existing coal-fired operators (>20% coal reliance) if they have a transition strategy that aligns with the goals of the Paris Agreement, or if the transaction is related to renewable energy or clean technology

Coal mining

Not providing financing where the stated use of proceeds is for greenfield1  thermal
coal mines. 

We only provide financing to existing thermal coal-mining companies (>20% of revenues) if they have a transition strategy that aligns with the goals of the Paris Agreement, or if the transaction is related to renewable energy or clean technology

Mountaintop removal  (MTR) 

Not providing financing to coal-mining companies engaged in MTR operations.

Oil and gas

 

Arctic oil and oil sands

Not providing financing where the stated use of proceeds is for new offshore oil projects in the Arctic or greenfield1  oil sands projects. 

We only provide financing to companies with significant reserves or production in Arctic oil / oil sands (>20% of reserves or production) if they have a transition strategy that aligns with the goals of the Paris Agreement or if the transaction is related to renewable energy or clean technology.

Liquefied natural gas (LNG)

and ultra-deepwater drilling

Transactions directly related to LNG infrastructure assets are subject to enhanced SCR due diligence considering relevant factors such as management of methane leaks, as well as the company’s past and present environmental and social performance. 

Transactions directly related to ultra-deepwater drilling assets are subject to enhanced SCR due diligence considering relevant factors such as environmental impact analysis, spill prevention and response plans, and the company’s past and present environmental and social performance.

1 Greenfield means a new mine / well or an expansion of an existing mine / well that results in a material increase in existing production capacity.

Climate risk management and control

Standard financial and non-financial risk processes ensure that material climate risks are identified, assessed, approved and escalated in a timely manner. Key responsibilities, processes and tools applicable to business divisions and Group Functions are being defined as part of our firm’s climate risk program.

 

Climate risk reporting

As part of our 2020 reporting, we disclosed our firm’s first climate risk heatmap in the UBS Sustainability Report and included an SCR section in the Annual Report. In 2021, we automated the climate transition risk heatmap for periodic internal risk reporting and introduced a physical risk heatmap as part of our climate report.

The development of internal and external climate risk disclosures will continue in the coming years in the context of our climate risk program in order to address regulatory expectations and provide leading practice in this space.


Protecting our clients’ assets

As a global financial institution, it is our responsibility to help clients navigate through the challenges of the low-carbon transition.

We help our clients assess, manage and protect their assets from climate-related risks by offering innovative products and services in investment, financing and research and by providing transparency on climate risk exposure.

Across UBS Asset Management, carbon emissions data is available to portfolio managers and analysts, enabling them to leverage carbon and carbon intensity data for more than 10,000 companies, and allowing them to examine the carbon footprint of their portfolios. This complements the work of portfolio managers and analysts using our proprietary ESG Risk Dashboard which aggregates multiple ESG data sources to help identify companies with material ESG risks. Asset Management also uses its own risk system to aggregate ESG risks at a portfolio level

Asset Management has developed a suite of products, named Climate Aware, to help investors align their portfolios toward a low-carbon future. The first Climate Aware passive equity strategy was developed in conjunction with a large UK pension fund and launched in 2017. In 2020, Asset Management launched a

59 


Sustainability Report 2021 | What 

broader Climate Aware suite of investment strategies based on the original Climate Aware methodology, including active and passive, equity, and fixed income. The Climate Aware strategy enables investors to reduce a portfolios carbon footprint, invest in new technologies, and align portfolios to a low-carbon climate “glidepath,” such as the 1.5°C scenario, envisioned by the Paris Agreement. Today, the Climate Aware strategies have grown to USD 23.4 billion in investments. They are supported by Asset Management’s climate engagement program.

Asset Management has applied an exclusion of companies that generate more than 20% of their revenues from thermal coal mining or oil sands extraction across all equity and fixed income strategies. We also apply an exclusion of companies with more than 20% of their revenues from thermal coal-based power generation across our sustainability focus and impact investing strategies. We believe that these companies will face the most significant climate-related financial risks in light of the low-carbon transition.

UBS is a founding member of the Net Zero Asset Managers initiative. This commitment recognizes the urgent need to accelerate the transition toward global net-zero emissions and for asset managers to play their part in helping deliver the goals of the Paris Agreement and ensuring a just transition.

    Refer to the “Key climate-related memberships and commitments” table above

 

Our Investment Bank supports clients on their transition journey, in terms of addressing climate risk and executing on their sustainability strategies. This includes the provision of advisory services, capital raising and access to capital markets. We are also looking at ways to facilitate access to carbon markets to meet clients’ needs. Within Global Wealth Management, we identify the most material ESG issues to the sectors within the framework of our sustainable investing scoring assessment, of which one of the six focus topics is climate change. We have also an established shelf of long-term investment themes, the majority of which have a strong link to sustainability. A significant number explicitly focus on climate change-related themes such as renewable energy and green technology. At the portfolio level, companies with more than 5% revenue exposure to thermal coal are excluded from sustainable investing single security portfolios managed by Global Wealth Management on a discretionary basis. Looking ahead, we are working to build more detailed carbon footprint data into our research and reporting toolkits.

Engagement

Within our Asset Management division, engagement is a key constituent in the investment process across both passive and active strategies. Its stewardship policy provides an overview of the way in which engagement cases are prioritized.

Engagements are driven by investment professionals across all functions, including analysts, portfolio managers and the SI team. The sharing of ESG information and investment research in a centralized manner via our internal platforms ensures a consistent and aligned voice from the firm. Engagement insights are used to inform voting decision making and are also fed back into in-house ESG risk assessments, enabling a forward-looking view on ESG risks and opportunities.

Asset Management undertakes multi-year thematic engagements focused on specific themes considered material as identified by available internal and external research and aligned with the overall sustainability and sustainable investment strategy of the firm. Our climate thematic engagement focuses on companies’ response to mitigating their climate transition-related risks. Asset Management also actively votes on shareholder resolutions to improve transparency and disclosure around climate-related reporting. The climate engagement program began with the most significant underweighted oil and gas companies and utilities companies in the Climate Aware strategy.

In 2021, Asset Management reviewed the progress of companies in its three-year climate engagement program. More than half of these engagements were assessed as having made good or excellent progress, but we also identified five companies where we considered little progress had been made. We excluded those five companies from our SI-focused and Climate Aware strategies, which demonstrates that we take action when companies are not meeting their transition plans or are not willing to engage.

During 2021, Asset Management revised the list of companies that we engage with, extending the focus sectors to include those with a significant contribution to GHG emissions. This means that future engagements will include companies from the following sectors: oil and gas, electric and other utilities, metals and mining, construction materials, automotive, and chemicals.

We retain a strong commitment to the Climate Action 100+ collaboration, wherein investors engage with high carbon intensity companies. We are members of 26 coalitions and lead six of them.

Climate Action 100+ was launched in December 2017 to help drive the clean-energy transition and achieve the goals of the Paris Agreement. It has the support of 615 investors, representing more than USD 60 trillion of assets under management (AuM) (as of 31 December 2021). Whether Asset Management is a lead or participating investor, it is an active member of these coalitions, providing feedback on the climate change performance of companies, the discussion agenda, engagement goals and the progress of these dialogues.

    Refer to UBS Asset Management’s annual stewardship report, available at ubs.com/gri, for more details

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Expanding climate-related opportunities

Climate-related opportunities identified

Although there is a natural, and critical, focus on climate-related risks, mitigating the impacts of climate change also opens new opportunities. Banks are exploring opportunities in a variety of areas, including:

     new products and services, for example, in the area of real estate financing;

     sustainable financing to fund green projects. For instance, renewable energy projects, or financing in areas such as clean technology;

     integration of sustainability aspects in corporate financing, including innovative structures such as green equity-linked instruments;

     partnerships with companies to deliver climate solutions, for example, working with manufacturers to provide financing options for electric vehicles;

     developing new technologies, such as digital solutions that help customers measure and offset their carbon footprint;

     supporting investors in directing capital, for example, educating and guiding on sustainable investment and finance opportunities.

