6-K 1 gri2019report.htm 6kubsgri2019

 



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 5, 2020

 

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 Group AG and UBS AG's Sustainability Report 2019, which appears immediately following this page.

 

 


 

  

 

Sustainability Report 2019

Based on GRI Standards

 


 

 


 

 


 

 

 


 

 

 


 

 

 


 

Table of contents

Driving change that matters

 

3

Chairman’s statement

 

5

Sustainability at UBS

 

 

 

 

Our strategy, business model and environment
(Extracts from the UBS Annual Report 2019 supported by additional information for GRI purposes

 

7

Our strategy

 

8

Our sustainability strategy

 

9

Performance targets and measurement

 

9

Sustainability objectives

 

10

Our businesses

 

21

Our environment

 

25

How we create value for our stakeholders

 

29

Clients (additional information)

 

34

Shareholders and investors (additional information)

 

38

Employees (additional information)

 

49

Stakeholder relations (additional information)

 

 

 

Our governance and principles

 

51

Sustainability governance

 

51

Key policies and guidelines

 

54

Our climate strategy

 

64

Sustainability-related training and raising awareness

 

64

Sustainable performance and compensation

 

 

 

 

Materiality under GRI Standards

 

66

GRI-based materiality assessment

 

67

Material GRI topics 2019

 

 

 

 

Driving change in finance

 

70

Sustainable investing

 

72

Key sustainable investing products and services in 2019

 

 

 

 

Driving change in philanthropy

 

75

UBS Philanthropy

 

 

 

 

Driving change in business

 

76

Advancing sustainability in the financial sector – UBS’s key activities in 2019

78

Environment and human rights

79

Management of environmental and social risks

82

In-house environmental management

93

Responsible supply chain management

94

Combating financial crime

95

Ratings and recognitions

97

External commitments and memberships

 

Driving change in communities

 

98

Overview

 

100

Progress against 2020 target

 

102

Impacting organizations in 2019

 

102

2025 goal

 

 

 

Our sustainability track record

 

103

Our sustainability track record

 

 

 

Assurance and certification

 

105

Independent assurance report by EY

 

107

ISO 14001 and 50001 certificates

 

111

ISO 37001 certificate

 

 

 

 

Appendix 1 – Governance and policies

 

112

Charter of the Corporate Culture and Responsibility Committee

 

113

Our Code of Conduct and Ethics

 

117

UBS in society constitutional document

 

120

Environment and social risk policy framework

 

127

Health and safety statement

 

 

 

Appendix 2 – Additional information for GRI

 

128

UBS in society management indicators

 

129

Information for management approaches for material topics

 

131

Impact of material GRI topics

 

132

Calculating and reporting on climate change-related financing and advisory activities

 

133

Direct economic value generated and distributed by UBS Group AG consolidated in 2019

 

134

Financial literacy

 

 

 

Appendix 3 – Sustainability objectives and achievements

 

135

UBS sustainability objectives and achievements 2019 and sustainability objectives 2020

 

 

 

Appendix 4 – Global Reporting Initiative content index

 

143

Global Reporting Initiative Content Index 2019

 

 

 

 

Appendix 5 – Sustainability Accounting Standards Board index

 

161

Sustainability Accounting Standards Board Index 2019

 

 

 

 

Appendix 6 – EU Non-financial disclosures index

 

165

Risk evaluation

 

166

Non-financial disclosures in accordance with German law implementing the EU directive 2014/95

 

  

1 


UBS Group AG consolidated 

About this Sustainability Report

We strive to report openly and transparently about our firm’s sustainability approach and activities, consistently applying our firm's information policy and disclosure principles. The core medium for our sustainability disclosure is this Sustainability Report 2019, supplemented – as referenced in the GRI Content Index – by other relevant information, which can be found in the UBS Annual Report 2019.

We have included the following sections from the UBS Annual Report 2019 at the beginning of this document:

   Our strategy

   Performance targets and measurement

   Our businesses

   Our environment

   How we create value for our stakeholders

 

Except where clearly identified, all of UBS’s sustainability information included in this Sustainability Report is presented for
UBS Group AG and all its subsidiaries. Information on our consolidated subsidiaries can be found in Note 31 “Interests in subsidiaries and other entities” in our Annual Report 2019. UBS AG consolidated information does not differ in any material respect from UBS Group AG’s consolidated information.

We use the Global Reporting Initiative (GRI) as the basis for our sustainability reporting and apply a careful process weighing up the materiality and relevance of the information reported and the expectations of all our stakeholders.

This document also includes our group’s disclosures of non-financial information required by Germany’s implementation law of EU directive 2014/95 (CSR-Richtlinie-Umsetzungsgesetz / CSR-RUG) (nichtfinanzieller Konzernbericht). A table at the end of this document (page 166) provides the references to such non-financial information.

This Sustainability Report has been reviewed by Ernst & Young Ltd (EY) against the GRI Standards (limited assurance). The content has been prepared in accordance with the GRI Standards, Comprehensive option, as evidenced in the EY assurance report. Both, the GRI content index and the assurance report, have been included in this document and can also be downloaded from www.ubs.com/gri.  

 

 

5 March 2020

UBS Group AG and UBS AG


Contacts

UBS Corporate Responsibility Management

The Corporate Responsibility team manages UBSs sustainability disclosure and also acts as information provider for sustainability-related enquiries.

 

cr@ubs.com

 

Terms used in this report, unless the context requires otherwise

“UBS,” “UBS Group,” “UBS Group AG consolidated,” “Group,” “the Group,” “we,” “us” and “our”

UBS Group AG and its consolidated subsidiaries

“UBS Group AG” and “UBS Group AG standalone”

UBS Group AG on a standalone basis

2 


 

Driving change that matters


.

 

 

Chairman’s statement

In this statement, UBS Chairman and Corporate Culture and Responsibility Committee Chairman Axel A. Weber provides his views on UBS’s long-term value creation  

 

In 2019, we again demonstrated our commitment to advancing sustainability in our firm, for and with our clients, and in our industry. We are proud of what our firm has achieved during the course of last year – and of our ambitious plans going forward.

 

The Corporate Culture and Responsibility Committee (CCRC) regularly monitors our firm's sustainability activities and ambitions and approves its strategy and goals. In 2019, we witnessed an accelerated momentum in our UBS in society program as well as in our sustainable finance activities. A key indicator is the development of our Core SI (sustainable investing) assets under management where we managed to more than double penetration from 5.6% of total invested assets in 2017 to 13.5% in 2019 – and thus reached the goal we set ourselves then one year earlier than planned.

 

Highlights presented to the CCRC included the further strengthening of our firm's sustainability strategy. Notable examples include the integration of sustainability topics in our employee lifecycle activities – with the explicit ambition (included in our UBS in society constitutional document) of being an employer of choice, as well as the expansion of sustainable finance activities across our firm.

 


At UBS, we are convinced that this momentum will continue to accelerate during the coming years. Continually growing interest by our clients in sustainable finance solutions is evidenced in major surveys that we conducted among our private and institutional clients, as well as in our biannual stakeholder survey. I also experience it in my regular, personal interactions with clients across all of our firm's businesses and regions.

