Allnews.ch: How has UBP integrated sustainable investment principles into its investment strategy and what are its sustainable investment priorities?
Karine Jesiolowski: In 2012, we signed up to the United Nations Principles for Responsible Investment (UNPRI) and launched a socially responsible investment (SRI) fund that invests in convertible bonds. 2014 saw us roll out our responsible investment policy and we introduced exclusion lists to our investment strategy, which, among other things, bans investing in the controversial arms trade. In terms of exercising our voting rights, we’ve also started to exercise proxy voting rights on equities by working with the consultancy ISS. In terms of engagement, we’ve worked with GES International, which was bought this year by Sustainalytics. From 2018, our involvement in responsible investment expanded with the launch of a European equity impact investing fund, as well as an SRI fund which invests in emerging market corporate bonds.
We’ve also made a big effort to integrate sustainability into everything we do, with a commitment that applies not only to asset management but also to private banking. For example, in real terms, this means that we’ve put together a longer exclusion list that applies not only to all of our funds, but also, among others, to our wealth management mandates and to our investment advisory lists. At institutional level, UBP is a member of bodies such as Swiss Sustainable Finance, Sustainable Finance Geneva and the Cambridge Institute for Sustainability Leadership’s Investment Leaders Group.
Do these exclusion principles also take environmental considerations into account?
Yes indeed. On top of businesses that are typically banned, such as those involved in the controversial arms trade, we also exclude firms involved in coal mining from our entire product range when this involvement exceeds 20% of their revenue. We also exclude companies involved in nuclear weapons. Our exclusion lists are regularly updated in line with how businesses develop.
Do you carry out your own research or do you use research from third-party providers?
We don’t have a team of analysts specially dedicated to environmental, social and governance (ESG) analysis which would provide expert advice to other business lines within the Group. At UBP, asset management teams are themselves responsible for integrating ESG criteria into their asset- and wealth-management work. To do this, these teams compose their own ESG and impact analyses by engaging directly with the companies and by using ESG research from third-party providers. We also compile company watch lists to make asset managers more aware of ESG issues.
Are these watch lists only used negatively or can they be used positively?
No, they can also be used positively. We also put together lists of “sustainability champions”, on which companies are either leaders in adopting sustainable development goals, or because of their ESG policies in general.
Are sustainability principles applied in the same way to emerging market companies as to companies in the developed world?
There’s no reason to exclude emerging countries from the sustainable investment universe simply because they’re emerging countries. One difference between industrialised and emerging countries is that there are generally fewer ESG investments in the latter. Nonetheless, the belief that responsible investment is incompatible with emerging markets is completely wrong and is above all due to a lack of knowledge of these markets. Take the example of the emerging market corporate bond universe: two-thirds of the paper that’s issued has ESG ratings of average or better with one third being unfavourable. Furthermore, the potential impact that results from taking ESG criteria into account is often much bigger for emerging market companies than for their developed market counterparts. It’s therefore particularly important to engage with firms in emerging countries. Take, for example, such issues as waste management.
Which emerging countries do you include in your ESG investment universe?
In our sustainable fund range, we only excluded a small number of emerging countries. These include countries under sanction or on the FATF blacklist of high-risk or monitored jurisdictions. For the others, we take a bottom-up approach, meaning we analyse a vast number of companies included, for example, in the MSCI EM, the MSCI Frontier or the JP Morgan Corporate EM Bond Index. I believe this fundamental analysis of each company is essential when investing in the emerging universe.
Are Chinese companies part of this universe?
Absolutely. Even though overall there still aren’t many Chinese companies that have a very high ESG rating, lots of them are nonetheless making great progress in this direction.
Is this for reputation reasons?
Not only. You have to remember that when companies in emerging countries – whether they come from China, India or anywhere else – come to the international financial markets to raise capital, they’re competing with companies in the developed world. Just as they’ve had to conform to the relevant international standards of accounting and reporting and so forth, there are similar developments in terms of sustainability criteria, as investors are increasingly demanding in this field and emerging market companies are becoming more and more conscious of the stakes involved.
Karine Jesiolowski
Senior Investment Specialist
Head of Responsible Investment - Asset Management
Interview by Yves Hulmann from allnews.ch