Assessing the issues

An important first step in developing solutions and strategies for a low-carbon economy is to understand the issues driving them.

As part of our net-zero commitment, we have conducted a baseline and target-setting exercise for financed emissions, initially in three sectors: fossil fuels, power generation and real estate (commercial and residential).

We already only conduct business in the areas of fossil fuels and power generation under stringent criteria. We will continue to engage with power generation and extraction companies (among others) on their climate transition plans, and raise our voice with stragglers. Work is also underway on the remaining sectors, in line with NZBA requirements.

Capturing the opportunities and developing
sustainable solutions

We are continually developing and refining sustainable solutions and approaches that help reduce the risks of climate change. When developing new products and services, we aim to address material risks and opportunities, allowing clients to invest in sustainable solutions that can deliver returns comparable to traditional investments, and which align with their values.

For this reason, sustainable investments now represent our preferred solution to private clients investing globally.


In our Global Wealth Management and Personal & Corporate Banking business divisions, private clients can access discretionary mandates based on our sustainable investing strategic asset allocation (SI SAA) methodology. This is grounded in our innovative SI SAA approach to building diversified portfolios across asset classes.

This approach allocates assets to strategies that directly help mitigate climate change, such as green and multi-lateral development bank bonds, and thematic investments. It also contributes to strategies that address climate change adaptation or indirectly help mitigate climate change, for example, by investing in companies that manage ESG issues better than their peers or show continuous improvement. In 2020, we launched a customized portfolio advisory solution that enables private clients to tilt portfolios toward climate change considerations, one of six sustainability topics of preference. In 2021, this was extended to additional client segments. Our 2021 investor sentiment survey showed climate to be one of the top sustainable investment areas of focus among private clients, demonstrating our clients’ appetite for the direction we are taking.

    Refer to the summary of the UBS investor sentiment survey in the “What” section to this report

 

Global Wealth Management integrates sustainability assessments into the standard due diligence processes for all new fund solutions offered via its platform. These assessments focus on fund managers’ sustainability commitments and capabilities, as well as the degree to which sustainability is incorporated into the investment process. Clients, regulators and the marketplace more broadly are increasing their scrutiny of environmental considerations, notably climate risk. Therefore, we continue to enhance our processes further still to focus both on risk mitigation and investment opportunities for our clients in this space.

By the end of 2021, we had mobilized USD 11.6 billion of private client money into impact investments related to the SDGs, of which climate considerations form a part.

Global Wealth Management’s fund offering includes climate-focused investment strategies, for example, investments in clean alternative energy and smart mobility. Our Global Wealth Management and Asset Management business divisions also address ESG factors across their investment disciplines. Asset Management’s Real Estate and Private Markets teams apply a sustainable investment strategy. This strategy aims to enhance the performance of mandates for direct and indirect real estate and infrastructure investments. In Switzerland, our UBS Clean Energy Infrastructure Switzerland strategy offers institutional investors access to a diversified portfolio of infrastructure investments in growth areas of sustainable energy production, energy efficiency and supply infrastructure with a focus on Switzerland.

 

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Sustainability Report 2021 | What 

Climate Aware – a framework for investors

We have already highlighted the Climate Aware strategy approach developed by Asset Management. The strategy is based on a framework, which covers three main areas.

(i) Portfolio mitigation (lowering investment exposures
to carbon risk)

In our experience, balancing required returns and minimizing climate risks works best when investors integrate climate considerations into a diversified portfolio. This approach also helps focus minds on the risks of climate change.

As the TCFD has highlighted, these risks can be regulatory, market-driven, technological and physical. How the risks manifest within markets, industry sectors and for individual issuers depends on an interplay of the following factors. Accounting for these factors shines a spotlight on the most material issues relating to carbon-intensive sectors needing to reduce their emissions. It also leads to a deeper investment-related understanding of the physical risks: regulations; commercial considerations; and the impact of technology on business models, revenue costs and capital requirements.

(ii) Portfolio adaptation (increasing exposure to climate innovations and solutions)

Supporting a low-carbon future involves investing in and funding new technologies and solutions. The key investment areas relate to reducing emissions, energy transition (moving global energy systems to sustainable models) and energy efficiency. They include companies that manufacture and deploy technologies, and those that provide the infrastructure and services required to make those technologies widely available. To reduce their climate impact, companies may develop their business structure, asset ownership, supply chains and delivery models in various ways.

Different kinds of investors also have different risk appetites and requirements for types of investments. For example, venture capital, private equity, real estate, public equity and public fixed-income investments come with different exposures to technology risk.

(iii) Portfolio transition (aligning portfolios to investors’ chosen climate journeys)

It is important for investors to understand the difference between their current situation and the opportunities of moving to a low-carbon future. Scenario analysis helps prompt longer-term thinking about the risks and opportunities of climate change. We advocate for and engage with stakeholders on climate-related principles, including proxy voting. These approaches also help investors understand different investment and climate approaches in different sectors and countries.

Supporting companies to mitigate and adapt to climate change

Our Investment Bank is actively engaged in building up our offering of products that address the broad range of themes falling under the wider topic of sustainability. We provide
 
 sustainable finance and advisory services to companies that help mitigate and adapt to climate change, and those in transition to a more sustainable and circular economy. These include, for example, businesses in the solar, wind, hydro, energy efficiency, transport, waste and biofuels sectors.

Our products and solutions include green and sustainable, sustainability-linked bonds issued in accordance with market principles and / or taxonomies.2 UBS’s share of financing of such transactions amounted to USD 13.2 billion (with the full deal value of these transactions being USD 63.3 billion).

We aim to be the preferred strategic partner for financing transactions and advisory related to Switzerland’s Energy Strategy 2050. In this context, we help energy utilities raise capital on international capital markets to transition to renewable energy.

Green Funding Framework

In 2021, UBS launched the Green Funding Framework. This Group-wide framework sets out how UBS intends to connect our sustainability objectives with access to financial markets through a variety of funding products.

The framework is based on current established market practice and meets the core pillars set out in the ICMA Green Bond Principles updated in 2021. It has been assessed by Sustainalytics and has received certification from the Climate Bonds Initiative.

In June 2021, UBS AG issued its inaugural Swiss franc- and euro-denominated senior green bonds allocated to refinancing mortgages on Minergie-certified Swiss properties (with a look-back period of up to two years). Forming part of the new enhanced sustainability strategy, with these bonds UBS raised, for the first time, unsecured funding with an ESG feature.

UBS is committed to reporting on the allocation of any proceeds raised under the framework and the estimated environmental impact of the eligible green assets.

    Refer to ubs.com/greenbonds  for more details on the Green Funding Framework, external reviews and annual reporting (including the impact and allocation reporting)

Supporting clients with climate-related philanthropic endeavors

UBS Optimus Foundation enables clients to get involved in programs relating to sustainable land use – restoring and conserving land, and supporting climate-resilient agriculture and agroforestry; and to coastal and marine ecosystems – restoring and conserving wetlands, supporting sustainable fisheries, and reducing ocean waste and pollution. To help our clients achieve the best possible results from their philanthropy, UBS and experts conducted an extensive landscape analysis, which led to a systematic approach enabling clients to assess where to invest and how best to contribute to and accelerate climate action.

 

 

 

 

2 Such as, but not limited to, ICMA Green Bond Principles, Sustainability Bond Guidelines, and, Sustainability-linked Bond Principles; LMA / LSTA / APLMA Green Loan Principles, Sustainability-linked Loan Principles.

 

62 


 

Metrics and targets

UBS’s approach to net zero – from commitment to action

UBS supports the goals of the Paris Agreement, which includes aligning our own operations and business activities with the pathway of a five-step net-zero plan to: (i) measure carbon emissions; (ii) define a roadmap and set targets; (iii) reduce climate impact; (iv) finance climate action and support the transition of our clients; and (v) communicate and engage. We have organized the key content on these steps under three headers in this section: net zero to reduce our direct climate impact, net zero to finance climate action and support the transition of our (financing) clients, and net zero to protect our (investing) clients’ assets.