 

As we move into the 2020s, we will further expand our firm's sustainability efforts, shaping them in particular around three interconnected frameworks: the United Nations Sustainable Development Goals (SDGs); the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD); and the UN-backed Principles for Responsible Banking (PRB).

 

We were among the very first banks that shone a light on the importance of the SDGs – and specifically on what it takes to make them investable for clients, recognizing the major investment gap associated with their achievement with estimates ranging from USD 2 trillion to as high as USD 7 trillion annually. This gap needs to be closed if the world wants to successfully tackle the enormous societal and environmental challenges expressed through the SDGs. We are keen to help develop solutions in this regard, building on our successful and sometimes pioneering work aimed at mobilizing private and institutional capital towards the Goals.

 

 

3 


 

Secondly, the TCFD's recommendations, focusing on the risks associated with climate change, try to help address in particular information gaps that prevent investors from properly assessing related financial risks for their portfolios and thus to direct capital flows to more sustainable uses. Following the launch of these recommendations in 2017, we have continuously improved and expanded our climate-related disclosures to demonstrate our active engagement for an orderly transition to a low-carbon economy. A key component of our comprehensive climate strategy is to offer innovative products and services in the areas of investments, financing and research as well as to encourage more transparency by companies. At the same time, we are working on further restricting assets that are associated with climate-related risks. We continue to be successful on both fronts, increasing our climate-related SI by 23% to
USD 108 billion from 2018 to 2019 while reducing our carbon-related assets from USD 3.2 billion to USD 1.9 billion.

 

Finally, in 2019 we became a founding signatory of the PRB, a framework that is meant to support banks in integrating society's goals into their business strategy – and that incorporates both the SDGs and the Paris Agreement on Climate Change. For the PRB's four-year implementation period, we have committed to set, publish and work towards ambitious targets. This commitment reinforces our long-standing focus on maximizing positive effects through our sustainable business activities and on minimizing negative impacts, notably through our management of environmental and social risks.

 


This Sustainability Report provides comprehensive information on all of the aforementioned commitments and activities – and more. I invite you to read it, in particular as it demonstrates how our employees contribute to UBS's sustainable performance.

UBS’s commitment to the UN Global Compact

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

 

 

 

 

Axel A. Weber

Chairman of the Board of Directors

 

 

 

 

4 


 

Sustainability at UBS

Our concept of sustainability is guided by the United Nations (UN) Sustainable Development Goals (SDGs), which 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.

Our commitment to the SDGs

As a founding signatory of the UN-backed Principles for Responsible Banking, UBS has committed to aligning our business strategy to be consistent with and contribute to society’s goals. By doing so, we pledged to strategically align our business with the SDGs and the Paris Agreement on Climate Change.

What are the SDGs?

The 17 SDGs provide a global roadmap to address environmental, economic, and social imbalances that affect the world’s population and its institutions. Such sustainability aims are relevant to everyone. The SDGs were agreed upon by 193 states in 2015 and officially launched by the UN on 1 January 2016.

How do they pertain to UBS?

We were among the very first banks that shone a light on the importance of the SDGs. Already in 2015, before their official launch, we published a paper on what it takes to make the SDGs investable for clients. Our focus has continued to be on investability as this is consistent with a key message that accompanied the launch of the SDGs – the recognition of a major investment gap (with estimates ranging from USD 2 trillion to as high as USD 7 trillion annually) that will need to be closed if the world was to achieve the Goals by 2030.

We have refined our analysis of and commitments to the SDGs ever since, not least in four successive white papers for the World Economic Forum (WEF) Annual Meeting. In our 2017 white paper we set out commitments to sustainable and impact investing, which we executed on by working with other institutions to create innovative solutions that can help private and institutional clients achieve their financial and societal objectives.

We have also executed on our 2018 white paper commitments to partnership for the Goals, by working more closely with multilateral development banks, through our partnership with the World Bank, to offer development bank bond solutions for private clients; by collaborating to fill gaps in the sustainable investing landscape with innovative new solutions; and by acknowledging the demand and impact of collaborative philanthropy.

In 2019 we highlighted the need for people to become more aware of the SDGs; for sustainability to be easier understood; and for more solutions that enable the public to make a real contribution to people and planet. We outlined eight potential solutions on how to improve the sustainable investing, giving, and consumption ecosystems to mobilize greater support for tackling world's most urgent challenges.

In 2020 we again published a white paper on the occasion of the WEF Annual Meeting, focusing on SDG 13, Climate action, and on ways in which investors can align their investments towards a climate-smart future.

Through the #TOGETHERBAND campaign, which we launched jointly with BOTTLETOP in 2019, we raise public awareness and inspire action to achieve the SDGs. The campaign is supported by a group of high-profile ambassadors and experts with a strong commitment to sustainability.

®   Refer to www.ubs.com/wef-2020  for more information about our white paper

®   Refer to www.ubs.com/togetherband  for more details about the campaign

What do we do?

At UBS we see a strong business rationale for catering to the growing importance of and demand for sustainability – as embodied by the SDGs. We are committed to play a leading role in providing both finance and expertise to meet these ambitious global goals. As the largest truly global wealth manager to high net worth and ultra high net worth clients, we regard it as particularly critical to help private wealth contribute to fund the development of a more sustainable world.

UBS has touchpoints to the SDGs across the entire firm. With a business model covering retail, private and institutional clients we have links to every single SDG through one or more of our firm’s activities. Some of the key examples include the UBS Optimus Foundation’s support for The Power of Nutrition foundation (SDG 2), the UBS Oncology Impact Fund (SDG 3), and the Gender Equality ETF (SDG 5).

We believe, however, that five SDGs (4, 8, 12, 13, 17), as per the table below, are of particular pertinence to our firm. In particular due to our strategy and business model and (business) focus areas it is with these five that we see the most material impacts across our value chain – notably by helping to advance positive developments through sustainable finance & investing and ESG expertise as well as minimizing negative impacts through the management of environmental and social risks.

We have captured these five SDGs, our rationale for each one and key focus areas pertaining to each of them in the graph on the following page. Over the coming years, we will continue to refine our analysis of our firm’s links to the SDGs – in order to better understand and depict positive and negative impacts across our value chain and to set objectives accordingly.

 

5 


 

Sustainable Development Goals in our focus

  

6 


 

Our strategy

We aim to drive higher and superior returns by growing and leveraging our unique, integrated and complementary business portfolio and geographic footprint.

UBS is the largest truly global wealth manager and a leading personal and corporate bank in Switzerland, with focused investment bank and asset management divisions. We concentrate on capital-efficient businesses in our targeted markets, where we have a strong competitive position and an attractive long-term growth or profitability outlook. We view capital strength as the foundation of our strategy.

In delivering all of UBS as one firm to our clients, we intend to: strengthen our leading client franchises and grow share; position UBS for growth by expanding our services and capabilities; drive greater efficiencies and scale; and further intensify collaboration for the benefit of our clients.

