Swiss investment banking giant UBS revealed this week that it has decided to further tighten its standards on coal financing transactions, ruling out project-level finance to new coal-fired power plants around the world, at the same time as the bank seeks double penetration of sustainable investments by 2020.
UBS is one of the world’s top 40 banks and leads the Dow Jones Sustainability Indices (DJSI), the most widely recognized sustainability rating, and was recently upgraded to AA by MSCI ESG Research in its latest sustainability ratings, placing it in the top three of its primary peer group. Sustainalytics — the environmental, social, and governance (ESG) ratings and research analysts — also ranked UBS as an industry leader, while CDP (formerly the Carbon Disclosure Project) confirmed the bank’s position on its Climate A-List.
The bank revealed its 2018 sustainability progress this week, showing that it was making significant progress in 2018 towards meeting its ambitious targets in sustainable investing, philanthropy, and business stability, while simultaneously reducing its own environmental footprint. Specifically, as of the end of 2018, the bank’s total sustainable investment (SI) assets represented $1,110 billion and core SI assets amounted to $313 billion, representing 35.8% and 10.1% of the bank’s total invested assets respectively.
Further, UBS’s $313 billion core SI assets — including environmental, social, and governance integration and a range of sustainability strategies — increased by 72% in 2018 from $182 billion in 2017, driven primarily by the integration of ESG factors into UBS Asset Management’s investment research process.
UBS also directed $1.9 billion of client assets towards Sustainable Development Goals (SDG) related impact investments, increasing its progress towards its target of $5 billion in commitments by the end of 2021.
“We see a strong business rationale for catering to the growing importance of and demand for sustainability,” said UBS Chairman Axel A. Weber. “We have set ourselves the goal to create long-term positive value for clients, employees, investors and society. Our goal carries with it a clear responsibility for taking a leading role driving change towards a positive future.”
UBS has reduced its carbon-related assets to $2.7 billion, down from $6.6 billion in 2017, while its climate-related sustainable investments increased to $87.5 billion, up from $74 billion in 2017.
The bank also announced on Thursday that it was further tightening its coal financing transactions, and will no longer provide project-level financing to new coal-fired power plants around the world. The bank has already “significantly” reduced lending and capital raising to the coal mining sector and has cut support to coal-mining companies engaged in mountain-top removal (MTR) operations. UBS will continue to support financing transactions for existing coal-fired operators (which are more than 30% reliant on coal) but who have a transition strategy in place that aligns with a pathway under the Paris Agreement, or the transaction is related to renewable energy.
“It’s our priority to protect our clients’ assets and UBS from the materialization of risks,” explained Christian Bluhm, Group Chief Risk Officer. “This includes climate-related risks since sustainable financing is high on our agenda. We already limited our risk appetite for carbon-related assets and have further tightened our standards on coal-financing transactions while growing our exposure in climate-related sustainable asset classes.”
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