 

UBS’s net-zero approach – from commitment to action

1. Measure carbon emissions

We have measured carbon emissions for scopes 1,2 and parts of scope 3 of our own operations since 2004. Following our net-zero commitment in April 2021, we commenced measuring carbon emissions in our financing (starting with three priority sectors) and investment portfolios.

2. Define roadmap and set targets

We have defined 2025, 2030 and 2035 targets in the run-up to net zero by 2050.

3. Reduce climate impact

We have consistently reduced the carbon footprint of our operations (scopes 1 and 2) since we set our 2004 baseline. In 2021 we have defined pathways to reduce emissions in our financing and investment portfolios.

4. Support clients’ transition and finance climate action

We engage with our investing clients. We offer solutions to mobilize capital for a low-carbon world, e.g., with the issuance of green bonds and our Climate Aware strategy. For self-occupied real estate, we offer the UBS Renovation Mortgage

5. Communicate and engage

We have reported on our climate strategy since 2014. Starting from reporting year 2021 we have expanded this disclosure to include our net-zero plans. We are engaging with our clients, peers and other stakeholders to further develop methodologies and be an active supporter of a net-zero economy.

Net zero to reduce our direct climate impact

Scopes 1 and 2

We aim to achieve net-zero direct (scope 1) and energy indirect (scope 2) emissions by 2025. Our primary focus is on decarbonizing our footprint by reducing consumption and removing fossil fuel heating installations in our owned buildings when we undertake renovations, as well as divesting from older, non-strategic buildings. For any residual scope 1 and 2 emissions that cannot be mitigated through retrofits, we will invest in credible carbon removal projects (including negative emissions technology) to abate the remainder and to support innovation in these areas.


As part of our commitment to net zero we will also work to compensate our historic emissions back to the year 2000. This represents 4.2 million metric tons of CO2, primarily resulting from electricity and other energy consumption from UBS buildings during those years. To address these emissions, we are in the process of sourcing a portfolio of transparent carbon offsets from the voluntary carbon market across a range of project types and geographies. Our portfolio is primarily focused on renewable energy / energy efficiency projects reflecting the main origin of the emissions in our buildings, but also includes a number of nature-based offsets including reforestation, afforestation and conservation. We are committed to supporting the development of internationally agreed quality standards in the voluntary carbon market in order to reinforce the market’s role in the transition to a low-carbon economy.

Scope 3 – upstream

To reduce emissions related to our supply chain, our responsible supply chain management framework continues to drive our sustainable procurement as it has done since 2008. All of our high-impact vendors go through our responsible supply chain management (RSCM) assessments.

We are now engaging with key vendors on targeting net zero by 2035.

Offsetting to balance residual scope 1, 2 or 3 emissions

According to the guidelines established by the NZBA, offsets can play a role to supplement decarbonization in line with climate science. The reliance on carbon offsetting for achieving end-state net zero should be restricted to carbon removals to balance residual emissions where there are limited technologically or financially viable alternatives to eliminate emissions.

When it comes to our own operations, over the last few years we have strategically invested into energy efficiency measures and sourcing of 100% renewable electricity, which have materially reduced our net emissions footprint today compared with only a few years ago. We will be further reducing this and aim for net zero in our own operations for scopes 1 and 2 by 2025. By that point we envisage there being less than 10% of remaining gross emissions that cannot be mitigated by other means and where we would need to purchase high-quality carbon removal offsets to compensate. For our key vendors (scope 3) we are targeting net zero by 2035, and we will engage with them on similar measures and assess the options for offsetting residual emissions (as is the case already for our emissions from air travel which have been offset since 2007).

When it comes to client business, we will support our financing and investing clients in their transition to net zero. Where our clients see a need to resort to offsets to achieve their goals, we will aim to help with access to suitable offsetting facilities and instruments. The accounting of offsets when reporting financed emissions is an area under development. We are closely monitoring the efforts on this topic by standard setters such as in the context of the Race to Zero campaign.

 

63 


Sustainability Report 2021 | What 

Net zero to finance climate action and support the transition
of our clients

In April 2021, we committed to set targets that further align our financing portfolio with the objectives of the Paris Agreement. As per the guidelines of the NZBA, we have prioritized sectors that have the most material climate impact in this first iteration of our net-zero ambitions.

In addition to the contribution to global emissions, we also considered the materiality of our financial exposure and the availability of data and applicable methodologies to estimate baselines and develop pathways toward the goal of net zero. We have selected three priority sectors that include a sizable share of our credit portfolio and our financed emissions: fossil fuels, power generation and real estate (commercial and residential).

Our three priority sectors account for approximately 43% of our loans and advances to clients.3

Our emission baselines and trajectories are based on the full lending commitment made to our clients. This includes our outstanding loans, as well as undrawn amounts which we would be obliged to provide if so requested by a counterparty. In our view, this is the most relevant approach to measure and steer our credit portfolio toward our ambitions.

As a new member of the Partnership for Carbon Accounting Financials (PCAF), we aim to disclose emissions in future reporting across our loan book based on the outstanding loan amount (in addition to emissions based on credit facilities).

Our net-zero measures focus on lending activities. We recognize that capital markets facilitation also plays an important role in the financing of our clients. These transactions are therefore also subject to our SCR policy but are currently not part of our net-zero baselines. Capital markets are relatively new to the field of emissions accounting, with no accepted industry-wide standard. We will engage standard setters on emerging approaches in order to consider those activities in our future ambitions.


For each of our priority sectors, we have selected the most suitable metric to track our progress toward net zero (i.e., physical emissions intensity or absolute emissions). Generally, we believe that most sectors will be best steered by using physical emissions intensity. This encourages the transition of our clients toward emissions-efficient technologies and makes sustainable growth possible. In addition, emissions intensity measures tend to be less volatile. A metric based on absolute emissions is more appropriate for sectors with less potential for emissions-efficiency gains.

To estimate our emissions baselines, we relied on data disclosed by our clients in their own disclosures, data from specialized third-party providers and internal data. Current limitations on the availability of emissions data required us to include approximations in the calculations; for example, by applying appropriate proxy values where specific data is not (yet) available. We expect the availability and quality of emissions data to improve in the next few years. Improved data may be used to strengthen the robustness of the reporting, which may result in restatements of our baselines and pathways over time.

The goals of the Paris Agreement can be translated into socioeconomic models with transition pathways for various economic activities. These models, also known as benchmark scenarios, represent the trajectory, a portfolio should follow in order to be consistent with a transition pathway to reach the temperature objectives outlined by the Paris Agreement. The benchmark scenario used to support our net-zero ambition is derived from the International Energy Agency (IEA) 2021 Net Zero by 2050 data, which is available on the IEA’s website. This scenario was selected as one of the most recent, broadly accepted 1.5°C models available.

As a general note, it is important to understand that while UBS will engage in significant efforts to achieve its net-zero ambition, the reduction objectives for financed emissions shown are based in part on anticipated regulatory action to support emissions reductions by the governments of the jurisdictions in which we operate.

As the world drives toward a low-carbon future, we will adjust our ambition where warranted by new projections or methodological developments.

 

 

 

 

 

 

 

3 Combined share of the three priority sectors of UBS’s total loans and advances to customers, including guarantees and irrevocable commitments.

 

64 


 

Fossil fuels

UBS is committed to reducing the absolute financed emissions (measured in metric tons of CO2e) associated with loans to oil and gas companies by 71% by 2030 (compared with 2020 levels).

 

Baseline and proposed reduction of absolute emissions for fossil-fuel financing. Underlying data of UBS pathway and IEA Net Zero by 2050 is based on CO2e, indexed here to 100 for comparability.