Driving increasing returns

We manage UBS for the long term, focusing on sustainable profit growth and responsible resource deployment. We aim to balance growth opportunities with cost and capital efficiency in order to drive attractive risk-adjusted returns and sustainable performance.

For the years 2020–2022, we have seven strategic priorities, which are outlined below.

Priority I We aim to increase profit before tax in our Global Wealth Management business by 10–15% and drive higher pre-tax margins by elevating our leading franchise. We are adjusting our coverage across the client spectrum to deliver more tailored services and solutions. We are reorganizing ourselves to be closer to clients, in order to increase time spent with them, empowering regions, improving our responsiveness and speed to market, as well as delivering on all of the firm’s capabilities through expanded strategic partnerships with the Investment Bank and Asset Management. Furthermore, we are expanding our product offering while becoming more efficient, leveraging scale through partnerships and optimizing processes to increase productivity.

Priority II In our Investment Bank, we intend to improve returns by driving profitable growth, by further optimizing resources and through collaboration. We will maintain our capital-light business model that is focused on advice and execution and leverages our digital capabilities. Together with our other business divisions and through external partnerships, we aim to deliver market-leading digital, research and banking capabilities to our clients, while consuming up to one-third of Group resources.

Priority III In Asset Management, we intend to capitalize on our differentiated client offering for further growth,
performance and scale. We plan to build on our strengths in fast-growing areas of the industry, such as sustainable investing, private markets and alternatives.

Priority IV Personal & Corporate Banking aims to deliver steady profit growth by enhancing its digital initiatives and services, while improving efficiency. By expanding our leading position in digital services in Switzerland, along with broadening our advisory solutions and product offering, we expect to increase profits despite the current negative interest rate environment.

Priority V We want to deliver more as one firm to our clients. The collaboration between our business divisions is critical to the success of our strategy and is a source of competitive advantage. This collaboration also provides further revenue growth potential and enables us to better meet client needs; for example, in the ultra high net worth and Global Family Office space.

Another area where collaboration between our business divisions can bring more value to clients is in sustainable finance. As the largest truly global wealth manager, we have a responsibility to take a leading role in shaping a positive future, and our goal is to be the financial provider of choice for clients who wish to mobilize capital toward the achievement of specific environmental or social outcomes. We are shaping the landscape of sustainable finance by using thought leadership, innovation and partnerships to support clients in their sustainability efforts.

®   Refer to “Society” and “Our focus on ESG” in the “How we create value for our stakeholders” section of this report for more information about our engagement and leadership in sustainability matters

 

Priority VI We aim to drive improvements in firm-wide efficiency to fund growth and enhance returns. We believe continued optimization of processes, platforms, our organization and capital resources will help us to achieve this.

We will continue to invest in technology with the goal of improving efficiency and effectiveness, driving growth and better serving our clients.

We also intend to realize the benefits of existing external partnerships and to explore selected new opportunities.

Priority VII We plan to maintain an attractive capital return profile through dividends and share repurchases. Our capital strength and capital-accretive business model allows us to grow our business while delivering attractive capital returns to our shareholders.

We aim to increase our ordinary dividend per share by USD 0.01 each year, and to return excess capital through share repurchases. We consider business conditions and any idiosyncratic developments when determining excess capital available for share repurchases.

  

7 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our strategy
 

Our sustainability strategy

Our firm's sustainability strategy is guided by our goal to be the financial provider of choice for clients wishing to mobilize capital towards the achievement of the SDGs and the orderly transition to a low-carbon economy. We work towards this goal by integrating sustainability into our mainstream offerings, through new and innovative financial products with a positive effect on the environment and society, and by advising clients on their philanthropic works. And it is through the management of environmental and social risks, the management of our environmental footprint and our sustainability disclosure that we continue to set standards in our industry.

®   Refer to the UBS in society constitutional document in the Appendix 1 for more information about our sustainability strategy

®   Refer to ”Society” in this section for more information about our sustainability strategy

  

8 


 

Performance targets and measurement

Targets and capital guidance

In January 2020, we updated and simplified our performance target framework. We reduced the number of targets to concentrate primarily on the Group rather than our business divisions, underlining our focus on cross-divisional collaboration. Our targets are underpinned by the latest three-year strategic plan, which reflects our strategic initiatives, management actions, as well as certain economic and market assumptions. The return and efficiency targets have been revised to reflect changes in the market outlook since the previously communicated targets were set in October 2018.

The table below shows the performance targets and capital guidance for the 2020–2022 period. Our updated performance targets are based on reported results. From the first quarter of 2020, we will no longer disclose adjusted results in our financial reports. We will continue to provide disclosure of restructuring and litigation expenses as well as other material profit or loss items that management believes are not representative of underlying business performance in our management’s discussion and analysis.

Performance against targets is taken into account when determining variable compensation.

®   Refer to “Performance and compensation at a glance” in the “Compensation” section of this report for more information about variable compensation

®   Refer to “Alternative performance measures” in the appendix to this report for definitions of and further information about our performance measures

 

Targets and capital guidance 2020–2022
(on a reported basis)

 

 

 

Group
returns

 

12–15% return on CET1 capital (RoCET1)

 

 

 

 

 

 

Cost

efficiency

 

Positive operating leverage and 75–78% cost / income ratio

 

 

 

 

 

 

Growth

 

10–15% profit before tax growth in Global Wealth Management

 

 

 

 

 

 

Capital
allocation

 

Up to 13 of Group RWA and LRD in the Investment Bank

 

 

 

 

 

 

Capital
guidance

 

~13% CET1 capital ratio
~3.7% CET1 leverage ratio

 

 

Sustainability objectives

We have set strong overarching ambitions that guide our sustainability performance. We are transparent about our aims and progress wherever possible to demonstrate our commitment. We set annual sustainability goals, which are reflected in the comprehensive set of GRI objectives included in this document.


In addition, our firm's sustainability aims, i.e., beyond the 2020 time horizon, reflect our focus on the mid- to long-term.

®   Refer to “Society” in this section for more information about our sustainability aims and key goals

®   Refer to the Appendix 3 for our sustainability objectives and achievements 2019 and sustainability objectives 2020

  

9 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

Our businesses

Working in partnership

We operate through four business divisions – Global Wealth Management, Personal & Corporate Banking, Asset Management and the Investment Bank. Our global reach and the breadth of our expertise are major assets that set us apart from our competitors. We see partnership as key to our growth, both within and between business divisions. We are at our best when we combine our strengths to provide our clients with more
comprehensive and better solutions through, for example, the creation of a unified capital markets group across Global Wealth Management and the Investment Bank, and a Global Family Office joint venture.

Combining our strengths makes us a better firm. Initiatives such as the Group Franchise Awards encourage employees to look for ways to build bridges between areas and offer the whole firm to our clients.

 

 

 

  

10 


 

Global Wealth Management

We are the largest truly global wealth manager, with USD 2.6 trillion in invested assets. Our goal is to provide tailored advice and solutions to private clients and family offices.