 

This proposed reduction is in line with the IEA Net Zero by 2050 scenario and includes scope 1, 2 and 3 emissions. Scope 3 emissions are associated with the combustion of fossil fuels and contribute the majority of emissions within this sector. Our assessment of the fossil fuel sector includes exploration, production and refinery activities, as well as integrated companies operating across the value chain.

For these disclosures we have excluded activities, such as transportation, retailing and trading. Scope 3 emissions measurement methods are yet to be developed for these activities, including in the context of commodity trade finance (CTF). We closely follow the development of emissions measurement standards for this area and will adopt where applicable and as agreed. As it is important for us to ensure progress on emissions reductions in these areas, we have established internal targets. As a result, our CTF business will, for example, be increasingly involved in less carbon-intensive or circular economy commodities, such as in the biofuels or metal recycling sectors.


Power generation

We are also committed to reducing the emissions intensity (measured in kilograms of CO2e per MWh) associated with lending to power generation companies by 49% by 2030 (compared with 2020 levels), taking into account scope 1, 2 and 3 emissions.

 

Baseline and proposed reduction path for power generation financing by UBS, as emissions intensity in kilograms of CO2e/MWh. Note: IEA data shown is adjusted to represent scope 1, 2 and 3 emissions.

 

Scope 1 emissions are responsible for the majority of emissions by the power generation sector. This intensity metric monitors emissions related to the production of electricity and promotes change toward an increasing share of renewable energy sources. We have decided to consider all life cycle stages of energy systems (scope 1, 2 and 3 emissions), so our baseline and pathway includes CO2e emissions resulting from upstream, operational and downstream processes. Aside from addressing a future NZBA requirement, this improves the comparability of the emissions from different energy technologies. At this point in time, our emissions intensity is below the IEA benchmark, thanks to high exposure to renewables, particularly in our home market of Switzerland. To maintain this trajectory, we will support the transition of our clients and exit exposure in the absence of credible progress.

 

65 


Sustainability Report 2021 | What 

Residential real estate

UBS is committed to reducing the emissions intensity (measured in kilograms of CO2e per m2) for our residential real estate portfolio by 42% by 2030 (compared with 2020 levels).

 

Baseline and proposed reduction path for residential real estate financed by UBS, as emissions intensity in kilograms CO2e per m2.

 

Our residential real estate portfolio includes mortgages for owner-occupied properties and properties rented out on a non-commercial scale. This commitment covers mortgages in three countries representing 98% of UBS’s residential mortgage volume, with the largest share being in Switzerland. Scope 1 and 2 emissions (for example, direct emissions from buildings and indirect emissions of purchased energy) are included, but other emissions in the value chain, such as those related to original construction, are not. To achieve our emission reduction ambitions, we plan to extend our mortgage offering with new products and services for homeowners seeking to retrofit their properties and making them more energy efficient. However, we will only achieve our proposed targets if, at the same time, governments support the decarbonization of real estate, for example by incentivizing improved property efficiency and use of non-fossil fuel heating systems.

Furthermore, government action to establish standardized emissions ratings for properties in their jurisdictions (where not already available) is an important enabler for financial institutions to differentiate their mortgage offerings on the basis of a property’s energy efficiency. It is partly because of the dependency on the speed of governmental action on these matters that the emissions trajectory remains above zero by 2050. UBS will consider readjusting the reduction pathways in alignment with new methodological developments and where new data availability allows.


Commercial real estate

UBS is also committed to reducing the emissions intensity (measured in kilograms of CO2e per m2) for our commercial real estate portfolio by 44% by 2030 (compared with 2020 levels).

 

Baseline and proposed reduction path for commercial real estate financed by UBS, as emissions intensity in kilograms CO2e per m2.

 

The commercial real estate book includes loans financing rented-out properties in multi-family homes, or any other income-producing real estate. As for residential real estate, the measures consider scope 1 and 2 emissions, and the reduction pathway results from future innovations in the UBS offering (related to green buildings and renovations), as well as actions by governmental bodies. In general, UBS expects somewhat higher potential for emissions reduction for commercial real estate than on the residential side.

 

 

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Baselines and proposed reduction pathways for lending in initial priority sectors1

 

 

Lending volume 2020

Lending volume 2021

Emissions baseline
2020

Emissions target 2030 versus baseline 2020

Notes

Fossil fuels

USD 1.2 billion

USD 0.7 billion

3,781 kt CO2e

(71%)

Reduction of absolute emissions
(scopes 1, 2 and 3)

Power generation

USD 0.9 billion

USD 1.2 billion

238 kg CO2e/MWh

(49%)

Reduction of emissions intensity
(scopes 1, 2 and 3)

Residential
real estate

USD 151.1 billion

USD 155.9 billion

30 kg CO2e/m2

(42%)

Reduction of emissions intensity
(scopes 1 and 2)

Commercial
real estate

USD 43.7 billion

USD 44.7 billion

32 kg CO2e/m2

(44%)

Reduction of emissions intensity
(scopes 1 and 2)

1 Calculations based on maximum lending facility extended to clients (conservative).

 

 

67 


Sustainability Report 2021 | What 

Net zero to protect our clients’ assets

Asset Management

In November 2021, our Asset Management division communicated its net-zero interim target, committing to align USD 235 billion of AuM (equivalent to 35% of eligible assets and 20% of total AuM) to achieve a 50% carbon emission reduction by 2030.

Our initial net-zero target is one of the largest commitments in absolute terms of the targets currently disclosed through the NZAMi. It represents a significant step, given that our Asset Management division is a globally diversified business with a high proportion of indexed capabilities, as well as assets for which no net-zero alignment methodology currently exists, such as multi-asset funds, hedge funds, money markets and sovereign and municipal issuers. In December 2021, 5% of AuM were in a position where portfolio carbon emissions were 50% below their respective benchmark.

This commitment covers the scope 1 and 2 emissions of our strategies and funds. We have set a 2019 baseline covering the weighted average carbon intensity of the respective benchmark for each strategy and fund included in our target. We aim to reduce the weighted average carbon intensity of individual strategies and funds to 50% of the level of their respective baseline carbon intensity by 2030. We are exploring how to best make use of scope 3 metrics, given the current range of data availability and quality. In addition to managing the carbon intensity of our selected strategies and funds, we will continue to use our climate engagement program to ensure real economy transition of the companies we invest in.

  

 


UBS’s commitment is derived from its active equities, active fixed income, index equities and real estate investment assets. We currently estimate that approximately 35% of these assets are capable of net-zero alignment by 2030. A large proportion of the assets that cannot be easily managed in net-zero alignment by 2030 are in our substantial indexing business, where bringing market capitalization-weighted assets into net-zero alignment requires clients to agree to track alternate, low-carbon benchmarks.

Alignment of Asset Management AuM to net zero

To achieve our emissions reduction target we are working collaboratively with our clients to ensure they have access to best practices, robust approaches, standardized methodologies and improved data. We also continue to work on developing methodologies, including participating in industry working groups and other forms of collaboration, to address assets for which there is currently no methodology for net-zero alignment.

As well as being one of the first asset managers to sign the NZAMi, our Asset Management division continues to take the lead in other aspects of climate change investing. Our Climate Aware investment strategies reached USD 23.4 billion in assets, with our active Climate Aware Equities strategy having been granted the Austrian ecolabel. We also received Belgium FabelFin labels for our exchange-traded funds.

In terms of research, our Asset Management business division has published a paper titled “Value of a Green Transition” that outlines a proprietary climate transition methodology and assesses optimal levels of investment in green technologies for highly carbon-intensive sectors.

    Refer to the paper on “Value of a Green Transition”  

Wealth management

Global Wealth Management has become a partner of choice for leading private markets managers for their impact investing solutions, including those that invest in climate-related solutions and technologies. We will continue our efforts to mainstream sustainable and impact investments broadly for private clients, given our view that material sustainability issues matter for financial performance and our clients’ interest in many of these topics. With regard to climate, our Chief Investment Office (CIO) is convinced that the net-zero transition will prove to be one of the most consequential investment trends over the coming decades. We offer advice and solutions that help guide and implement this view to the maximum extent possible and aim to employ our knowledge and partnerships to develop additional products and offerings in line with net-zero objectives.

 

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Next steps

As for the transition of our financing clients, efforts are underway to reliably assess the emissions baseline for further climate-sensitive sectors and define medium- and long-term emissions reduction pathways as outlined by the NZBA.

We will work to continually refine and improve the accuracy of the emissions baselines as data and industry best practices develop.

UBS will also continue to employ knowledge gained to further develop products and offerings in line with the net-zero objectives. Future reporting will make transparent the progress toward our ambition. Reduction pathways will be adjusted if appropriate when relevant new information becomes available.


Evolving our climate-related metrics

For many years, we have been developing methodologies that enable us to disclose climate-related metrics more robustly and transparently. Most recently, regulators and standard setters have provided more guidance on climate metrics. We firmly aim to keep pace with these new developments and requirements and further evolve our climate-related metrics. This commitment remains, as does our determination to continue leading the way in efforts to mitigate climate change.

As part of these efforts, we are assessing the best approach for disclosing metrics relating to our sustainable investments. For example, not all sustainable investments relate to the climate and, as such, climate-related metrics do not apply.

The carbon-related assets metric has been updated to cover the four non-financial groups as defined by the TCFD, i.e., energy, transportation, materials and buildings, and agriculture, food, and forest products. We have recalculated all previous years’ exposure figures using the enhanced approach. We now also disclose climate-sensitive sectors exposure related to both transition and physical risks. In addition, we have added legal entity-specific climate risk metrics for UBS AG and UBS Switzerland AG. In 2021, we again reduced our lending exposure to carbon-related assets (as defined by the TCFD) to 9.9% (USD 45.6 billion). This is down from 10.4% at the end of 2020 and 10.7% at the end of 2019.

Similarly, in 2021, our exposure to climate-sensitive sectors (physical risks) decreased to 5.6% (USD 25.5 billion) from 6% at the end of 2020 and 6.9% at the end of 2019. Our exposure to climate-sensitive sectors (transition risks) reduced to 8.2% (USD 37.5 billion) from 8.6% at the end of 2020 and 9% at the end of 2019. For example, we are lending less to high-risk sectors and more to low-risk sectors. For our CTF business we analyze underlying commodities in order to capture the climate-relevant exposures for these metrics. The weighted carbon intensity of our Climate Aware strategies decreased to 65.5 metric tons carbon dioxide equivalent (CO2e) per million US dollars of revenue (down from 68.2 metric tons in 2020). This is 49.4% less than the weighted carbon intensity of the composite benchmark.

With additions and revisions to our metrics we continue our efforts to ensure we are prepared for increased regulatory requirements on climate risk and ensure further alignment of our disclosures with the TCFD recommendations.

    Refer to our climate-related metrics table below

 

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Sustainability Report 2021 | What 

Climate-related metrics 2021

 

 

 

 

 

 

 

 

For the year ended

 

% change from

 

 

31.12.21

31.12.20

31.12.19

 

31.12.20

Risk management

 

 

 

 

 

 

Carbon-related assets (USD billion)1,2

 

45.6

45.4

40.1

 

0.4

of which: UBS AG (standalone)2,3

 

7.0

7.6

7.5

 

(8.7)

of which: UBS Switzerland AG (standalone)2,3

 

37.9

37.1

31.9

 

2.4

Proportion of total customer lending exposure, gross (%)

 

9.9

10.4

10.7

 

 

Total exposure to climate-sensitive sectors, transition risk (USD billion)2,4

 

37.5

37.5

33.4

 

0.0

of which: UBS AG (standalone)2,3

 

4.6

5.4

5.8

 

(15.9)

of which: UBS Switzerland AG (standalone)2,3

 

32.8

31.7

27.3

 

3.4

Proportion of total customer lending exposure, gross (%)

 

8.2

8.6

9.0

 

 

Total exposure to climate-sensitive sectors, physical risk (USD billion)2,4

 

25.5

26.2

25.6

 

(2.8)

of which: UBS AG (standalone)2,3

 

10.8

11.5

13.1

 

(6.1)

of which: UBS Switzerland AG (standalone)2,3

 

13.6

13.5

11.7

 

1.4

Proportion of total customer lending exposure, gross (%)

 

5.6

6.0

6.9

 

 

Identified significant climate-related financial risk on balance sheet5

 

None

None

None

 

 

 

 

 

 

 

 

 

Opportunities

 

 

 

 

 

 

Number of green, sustainability, and sustainability-linked bond deals6

 

98

29

26

 

237.9

Total deal value of green, sustainability, and sustainability-linked bond deals (USD billion)6

 

63.3

19.3

15.6

 

 

UBS apportioned deal value of above (USD billion)

 

13.2

5.7

3.4

 

 

 

 

 

 

 

 

 

Portfolio emissions7

 

 

 

 

 

 

Weighted average carbon intensity – Climate Aware strategies (tonnes CO2e per USD million of revenue)7

 

65.5

68.2

74.5

 

(3.9)

Compared to weighted carbon intensity of composite benchmark (%)9

 

(49.4)

(51.0)

(54.0)

 

 

Weighted average carbon intensity – low carbon indexes and rules based (tonnes CO2e per USD million of revenue)

 

72.0

 

 

 

 

% AuM weighted average carbon intensity below benchmark (low carbon indexes and rules based)

 

100.0

 

 

 

 

Weighted average carbon intensity – active equity assets (in tonnes CO2e per USD million of revenue)

 

109.8

 

 

 

 

% AuM weighted average carbon intensity below benchmark (active equity)

 

62.4

 

 

 

 

Weighted average carbon intensity – active fixed income assets (tonnes CO2e per USD million of revenue)

 

198.0

 

 

 

 

% AuM weighted average carbon intensity below benchmark (active fixed income)

 

76.3

 

 

 

 

Weighted average carbon intensity – other equity indexed assets (tonnes CO2e per USD million of revenue)

 

144.0

 

 

 

 

% AuM weighted average carbon intensity below benchmark (other equity indexed)

 

n/a

 

 

 

 

Stewardship – Voting

 

 

 

 

 

 

Number of climate-related resolutions voted upon10                               

 

89

50

44

 

78.0

Proportion of supported climate-related resolutions (%)

 

78.6

88.0

81.8

 

 

Own operations (reporting period: July to June)

 

 

 

 

 

 

Net GHG footprint (1,000 metric tons CO2e)11

 

30

75

104

 

(60.0)

Change from baseline 2004 (%)

 

(92.0)

(79.0)

(71.2)

 

 

Share of renewable electricity (%)

 

100

85

72

 

 