Since the combination of Wealth Management and Wealth Management Americas in 2018, we have continued to deliver comprehensive services to clients, capture operational efficiencies, and invest in our business. More than 22,000 Global Wealth Management employees assist our clients with achieving their goals. Our presence in the ultra high net worth segment is particularly strong, and we have access to the majority of the world’s billionaires.

In Japan, we have entered into a comprehensive strategic wealth management partnership with Sumitomo Mitsui Trust Holdings, Inc. (SuMi Trust Holdings). The new joint venture will combine UBS’s wealth management capabilities with SuMi Trust Holdings’ stature as Japan’s largest independent trust bank. SuMi Trust Holdings offers a range of services, including banking, real estate, asset and wealth advisory services, and has strong client access and brand name awareness in Japan.

Global Wealth Management organizational changes

In January 2020, we announced several initiatives designed to achieve Global Wealth Management’s growth ambitions and to elevate the quality and value of the service we deliver to our clients. First, we have reframed our offering around each client’s needs to deliver more tailored services and solutions. Second, we have made it easier for advisors to spend more time with clients and to better understand their needs and preferences, and we have taken measures to improve our responsiveness and speed to market. We created three distinct business units in EMEA – Europe; Central and Eastern Europe; and the Middle East and Africa – to better capture the diverse opportunities in these markets. Finally, we intend to deliver all of the firm’s capabilities through strategic partnerships with the Investment Bank and Asset Management.

Our focus

We serve high net worth and ultra high net worth individuals, families and family offices around the world, as well as affluent clients in selected markets. Through our organizational changes, we are making our Global Family Office capabilities, which are provided to ultra high net worth individuals, available to more clients, targeting coverage of around 1,500 in total.

While we are already a market leader in the ultra high net worth segment outside the US,1 we believe that we can also become the firm of choice for the wealthiest clients in the US,
many of whom already have a relationship with UBS. Our globally diversified footprint allows us to capture growth both in the largest (the US) and the fastest-growing (Asia Pacific) wealth markets.

We are focusing on increasing mandate and lending penetration, delivering innovative solutions for our clients (e.g., structured solutions, private markets, sustainability and thematic investing), as well as enhancing our advisors’ productivity by making operational processes more efficient. Additionally, we aim to maintain low attrition and to increase our share of clients’ business.

We are investing in our operating platforms and tools to support our clients and client advisors, in order to better serve our clients’ needs and improve our efficiency. As of 31 December 2019, approximately 80% of invested assets booked outside the Americas were on the Wealth Management Platform as we continue to consolidate our operating platforms there. In the US, and in collaboration with our third-party software provider Broadridge, we are building the Wealth Management Americas Platform which we expect to become operational in 2021. The development of our platforms is happening alongside enhancements to our digital capabilities for the benefit of our clients and advisors.

®   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

How we operate

We have a global footprint, with a presence in the world’s largest and fastest-growing markets and are well positioned to serve clients with global interests and demands. The US is our largest market, accounting for more than 50% of our invested assets. We are the largest wealth manager in Asia Pacific and the second largest in Latin America in terms of invested assets.1

In Switzerland, we hold a leading market position1 and can deploy the full range of the Group’s products and services across Personal & Corporate Banking, Asset Management and the Investment Bank.

Our broad domestic footprint in Europe enables us to provide locally adapted offerings, and our local offices across Central Europe, the Middle East and Africa keep us close to our clients.

Through strategic partnerships with the Investment Bank and Asset Management, we provide clients with broad access to financing, global capital markets and portfolio solutions.

®   Refer to “Working in partnership” in this section for examples of collaboration between the business divisions

 

 

 

1 Statements of market position for Global Wealth Management are UBS’s estimates based on published invested assets and internal estimates.

 

11 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

 

 

As part of our organizational changes, ultra high net worth client relationships and advisors were integrated into regional business units to increase speed and proximity to clients. In our newly established Global Capital Markets team, we combined our Investment Product Services (IPS) unit and Investment Bank teams and their respective expertise. The Global Capital Markets team provides clients with an enhanced offering, faster execution, and more competitive conditions.

Our main competitors are either large US players that have a smaller presence outside the US (including Bank of America, JPMorgan Chase, Morgan Stanley and Wells Fargo) or geographically diverse firms with a smaller presence in the US (including BNP Paribas, Credit Suisse, HSBC and Julius Baer). Our size, geographic presence and diversified client portfolio are exceptional and would be difficult for other wealth managers to replicate organically.


What we offer

Our distinctive approach to wealth management is designed to strengthen engagement with our clients and to help them pursue what matters most to them.

By operating as a unified business, we aim to offer our clients the best wealth management solutions, services and expertise globally. Our experts provide our clients with thought leadership, investment analysis and formulated investment strategies, as well as develop and source solutions for them. The Chief Investment Office (CIO) provides the concise, comprehensive UBS House View, which identifies and communicates investment opportunities designed to protect and increase our clients’ wealth over generations. Regional client strategy teams deepen our understanding of clients’ needs, behaviors and preferences, enabling us to tailor our offerings to serve them better. Our product specialists deliver investment solutions, including our flagship investment mandates, innovative long-term themes and sustainable investment offerings.

®   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

12 


 

Clients benefit from our comprehensive set of capabilities and expertise, including wealth planning, investing, philanthropy, corporate and banking services, as well as family advisory services. We also offer considerable expertise across structured, mortgage and securities-based lending.

We work to improve our offerings and respond to changing client needs. In 2019, we launched a new line of UBS Manage offerings in Switzerland. In addition, to meet growing demand, we expanded the number of exclusive private markets opportunities for clients. Our sustainable investing solutions continue to be well received. Currently, invested assets in 100% sustainable investing solutions and bespoke sustainable investing solutions have grown to over USD 9 billion. We also broadened our sustainable investing offering, teaming up with external partners such as BMO Global Asset Management, Generation Investment Management and KKR & Co. Inc. to offer clients innovative sustainable development-related investment opportunities.


How we serve our clients

We serve our clients through local offices, dedicated advisors and experienced specialists. We use a mix of digital and non-digital channels (including marketing campaigns, events, advertising, publications and digital-only solutions to help drive greater awareness of UBS among prospects and reinforce trust-based relationships between advisors and clients.

How we are organized

Our business division is organized into regional business units: the US and Canada; Latin America; Europe; Central and Eastern Europe; the Middle East and Africa; Asia Pacific; and Switzerland. We also have a business unit for our Global Family Office clients. Central functions for global capabilities supporting these business units are the CIO, Global Banking, Global Capital Markets and the Chief Operating Office. We are governed by the executive, risk, operating, and asset and liability committees.

  

13 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

Personal & Corporate Banking

As a leading personal and corporate bank in Switzerland, we provide comprehensive financial products and services to private, corporate and institutional clients. We are among the country’s foremost players in the private and corporate loan market, with a substantial lending portfolio. Personal & Corporate Banking is at the core of our universal bank delivery model in Switzerland.