1 The carbon-related assets metric has been updated to cover the four non-financial groups as defined by the TCFD, i.e., energy, transportation, materials and buildings, and agriculture, food and forest products. Recognizing that the term “carbon-related assets“ is not well defined, the TCFD encourages banks to use a consistent definition to support comparability.    2 Includes total loans and advances to customers and guarantees, as well as irrevocable loan commitments (within the scope of expected credit loss).    3 Based on standalone IFRS numbers.    4 Climate-sensitive sectors are defined as those business activities that are rated as having high, moderately high or moderate vulnerability to transition risks and physical risks. For more details, refer to the “UBS lending to climate-sensitive sectors” table and the “Climate scenario analysis” in this report. Physical risk number includes USD 4 billion of loans backed by real estate in regions with elevated physical climate risks. Global Wealth Management corporate lending to customers represents 1.1% of all on- and off-balance sheet loans and advances to customers, and is excluded from the climate-sensitive sectors analysis in 2021.    5  Methodologies for assessing climate-related financial risk are emerging and may change over time, as described earlier under "Scenario analysis."    6 Such as, but not limited to, ICMA Green Bond Principles, Sustainability Bond Principles, and Sustainability-linked Bond Principles.    7 The numbers on portfolio emissions only apply to our Asset Management business. Carbon intensity is based on data for scope 1 and 2 CO2 emissions of investee companies provided by a third data provider. Asset class carbon intensity metrics are an aggregate of individual portfolios weighted by portfolio size. Time series calculation of carbon intensity and portfolio holdings data commenced in 2021, except for Climate Aware strategies where we already have reported in previous years.    8 Year-on-year decrease of carbon intensity is mainly driven by higher carbon targets of the investment strategy. Carbon intensity is based on scope 1 and 2 CO2 emissions of investee companies, which often rely on third-party estimates. Metric has been expanded in 2020 to include all equity and fixed income funds with a proprietary Climate Aware strategy (active and rules-based). Metric is the assets under management (AuM)-weighted average of the weighted average carbon intensities of the portfolios.    The metric is the AuM-weighted average of the weighted average carbon intensities of the respective benchmark.    10  This excludes proposals related to Japanese companies that included changes to the companies’ articles of association. 2021 numbers include shareholder and management proposals, 2020 and 2019 numbers shareholder proposals only. This reflects the increasingly common market practice of climate-related proposals being presented by management.    11 Net greenhouse gas (GHG) footprint equals gross GHG emissions minus GHG reductions from renewable electricity and CO2e offsets (gross GHG emissions include: direct GHG emissions by UBS; indirect GHG emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam; and other indirect GHG emissions associated with business travel, paper consumption and waste disposal). A breakdown of our GHG emissions (scope 1, 2, 3) is provided in Appendix 4 to this report.

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Limitations on data and methodologies

The proposed net-zero pathways shown in this report are based on assumptions where necessary. They help indicate how we want to achieve our net-zero ambition. We use them as our best estimates and will consciously work to further improve the accuracy of the underlying data and methodologies. Meeting the Paris Agreement ambition of a 1.5°C limit in global warming will require regulatory frameworks that support the transition to a low-carbon economy.

While UBS will engage in significant efforts to achieve its net-zero ambition, the reduction commitments for financed emissions are based in part on anticipated regulatory and policy developments to support emissions reductions by the governments of the jurisdictions in which we operate.

As we progress along our net-zero pathway, we will adjust our ambition where warranted as new projections or methodological developments occur.


 

 

 

 

 

  

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Sustainability Report 2021 | What 

What we do for societies
and the environment

The SDGs bring together the enormous societal and environmental challenges the world faces. We recognize that it is important to understand these challenges, as well as the opportunities arising from them, to consider their relevance to UBS and to identify potential actions our firm may need to take.

Governance and frameworks on the environment and human rights

Our firm’s approach to the environment and human rights, as well as our commitment to our employees (as reflected in our HR processes and policies) are implemented through our firm’s sustainability and impact governance, steered by the Group Executive Board (the GEB) and overseen by the Board of Directors (the BoD), notably by the Corporate Culture and Responsibility Committee (the CCRC).

Our environmental management system (EMS) covers the entire scope of UBS products, services and in-house operations that may give rise to an environmental impact. It is externally audited annually and recertified every three years.

We view the proper management of our firm’s environmental footprint and our supply chain as important proof points for how we do business in a sustainable manner. This is equally true for our comprehensive management of sustainability and climate risks (SCR). Our in-house environmental management, responsible supply chain management (RSCM), and SCR standards and management are enforced across the firm.

We constantly strive to reduce our greenhouse gas (GHG) emissions, waste production, energy and paper consumption, as well as water usage. Our RSCM principles embed UBS’s environmental, social and governance standards in our interactions with our vendors. Since 2008, firm-wide guidelines have established a systematic process for identifying, assessing and monitoring vendor practices in the areas of human and labor rights, environmental protection and corruption. A central component of this guideline is the UBS Responsible Supply Chain Standard to which our vendors are bound by contract. We engage with vendors to promote socially responsible practices. We have embedded environmental and social (incl. human rights) standards into our sourcing and procurement activities.


We apply an SCR framework to identify and manage potential adverse impacts to the environment and / or human rights, as well as the associated environmental and / or social risks that our clients’ and our own assets are exposed to. In addition, we identify high-risk vendors when establishing new contracts or renewals based on the vendors’ provision of goods and services that have either a substantial environmental and social impact or are sourced in markets with potentially high social risks. We also regularly screen active vendors as part of our RSCM control processes. Our ethical standards are defined in our Code of Conduct and Ethics (our Code) that govern our interactions with society and the environment.

Our approach to human rights

UBS is committed to respecting and promoting human rights in all our business activities. In assessing UBS’s potential human rights impacts we focus on three key stakeholder groups (employees, clients, vendors), as well as society at large.

With regard to employees, through our human resources policies and practices we have committed to respecting and promoting human rights standards. We review and update these policies and practices on a regular basis and are committed to meeting the obligations that a responsible company is expected to comply with.

    Refer to “What we do for our employees” above for more information about UBS’s employment practices

 

With regard to clients, we provide them with innovative investment solutions in themes related to the environment and human rights. We offer a range of sustainable investments to meet different client interests, values, risk profiles, return expectations and regional needs. We also aim to take sustainability risks into account when evaluating investment decisions with the objective of avoiding, identifying and managing potential contributions to human rights violations. We conduct ongoing reviews of our business relationships to assess whether they may lead to potential negative impacts on rights holders. Client relationships that are considered significant from an SCR point of view are subject to enhanced SCR due diligence. We have identified certain controversial activities in which we will not engage, or will only engage in under stringent criteria.

 

72 


 

Our approach to biodiversity

We aim to achieve positive impacts and reduce potentially adverse impacts on biodiversity and natural capital. Biodiversity loss, expressed most directly in SDGs 14 and 15 (“Life below water” and “Life on Land,” respectively), but also linked to other SDGs (e.g., SDG 13: “Climate Action”) is a major threat to our planet.

UBS recognizes the risks associated with biodiversity loss, the economic value of ecosystem services and the critical role of financial institutions in nature protection. We are a member of the Taskforce on Nature-related Financial Disclosures (the TNFD), which was established in 2021 in order to help develop and deliver a framework for organizations to report and act on evolving nature-related risks.

We seek to promote nature and biodiversity, focusing on our clients,
our vendors, our employees,
and society at large.

To address the needs of our clients, we have set standards for product development, investments, financing and supply chain management decisions. We also engage with clients and suppliers to better understand their processes and policies and to explore how any sustainability and climate risks may be mitigated. Recognizing biodiversity-related risks, we have identified and will not engage in certain activities that endanger animal species and contribute to deforestation and its related impacts. Our standards for controversial activities and areas of concern not only take into account deforestation and forest degradation but also other activities such as fishing, which has an impact on marine species


Biodiversity plays an important role in our overall integration of ESG considerations into the investment process. Our ambition is to be a leader in sustainable finance across all client segments and to achieve this we continuously develop our offering in this area.

Through our philanthropy services and UBS Optimus Foundation, we offer innovative ways to tackle some of the world’s most pressing environmental problems by providing guidance and information for our clients, for example ocean-related philanthropy or the protection of biodiversity and all life on land.

We have launched several campaigns to involve our employees and raise awareness of our environmental impact and of biodiversity loss. A notable example is the ”Go drastic, cut the plastic” campaign to eliminate single-use plastic items from use throughout the firm.

    Refer to ubs.com/gri  for our Human rights and Biodiversity statements

    Refer to “Governance on sustainability” in the “How” section of this report

    Refer to “Taking action on a net-zero future – our climate report” in this section and to the sustainability and climate risk policy framework in Appendix 6 to this report for more information

73 


Sustainability Report 2021 | What 

Reducing our environmental footprint

The transition to a low-carbon economy starts at our firm’s doorstep. By implementing sustainability measures across our operations, as well as engaging our employees on how they can support this journey, we ensure that our impact on the environment is continuously being reduced. Our reporting activities reflect our most material impacts and provide transparent monitoring of progress for our clients, employees and other stakeholders.

We continue to take many steps to further reduce our firm-wide environmental footprint and set new quantitative targets for the period 2021–2025. In 2020, we reached our ambitious target on sourcing 100% of our electricity consumption from renewable sources and as a result, further reduced our net greenhouse gas (GHG) footprint for scope 1 and 2 emissions in 2021 by 75% compared with 2020. Moreover, compared with 2020 we saw material improvements across a range of environmental measures including energy consumption (down 5%), water consumption (down 23%), paper consumption per FTE (down 24%) and waste per FTE (down 31%). To some extent the under-occupancy of our buildings during the COVID-19 pandemic contributed to those decreases. However, our transition to a more flexible hybrid working model, coupled with ever more efficient buildings and portfolio downsizing, means we do not expect these figures to revert to pre-pandemic levels.

We manage our environmental management system in accordance with ISO 14001:2015.


In 1999, we were the first bank to obtain the ISO 14001 certification for our worldwide environmental management system, which covers the entire scope of UBS products, services and in-house operations.

Every year since the first certification, we have successfully passed the ISO 14001 audits of our global environmental management system. Additionally, in the EU and the UK we are certified according to the energy management system standard ISO 50001:2018.

Information on both our environmental indicators (energy, water, paper, waste, recycling and travel) and associated GHG emissions is externally verified on the basis of the ISO 14064:2018 standard.

These three sets of comprehensive audits confirm not only that appropriate policies and processes are in place to manage environmental and energy topics in our operations but also that they are applied on a day-to-day basis.

    Refer to “Assurance and certification” in Appendix 7 to this report for our ISO certificates

    Refer to Appendix 4 to this report for details on our firm’s environmental footprint

    Refer to “Taking action on a net-zero future – our climate report” in this report for information on our scope 1 and 2 net- zero commitment

 

 

 

 

74 


 

Managing our supply chain responsibly

We embed environmental, social and governance standards into our sourcing and procurement activities. Our firm-wide RSCM framework is based on identifying, assessing and monitoring vendor practices in the areas of human and labor rights, the environment, health and safety and anti-corruption.

A central component of our RSCM framework is the UBS Responsible Supply Chain Standard, to which our direct vendors are bound by contract. The standard defines our expectations toward vendors and their sub-contractors regarding legal compliance, environmental protection, avoidance of child and forced labor, non-discrimination, remuneration, hours of work, freedom of association, humane treatment, health and safety, anti-corruption measures, and whistleblowing protection for employees.

    For more information refer to “Responsible Supply Chain Standards” available at ubs.com/suppliers   

Identifying, assessing, and monitoring high-impact vendors

We identify high-impact vendors when establishing new contracts or renewals based on the vendors’ provision of goods and services that have either a substantial environmental and social impact or are sourced in markets with potentially high social or governance risks. Such high-impact vendors are assessed against the UBS Responsible Supply Chain Standard. These vendors are requested to conduct a self-assessment on their management practices and to provide corresponding evidence. Actual and potential negative impacts that are considered in the impact assessment of purchased goods and services include, but are not limited to, the following:

     Adverse environmental impacts due to inefficient use of resources (e.g., water, energy, biomass) and emissions during the life cycle of the product;

     Hazardous substances, emissions, pollutants and limited recyclability of products, adversely affecting people and the environment;

     Unfair employment practices, such as low wages, excessive overtime, absence of occupational health and safety measures;

     Insufficient management of sub-contractors regarding sustainability aspects.

 

If our assessment reveals any non-compliance with our standard, UBS defines and agrees, together with the vendor, specific improvement measures, which we monitor. Lack of improvement may lead to the termination of the vendor relationship. We also regularly screen active vendors as part of our environmental and social risk control processes.

In 2021, 251 newly sourced vendors were classified as vendors that provide UBS with goods or services with potentially high impacts. In addition, 48 vendors were classified as ongoing engagements, which are re-assessed after 24 months to ensure that even in long-term contracts UBS’s expectations regarding environmental and social aspects are met and supervised continuously. Of all the vendors assessed, 28% were considered as in need of improving their management practices. Specific remediation actions were agreed upon and implementation progress is closely monitored.

In 2021, no UBS vendor relationship was terminated as a result of RSCM assessments. This results partly from the fact that we assess each vendor’s potential risks before entering into a contract with them.


We have also started engaging high-impact vendors on net zero discussions. We are asking them to declare their greenhouse gas emissions and provide information on commitments regarding climate change. In addition, we have replaced over 300 items this year in our purchase catalogues with sustainable alternatives that are made from recyclable material(s) and / or have ECOLOGO certification.

We have continued to strengthen our supplier diversity program to support underrepresented communities, particularly in the US, where we included at least one diverse supplier in 79% of our US tenders in 2021 and increased our spend with diverse US suppliers to 24% of US vendor spend. UBS is a proud corporate member of the National Minority Supplier Development Council (and the National LGBT Chamber of Commerce).

Engaging in sustainable technology

In 2021, UBS launched the Sustainable Technology initiative. This builds on a proven track record of delivering energy savings via technology; the move to virtualization, our successful cloud migrations and the adoption of private cloud-based end-user workstations and public cloud-based developer desktops (in place of physical hardware under the desk). We have now formed a focus group of employees from across the organization, with a diverse set of skills and experience, who are striving to further reduce the environmental footprint of technology at UBS. The objective is to drive cultural change in terms of energy consumption. Throughout 2021 there was a comprehensive global roadshow to introduce the key concepts to an engaged audience of UBS technology staff.

There are four key areas where our approach to technology is making a difference to the UBS energy profile. The first is optimization of our onsite operations and UBS data centers. The retirement of energy inefficient hardware or the accelerated decommission of redundant applications are just two examples. There has been some early success resulting from a drive to turn off non-production hardware out of business hours. Second, the cloud offers a real opportunity to make significant reductions in energy use. A large provider such as Microsoft (Azure) benefits from economies of scale that cannot be achieved at UBS. Accelerating our migration to the Cloud is helping to further reduce our own energy consumption.

The third area that we expect will make a substantial difference centers around software, rather than hardware. The introduction of green software development principles and a developer education campaign can help UBS achieve greater energy efficiency through changing our approach to application development. The fourth area is a holistic assessment of the software development lifecycle that can identify other opportunities for footprint reduction. This will include supply chain emissions and the verification of a supplier’s environmental credentials.

 

75 


Sustainability Report 2021 | What 

UBS’s charitable contributions

Direct cash contributions from the firm, including support through our community impact program, UBS’s affiliated foundations in Switzerland, the UBS Foundation of Economics in Society at the University of Zurich and contributions to UBS Optimus Foundation amounted to a total of USD 59 million in 2021.

    Refer to Appendix 5 to this report for an overview of UBS’s charitable contributions in 2021

Our community impact program

At UBS, we are committed to supporting the communities in which we work. Our community impact (formerly community affairs) program is a powerful vehicle to address issues associated with wealth inequality and mobilize employees by generating social impact. We work with our local communities to understand the issues they are facing and develop long-term partnerships to catalyze sustainable change in people’s lives. We enable our employees to help deliver this change through volunteering. Our community impact program distributed USD 11.9 million in grants during 2021.


During 2021, we focused on addressing social inequalities in our local communities through education and entrepreneurship. The impact of the ongoing pandemic during a large part of 2021 meant we continued to provide some COVID-19 relief to support the most vulnerable, as well as supporting recovery and rebuilding efforts through our community partners.

Following the announcement of the UBS purpose at the end of April 2021, we undertook a review of our global community impact strategy in light of UBS’s new sustainability commitments. We will increase our focus on education and the development of skills with the implementation of our revised strategy from 2022.