Our focus

We are a leading personal and corporate bank in Switzerland, providing a superior client experience and combining technology with a personal touch.

We have established a strong pipeline of growth initiatives across our business areas. Effective 1 November 2019, we have set up a new business area, Digital Platforms & Marketplaces, to rapidly extend our platform offering for mortgages.

We also aim to improve efficiency by streamlining processes and introducing new digital self-service tools. For example, we have rolled out an integrated mortgage workflow for extensions, which significantly reduces the time it takes to set up a contract. In addition, we have further optimized our contact center setup, increased automation of repetitive processes, and launched a pilot for a digital mailroom that reduces processing time by digitizing incoming physical mail and documents. Technology plays a key role in our client-centered operating model and we aim to expand our digital leadership. Our multi-year digitalization program enables us to further enhance the client experience. Thanks to technological solutions, we are able to offer clients new products and identify new cross-selling opportunities in a more targeted way.

®   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

Operationally, we strive for excellence in execution, focusing on efficiency while improving our service quality and overall agility. To scale our digital transformation efforts, in 2019 we opened our second digital factory in Switzerland, which is larger than our first one. These digital factories are now home to approximately 1,100 employees across various functions. Moreover, we introduced an agile academy and quick-launch formats to drive innovation and attract key talent.

How we operate

While we operate primarily in our home market of Switzerland, we also provide capabilities to support the growth of the international business activities of our Swiss corporate and institutional clients through our local hubs in Frankfurt, New York, Hong Kong and Singapore. We are the only Swiss bank providing local banking capabilities abroad to its corporate clients.


In the Corporate & Institutional Clients business, our main competitors are Credit Suisse, the cantonal banks and globally active foreign banks. We compete in areas covering basic banking services, cash management, trade and export finance, asset servicing, investment advice for institutional clients, corporate finance and lending, and cash and securities transactions for banks.

In the Swiss Personal Banking business, our competitors are Credit Suisse, PostFinance, Raiffeisen, the cantonal banks and other regional and local Swiss banks. In addition to those traditional players, we also face competition from international players entering the Swiss market and neobanks. We compete in areas such as basic banking, mortgages and foreign exchange, as well as investment mandates and funds.

What we offer

Our personal banking clients have access to a comprehensive, life cycle-based offering and convenient digital banking. We deliver a broad range of basic banking products, from payments to deposits, cards, online and mobile banking, as well as lending (predominantly mortgages), investments and retirement services. The overall service range is complemented by our UBS KeyClub reward program, which provides clients residing in Switzerland with exclusive and attractive offers, including those from third-party partners. In close collaboration with Global Wealth Management, we offer leading private banking and wealth management services.

Our corporate and institutional clients benefit from our financing and investment solutions, particularly access to equity and debt capital markets, syndicated and structured credit, private placements, leasing, and traditional financing. Our transaction banking offers solutions for payment and cash management services, trade and export finance, as well as global custody solutions for institutional clients.

We collaborate closely with the Investment Bank to offer capital market and foreign exchange products, hedging strategies and trading capabilities, as well as corporate finance advice. In cooperation with Asset Management, we also provide fund and portfolio management solutions.

®   Refer to “Working in partnership” in this section for examples of collaboration between the business divisions

How we serve our clients

We are the recognized digital leader, with the highest online and mobile banking penetration in Switzerland, and continue to invest in a multi-channel distribution model to further enhance our leading position.

 

14 


 

We are adapting existing branch formats to suit evolving client needs by converting some locations to smaller, more agile branches that serve as digital support hubs and are intended to ensure a strong local presence along with advice on basic client needs. We aim to further reshape our physical footprint in an innovative and client-centric way, particularly by defining future branch formats with different purposes.

In addition, we continue to provide our expertise to our clients through our contact center and our digital channels, offering basic banking services and transactions. Dedicated client advisors serve personal banking clients who need tailored solutions.

As part of our sustainability road map, we are substantially expanding our offerings. Our personal banking and institutional clients have access to a number of sustainable investment solutions, and we promote innovative approaches for corporate banking clients. For example, we issued the first green bond for a listed company in Switzerland.

For marketing campaigns, we use online media (including social media and search engine advertising), out-of-home media (posters and digital billboards) and, very selectively, print, TV, radio and cinema advertising. In line with our position as a digital leader in Swiss banking, and because of the channel’s cost-effectiveness, we follow a digital-first media strategy. More than 50% of our media spending goes into online channels.

How we are organized

Our business division is organized into Personal Banking, Corporate & Institutional Clients, and Digital Platforms & Marketplaces. Geographically, our business, with its 267 branches, is organized into 10 regions, covering distinct Swiss economic areas. We are governed by the executive, risk and operating committees, and operate mainly through UBS Switzerland AG.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 The size of the circles on the map reflects the number of branches in each location.

  

15 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

Asset Management

UBS Asset Management is a large-scale and diversified global asset manager, with USD 903 billion in invested assets. We offer investment capabilities and styles across all major traditional and alternative asset classes, as well as advisory support to institutions, wholesale intermediaries and Global Wealth Management clients around the world.

Our focus

Our strategy is focused on capitalizing on the areas where we have a leading position to drive further profitable growth and scale.

Sustainable and Impact Investing remains a key area, as clients increasingly seek solutions that combine their investment goals with sustainability objectives. We continue the expansion of our world-class capabilities in areas such as climate-aware solutions. We do this through: product and service innovation; dedicated research; integration of environmental, social and governance factors into our investment processes, leveraging our proprietary analytics; and active corporate engagement.

In response to the increasing importance of private markets and alternative investments, we are building on our existing expertise in these areas, including our hedge fund and real estate businesses, as well as our capabilities across infrastructure, private equity and private debt.

We continue to develop our award-winning1 Indexed and Alternative Beta business, including exchange-traded funds (ETFs) in Asia Pacific, Europe and Switzerland. We provide customization while leveraging our highly scalable platform, with a particular focus on key areas such as sustainability and fixed income products. Since 2016, the Alternative Beta business has seen growth in invested assets of approximately 85%.

Geographically, we are investing in our leading presence and products in China, both onshore and offshore, one of the fastest-growing asset management markets in the world, building on our extensive and long-standing presence in the Asia Pacific region.

In the rapidly evolving and attractive wholesale segment, we aim to significantly expand our market share through a combination of continued client penetration, expansion of our strategic partnerships with distributors and the build-out of our client service offerings.

®   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization

 

To drive further growth in our Investment Solutions business, which provides access to and combines the breadth and depth of our capabilities across public and private markets, we are
focused on delivering superior multi-asset strategies and white-label solutions to meet the needs of clients around the world.

We also continue to intensify our cross-divisional collaboration, in particular with Global Wealth Management, to enable our teams to draw on the best ideas, solutions and capabilities from across the firm to deliver superior investment performance and experiences for our clients.

®   Refer to “Working in partnership” in this section for examples of collaboration between the business divisions

 

To support our growth, we are focused on disciplined execution of our operational excellence initiatives. This includes further automation, simplification, process optimization and offshoring / nearshoring of selected activities, complemented by a continued modernization of our platform and development of our analytics and data capabilities.