Employee volunteering

The ongoing pandemic and associated restrictions meant that we were unable to restart face-to-face volunteering activities for a large part of 2021 to protect the health and welfare of our employees, our community partners and their beneficiaries. We worked with our community partners to develop and expand opportunities for our employees to support the local community working remotely and online. As employees returned to the workplace in the second part of 2021, we continued to develop a blended portfolio of remote and in-person volunteering opportunities to align with more flexible post-pandemic working patterns. We set global targets for employee engagement through volunteering, which are built bottom up and on a best-efforts basis, particularly given the uncertainties associated with the pandemic. During 2021, we successfully engaged 28% of our global workforce in volunteering, and 54% of total volunteer hours were skills-based.

 

 

Target 2021

2021

2020

2019

Number of employees volunteering

 

20,605

16,136

27,297

% employees engaged

26%

28%

22%

38%

Number of volunteer hours

 

140,478

104,452

202,784

% hours that are skills-based

46%

54%

58%

48%

 

 

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Measuring impact

Community impact uses a global framework, based on the industry-leading Business Investment for Societal Impact framework (or B4SI) for measuring and reporting. Use of such a standardized model across our global strategy ensures that we are able to effectively focus our approach and resources.

Our support was focused on addressing inequality through education and entrepreneurship skills as areas where our resources can make a sustainable impact. We offered programs that support young people to increase their education and acquire workplace skills. We also worked with entrepreneurs to help them build and scale businesses (including social businesses) that tackle unemployment and revitalize underserved communities.

In 2021, 85% of UBS’s community impact grants were made in line with our strategic focus areas. This was up from 50% in 2020, when there was an urgent need to support our local communities across a broader range of social issues in the face of COVID-19 challenges.

Individual beneficiaries in 2021

Our community impact program reached 723,124 young people and entrepreneurs across all regions in which we operate during 2021. This is a decrease in the number of beneficiaries from 2020, when increased community impact funding was provided to support the distribution of COVID-19 emergency relief grants in our local communities, but an increase on the number of individual beneficiaries supported in 2019.

We also measure the extent to which our support has benefited individuals (i.e., by using the B4SI depth of impact scale). This model has shown that UBS’s support has improved or transformed the lives of 93,403 individuals in 2021. This is a significant increase on the proportion of beneficiaries we supported at greater depth in 2020, but below the proportion in 2019.

    Refer to Appendix 5 to this report for the B4SI depth of impact scale model


Supporting intermediaries and VCSOs

We also work with intermediary organizations that are building the capacity of voluntary and community sector organizations (VCSOs). Using the B4SI framework, we measure the number of intermediary organizations we work with and the number of third-party organizations they reach with our support, as well as the ways in which those organizations are helped to develop. We worked with 20 intermediaries to support 812 third-party organizations during 2021.

2025 Community impact goal

We know that sustainable change can only be achieved by setting long-term and impactful targets. In 2020, we set a long-term target on the change that we want to make, aiming to support one million young people and adults to learn and develop skills for employment, decent jobs and entrepreneurship by 2025.

Of the 723,124 beneficiaries we reached in 2021, 679,116 beneficiaries were in support of our 2025 goal. We reached 519,534 beneficiaries in support of this goal in 2020. Cumulatively, this amounts to 1.199 million, meaning we have achieved our target in two years, and we are currently reviewing what long-term target we should now be putting in place.

As noted above, our revised community impact strategy will be implemented from 2022, increasing our focus on addressing issues associated with wealth inequality through education and skills. We will continue to report both the number of beneficiaries we have reached and the extent to which our support has changed lives.

 

 

  

77 


 

 

 


 

 


How

 

How we engage in partnerships

80

Our Sustainability and Impact Institute

80

Our commitment to the Net-Zero Banking Alliance

81

Our commitment to the Principles for

Responsible Banking

How we monitor our actions

 

82

Governance on sustainability

How we manage societal risks

84

Managing sustainability and climate risks

85

Combating financial crime

86

Protecting data

87

Controlling risks and metrics

How we include our stakeholders’ views

88

GRI-based materiality assessment

88

Our governance

88

Our process

89

Outcome

     

 

  

 


Sustainability Report 2021 | How 

How we engage in partnerships

It is our firm belief that by taking action – both on our own and in partnership with other large investors, standard setters, our clients and our peers, as well as our communities and our own employees – we can achieve a real impact on a truly global scale. This is why partnerships are integral to our sustainability approach.

Sustainability reporting is a clear case in point. We recognize that currently there is a lack of standardization, with gaps that in some cases can only be fixed by standardization of disclosure requirements. However, this will not be accomplished by the financial industry alone: it will require a concerted effort on the part of regulators, governmental organizations, non-profit organizations and many others.

We therefore regularly work with other financial firms and organizations outside our industry, including standard setters, to address this challenge. For example, UBS is a founding member or current signatory of groups such as the Task Force on Climate-related Financial Disclosures (the TCFD, since 2016), the Operating Principles for Impact Management (the Impact Principles, since 2019) and, more recently, the Banking for Impact working group. In 2021, we became a member of the newly established Taskforce on Nature-Related Financial Disclosures (the TNFD). We serve on the TNFD, alongside other thought leaders from organizations across key sectors and locations. In this way we help to inform and shape decision-useful frameworks designed to advance the sustainability agenda.


Our Sustainability and Impact Institute

In 2021, we launched the UBS Sustainability and Impact Institute (the SII), with the objective of providing our stakeholders with thought leadership and promoting debate around key sustainability themes and topics.

By intensifying our collaboration and advocacy with leading external partners, including the academic community, Nobel Laureates, UBS Global Visionaries and our clients, we seek to source independent views and promote constructive challenge and encourage objective, fact-based debate on the most critical issues and trends related to the future of sustainability. Furthermore, by contributing to discussions with industry standard setters and policy makers we aim to further shape the industry.

Our commitment to the Net-Zero Banking Alliance (NZBA)

As a founder member of the NZBA, we recognize the vital role of banks in supporting the global transition of the real economy to net-zero emissions and that we will only succeed in achieving this objective if clients and other stakeholders also play their part.

The commitment statement also includes the expectation that governments will follow through on their own commitments to ensure that the objectives of the Paris Agreement are met.

    Refer to the section “Taking action on a net-zero future – our climate report” of this report for more information about our commitment to net zero and the associated implementation steps

 

80 


 

Our commitment to the Principles for Responsible Banking

The Principles for Responsible Banking (the PRB) provide a framework for a sustainable banking system with the aim of aligning the industry with the SDGs and the Paris Agreement. The six Principles embed sustainability at the strategic, portfolio and transactional levels, across all business areas. As a founding signatory, we have committed to taking three key steps that enable our firm to continuously improve its impact on and contribution to society:

     to assess our positive and negative impacts on society and the environment;

     to set SDG-aligned global targets where we can have the most significant impact; and

     to publicly report on progress.

 

Our sustainability and impact strategy, governance structure, client offering, stakeholder engagement activities and goal-setting processes demonstrate our alignment with the Principles.

In 2021, we continued to expand the scope of our impact analyses and improve upon our existing methodologies in partnership with the UN Environment Programme and the industry,
and our peers.


Our review of in-scope business areas and activities confirmed SDG 13, Climate Action, as an area of opportunity, which we continue to address in our climate strategy and through our net-zero commitment.

In addition, SDG 5, Gender Equality, and SDG 10, Reduced Inequalities, were identified as areas of opportunity for significant impact. In 2022, we will explore how we can enhance our contribution to a diverse, equitable and inclusive society, with actions and activities that expand beyond our own workplace.

    Refer to “PRB Reporting and Self-Assessment” at ubs.com/gri  for our 2021 PRB reporting

    Refer to the “Why” and the “Taking action on a net zero future – our climate report” sections of this report for more information about the integration of climate and equality into our key strategic themes of planet, people, and partnerships

 

We continue to evolve our understanding of impact. In late 2020, we joined Banking for Impact, a consortium of banks and academia, together with a social enterprise. Our aim is to create new impact accounting standards for the financial industry, which will provide quantitative information for more comparability, transparency, and holistic decision making.

 

 

81 


Sustainability Report 2021 | How 

How we monitor our actions

Governance on sustainability

Board of Directors