In January 2020, we announced a number of changes to the operational setup of our Platforms businesses intended to deliver greater scale and breadth of offering for our clients and ensure the ongoing development of these world-class businesses in a highly competitive marketplace. The changes include the proposed sale of a majority stake (51.2%) in UBS Fondcenter to Clearstream, Deutsche Börse Group’s post-trade services provider. The sale is expected to close in the second half of 2020, subject to customary closing conditions. In addition, in order to fully leverage the expertise and resources within the wider Group to accelerate the growth of the business, we have decided to transfer UBS Partner, our highly innovative white-label technology solution, to the Corporate & Institutional Clients International business within the Personal & Corporate Banking business division. UBS Partner will be part of UBS’s “The Bank for Banks” client offering, and this is an exciting step in our collaboration efforts across the firm to bring the best of UBS to our clients.

With these changes, we are making a step change in the proposition for our clients, who will have seamless access to expanded platform capabilities, while at the same time enabling us to sharpen our focus on the execution of our strategic priorities.

How we operate

We cover the main asset management markets globally, and have a local presence in four regions: the Americas; Europe, the Middle East and Africa; Switzerland; and Asia Pacific.

Our main competitors are global firms with wide-ranging capabilities and distribution channels, such as Amundi, BlackRock, DWS, Goldman Sachs Asset Management, Invesco, JPMorgan Asset Management, Morgan Stanley Investment Management and Schroders, as well as firms with a specific market or asset class focus.

 

1 Second largest Europe-based indexed player based on peers’ public reporting (UBS calculation, 3Q19) and ranked fourth largest ETF provider in Europe as of December 2019 (source: ETFGI).

16 


 

What we offer

We offer clients a wide range of investment products and services in different asset classes in the form of segregated, pooled or advisory mandates, as well as registered investment funds in various jurisdictions.

Our traditional and alternative capabilities include equities, fixed income, hedge funds, real estate and private markets, and indexed and alternative beta strategies (including ETFs), as well as sustainable and impact investing products and solutions.

Our Investment Solutions business draws on the breadth of our capabilities to offer: asset allocation and currency investment strategies across the risk / return spectrum; customized multi-asset solutions, advisory and fiduciary services; and multi-manager hedge fund solutions and advisory services.

How we serve our clients

We deliver our investment products and services directly to institutional clients. High net worth and retail clients are served through Global Wealth Management, third-party banks and distributors.


Our teams are based in the key financial markets, bringing our unique perspectives and global expertise to our clients around the world. This, in combination with our presence on the ground, enables our teams to develop long-term relationships with our clients and a deep understanding of their specific needs.

How we are organized

Our business division is organized along five areas: Client Coverage, Investments, Real Estate & Private Markets, Products and the COO Area. We are based worldwide across four regions, with nine main hubs: Chicago, Hong Kong, London, New York, Shanghai, Singapore, Sydney, Tokyo and Zurich.

We are governed by executive, risk and operating committees, supplemented by business unit-specific committees.

 

 

 

  

17 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

Investment Bank

The Investment Bank provides a range of services to institutional, corporate and wealth management clients to help them raise capital, grow their businesses, invest for growth and manage risks. We are focused on our traditional strengths in equities, foreign exchange, research, advisory services and capital markets, complemented by a targeted rates and credit platform. We use our powerful research and technology capabilities to support our clients as they adapt to the evolving market structures and changes in the regulatory, technological, economic and competitive landscapes.

We aspire to deliver market-leading solutions to clients, using our intellectual capital and electronic platforms. We also provide services to Global Wealth Management, Personal & Corporate Banking and Asset Management, while managing our balance sheet, costs, risk-weighted assets and leverage ratio denominator with discipline.

Our capital-light business model allows the Investment Bank to deliver digital, research and banking capabilities, consuming up to one-third of Group resources.

Structural changes in the Investment Bank

In January 2020, we realigned our Investment Bank to meet the evolving needs of our clients and to further focus resources on opportunities for profitable growth and digital transformation. Corporate Client Solutions and Investor Client Services were renamed Global Banking and Global Markets, respectively. Global Banking moves to two product verticals (Capital Markets and Advisory), adopting a global coverage model. Global Markets combines Equities and Foreign Exchange, Rates and Credit, and introduces three product verticals (Execution & Platform, Derivatives & Solutions, and Financing) and three horizontal functions (Risk & Trading, Distribution and Digital Transformation). The new Global Markets structure is designed to facilitate the alignment of business processes and operations and to reduce inefficiencies and duplication. It further permits a more holistic understanding of our clients’ cross-product needs and is designed to foster tighter coordination of client coverage and distribution. This will allow for improved oversight of key risks and the allocation of resources. Investment Bank Research and UBS Evidence Lab Innovations continue to be a critical part of our advisory and content offering.

The changes are effective 1 January and we will provide restated prior-period information in advance of our first quarter 2020 results.

Our focus

Our key priority is disciplined growth in the capital-light advisory and execution businesses, while accelerating our digital transformation. Global Banking has a global coverage model and will utilize its deep global industry expertise to meet the emerging needs of its clients. In Global Markets, we are focused on clients’ expectation of excellence in execution, financing and structured solutions.

Our digital strategy is led by our businesses, which harness technology to deliver superior and differentiated client service and content. We established the UBS Investment Bank Innovation Lab to speed up innovation by facilitating proofs of concept. In Global Markets, the new Digital Transformation horizontal function facilitates adoption of best-in-class practices around trade idea generation, liquidity management, pricing tools and risk management. In Investment Bank Research, we continue to build UBS Evidence Lab Innovations to concentrate on data-driven outcomes.

Our balanced global reach gives us attractive options for growth across various regions. In the Americas, the largest investment banking fee pool globally, we are focusing on increasing our market share in our core Global Banking and Global Markets businesses.

In Asia Pacific, we see opportunities primarily from expected market internationalization and growth in China. We are planning to grow by further strengthening Global Banking, both onshore and offshore. Partnerships between the Investment Bank’s businesses and the Group, including the creation of a unified capital markets group, and, externally, joint ventures such as that with Banco do Brasil, are a key strategic focus. These initiatives should lead to growth by delivering global products to each region, leveraging our global connectivity across borders and sharing and strengthening our best client relationships.

®   Refer to “Working in partnership” in this section for examples of collaboration between the business divisions

How we operate

Our geographically balanced business has a global reach, with a presence in more than 30 countries and principal offices in the major financial hubs.

Competing firms are active in many of our markets, but our strategy differentiates us, with its focus on leadership in the selected areas where we have chosen to compete, and a business model that leverages talent and technology rather than balance sheet.

Our main competitors are the major global investment banks, including Morgan Stanley, Credit Suisse and Goldman Sachs, as well as corporate investment banks, including Bank of America, Barclays, Citigroup, BNP Paribas, Deutsche Bank and JPMorgan Chase. We also compete with boutique investment banks and fintech firms in certain regions and with regard to certain products.

 

18 


 

Through strategic partnerships with Global Wealth Management and Asset Management, we provide clients with broad access to financing, global capital markets and portfolio solutions.

®   Refer to “Working in partnership” in this section for examples of collaboration between the business divisions

What we offer

Through our Global Banking business, we advise our clients on strategic business opportunities and help them raise capital to fund their activities.

Our Global Markets business enables our clients to buy, sell and finance securities on capital markets across the globe and to manage their risks and liquidity. Furthermore, in Investment Bank Research, we offer clients key insights on major financial markets and securities around the globe. Separately, our team of experts in UBS Evidence Lab Innovations specializes in creating insightful data sets on diverse topics for companies of all sizes, spanning more than 30 countries and 50 sectors. We seek to develop new products and solutions that are consistent with our capital-efficient business model. These are typically related to new technologies or changing market standards.

®   Refer to “Clients” in the “How we create value for our stakeholders” section of this report for more information about innovation and digitalization


Since 2005, we have addressed increasing client demand for sustainable investing by providing thematic and sector research. We also provide investment solutions through socially responsible and impact exchange-traded funds and index-linked notes. In addition, we offer capital-raising and strategic advisory services globally to companies that make a positive contribution to climate change mitigation and adaptation.

How we serve our clients

We interact with our clients digitally and in person. In Global Banking, we leverage our intellectual capital and relationships to deliver high-quality solutions for our clients. In Global Markets, we use our execution capabilities, differentiated research content, bespoke solutions, client franchise model, and our global platform to expand coverage across a broad set of institutional and corporate clients. In Investment Bank Research, we deliver high-quality differentiated research to our institutional clients using a wide range of methods, including UBS Neo our multi-channel platform.

How we are organized

Our business division is organized into the following three units: Global Banking, Global Markets, and Investment Bank Research and UBS Evidence Lab Innovations. We are governed by the executive, operating, risk, and asset and liability committees. Each business unit is organized globally by product.

 

  

19 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our businesses
 

Corporate Center

Our Corporate Center provides services to the Group, with a focus on effectiveness, risk mitigation and efficiency. Corporate Center also includes the Non-core and Legacy Portfolio unit.

How we are organized

Corporate Center

The major areas within Corporate Center are Group Chief Operating Officer (Group Technology, Group Corporate Services, Group Human Resources and Group Operations), Group Treasury, Group Finance, Group Legal, Group Risk Control, Group Communications & Branding, Group Compliance, Regulatory & Governance, UBS in society, and Non-core and Legacy Portfolio.

Over recent years, we have progressively aligned our support functions with our business divisions. We operate the Group with the vast majority of these functions either fully aligned or shared among business divisions, where they have full management responsibility. By keeping the activities of the businesses and support functions close together, we increase efficiency and create a working environment built on a culture of accountability and collaboration

The Non-core and Legacy Portfolio, a small residual set of activities in Group Treasury and certain other function costs mainly related to deferred tax assets and costs relating to our legal entity transformation program are retained centrally.

 


Since our first quarter 2019 report and in compliance with IFRS 8, Operating Segments, we provide results for total Corporate Center only and do not separately report Corporate Center – Services, Group Asset and Liability Management (Group ALM) and Non-core and Legacy Portfolio. Furthermore, we have combined Group Treasury operationally with Group ALM and call this combined function Group Treasury.

®   Refer to the “Significant accounting and financial reporting changes” section and “Note 1 Summary of significant accounting policies” in the “Consolidated financial statements” section of this report for more information about the changes in the structure of Corporate Center

 

Group Treasury

Group Treasury  manages the structural risk of our balance sheet, including interest rate risk, structural foreign exchange risk and collateral risk, as well as the risks associated with our liquidity and funding portfolios. Group Treasury serves all business divisions and its risk management is fully integrated into the Group’s risk governance framework.

Non-core and Legacy Portfolio

Non-core and Legacy Portfolio manages legacy positions from businesses exited by the Investment Bank, following a largely passive wind-down strategy. It is overseen by a committee chaired by the Group Chief Risk Officer. The portfolio also includes positions relating to legal matters arising from businesses that were transferred to it at the time of its formation.

®   Refer to “Note 21  Provisions and contingent liabilities” in the “Consolidated financial statements” section of this report for more information about litigation, regulatory and similar matters

  

20 


 

Our environment

Current market climate

Global economic developments in 2019

In a year characterized by strong equity markets, ultra-low volatility and an inflection in interest rates, the pace of the global economy slowed on a broad basis in 2019. World GDP grew by 3.1%, which was substantially lower than the 3.7% growth achieved in 2018 and represents the weakest growth rate since the financial crisis.

US GDP increased 2.3%, compared with 2.9% in 2018, as trade tensions between the US and China hindered business investment and the boost from tax cuts introduced in December 2017 ebbed.

Trade tensions represented an even more serious drag on growth in the eurozone, which relies more than the US on global trade, manufacturing output, and business investment. Growth in the eurozone decreased to 1.2% in 2019, compared with 1.9% in 2018. Germany’s economy expanded by only 0.6%, after a 1.5% increase in the previous year. Outside the Eurozone, Swiss growth decreased as well, to 0.8%, compared with 2.8% in 2018.

China’s government attempted to partially offset the effects of increasing tariffs on its exports to the US by reducing bank reserve requirements and providing extra fiscal leeway to local governments. However, this stimulus was limited by concerns over high leverage in the economy. GDP growth decreased to around 6.1%, compared with 6.7% in 2018.

In other leading emerging economies, growth slowed or stabilized at low levels. The economy of India, which until recently had been one of the world’s fastest-growing major nations, expanded by 5%, compared with 6.1% in 2018. Momentum was weakened by the problems of the shadow-banking sector, which has been reducing the availability of credit to consumers. The Mexican economy, meanwhile, was roughly flat after expanding 2% in 2018, and Brazil’s growth rate decreased to 1.1% from 1.3%.

Major central banks were able to keep their accommodating monetary policies in place in 2019, given that low inflation rates persisted. Eurozone inflation stayed below the European Central Bank’s (the ECB) target (of at or below 2%), at around 1.2% for
the year. The ECB cut its deposit rate from negative 0.4% to negative 0.5%. US inflation was close to the target at 1.8%, permitting three quarter-point rate cuts over the course of the year to between 1.5% and 1.75%.

Equity markets rallied, with all major indices advancing. The MSCI All Country World Index gave a total return of 27% in US dollars. The S&P 500 index in the US returned 31%, while the technology-heavy Nasdaq Composite gained 37%. China’s CSI 300 was up 41% in local currency terms. Less well-performing markets included the UK’s FTSE 100 and Hong Kong’s Hang Seng, which both returned 17% in local currency terms.

It was also a favorable year for investors holding government bonds. The yield on 10-year US Treasury bonds fell around 80 basis points to 1.9%. The yield on the German Bund of the same tenor fell 40 basis points to negative 0.2%.

Economic and market outlook for 2020

We expect continued sub-trend growth in the coming year, and the global economy to continue expanding at about the same pace as in 2019. Consumer spending has remained robust in much of the world, especially in the US, where it is supported by a vibrant job market. The year ended with news of a “Phase 1” trade deal between the US and China, along with indications that tensions between the two powers may lessen. Not only did the agreement withdraw planned tariff increases and reverse some existing tariffs, it also moved negotiations forward in other areas of contention, such as intellectual property protection and US access to China’s financial services market. While this truce could be fragile and the US–China rivalry is not about to end anytime soon, the deal appears to reduce the risks to the global economy and business investment.

The UK left the European Union on 31 January 2020 and has entered a transition period in which the UK now faces a race to conclude talks on a trade deal with the EU ahead of the end of its transition period on 31 December 2020.

The next major political focus for markets will be the US election in November, which could generate higher volatility and affect key US sectors, such as technology, energy, finance and health care.

 

21 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our environment
 

Against a backdrop of sluggish growth and continued political risk, we believe central banks will be in no rush to raise rates. We do not expect the US Federal Reserve to increase rates in the coming year, barring an unexpected shift in the trajectory of the economic data. Rates are unlikely to rise again until 2021. We expect the ECB to cut rates to negative 0.6%, with the Swiss National Bank maintaining rates at a negative 0.75%.

The outbreak of novel Coronavirus or Covid-19 in China and its subsequent spread to other countries is likely to increase investor uncertainty. Although our base economic forecast is that the outbreak of Covid-19 will be contained and the effect on full-year economic growth will be relatively limited, the virus and containment measures are likely to have at least a short-term adverse effect on economic activity in China and other affected countries, with a collateral impact on the global economy. A significant rise in the number of Covid-19 infections, infections in a wide range of countries and regions, or a prolongation of the outbreak, could increase the adverse economic effects.

In terms of investing, stocks in most major markets are trading above historical averages on a price-to-earnings basis. As a result, we believe equity market returns are more likely to be driven by earnings growth than by a further expansion of multiples. Markets should also be supported by continuing economic growth in 2020. The risk of a recession remains relatively low. Uncertainty over the effects of the Covid-19 outbreak has substantially increased the macroeconomic risk to growth and this increased risk has at least partially been reflected in recent declines in equity markets.

  

22 


 

Industry trends

While our industry was heavily affected by regulatory developments over the past decade, technology has clearly emerged as the main driver of change today and is expected to further affect the competitive landscape as well as our products and operations going forward. In parallel, our industry is materially driven by market and macroeconomic conditions.

®   Refer to “Current market climate” in this section for information about global economic growth

Digitalization

Technology is changing the way banks operate and we expect this to continue, in step with exponential advances in computing capability, evolving  customer needs and digital trends. Investment in technology is no longer solely considered a means of making banks more efficient. Today, such investment is the key to keeping banks flexible and competitive in a digitalized world, and it creates the opportunity to develop new business models.

By connecting across the financial industry ecosystem through our innovation labs, digital factories, Future of Finance initiatives, and project collaborations, we aim to remain at the forefront of the digital movement to drive client experience as well as operational excellence. At the heart of our digital journey is the focus on our clients and their evolving needs. The speed, scale, security, transparency and precision that new technologies can offer enable us to create new services and experiences for our clients.

We also aim to improve operational efficiency by increasing the range of modernized and modularized applications and infrastructure in our IT portfolio, as well as by leveraging cloud technology and a growing number of front-to-back automated systems and processes. Effective data management and protection are crucial to us. The generated and curated data from our applications is protected under our data management framework, and supports the development of responsible artificial intelligence for better tailoring our client and employee experience.

Consolidation

In the financial services industry, many regions and businesses are still highly fragmented. We expect further consolidation, with ongoing margin pressure, the search for cost efficiencies and increasing scale advantages resulting from the fixed costs of technology and regulation being the key drivers. Many banks also seek increasing exposure and access to regions with attractive growth profiles, such as Asia and emerging markets, through local acquisitions or partnerships. Lastly, the increased focus on core capabilities or geographical footprints and the ongoing simplification of business models to reduce operational and compliance risks will result in further disposals of non-core businesses and assets.


New competitors

Our competitive environment is also evolving. In addition to our traditional competitors in the asset-gathering businesses, new entrants are targeting selected components of the value chain. However, we have not yet seen a fundamental unbundling of the value chain and client relationships, which might ultimately result in the disintermediation of banks by new competitors. Over the longer term, we believe the entry into the financial services industry of large platform companies could pose a significant competitive threat, given their strong client franchises and access to client data. Fintech firms are gaining momentum; however, they have not materially disrupted our asset-gathering businesses to date. We see a trend in forging partnerships between new entrants and incumbent banks, with the latter acquiring technology from fintech firms, thus gaining an edge over competitors in terms of technology, cost efficiency, and service quality.

Regulation

The post-2008 regulatory reform agenda has largely been completed. While some areas, such as funding in resolution, must still be fully addressed, and the implementation of certain standards, such as the finalized Basel III capital standard, is continuing on a national level, the focus is shifting from regulation to supervision. In parallel, some regulators are reviewing the efficiency of the new frameworks.

In general, regulatory-driven change continues to consume substantial resources. In 2020, we expect further consideration of adjustments to the Swiss too-big-to-fail framework, in particular focused on additional liquidity requirements for systemically important banks, and the national implementation of final Basel III rules. We expect continued work on resolution-related reforms, including stress testing, and a sustained focus on conduct and anti-money laundering. Furthermore, we are experiencing a surge in sustainability-related policy proposals targeted at various aspects of financial services across the globe. We also expect regulatory initiatives to address some of the more recent challenges that could affect financial stability, such as shadow banking and digital currencies.

Many of these developments are happening in the context of increased protectionism, posing challenges to the provision of cross-border financial services. Further restrictions with regard to market access into the EU in particular would have a significant effect on Switzerland as a financial center, affecting also UBS. Variations in how different countries implement rules, and an increasing national focus, bring a risk of additional regulatory fragmentation, which in turn may lead to higher costs for us and new financial stability risks.

 

23 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
Our environment
 

However, we believe the adaptations made to our business model and our proactive management of regulatory change put us in a strong position to absorb upcoming changes to the regulatory environment.

®   Refer to the “Regulatory and legal developments” section of this report for more information

Wealth creation

In 2018, global wealth overall grew marginally, given a steep decline in equity market performance in the fourth quarter. This trend was partially reversed in 2019, as equity markets rallied. Today, half of global wealth is concentrated in the Americas, followed by Asia Pacific (with approximately 30%) and the remainder in Europe, the Middle East and Africa.1 By segment,2 approximately half of global wealth is with high net worth individuals, ultra high net worth individuals hold approximately 30% of global wealth, and the remaining approximately 20% is within the affluent segment. Over the next four years, global wealth is expected to grow by 5–10% annually.1 Regionally, wealth creation will likely be driven by Asia Pacific and North America. The share of the Americas is expected to remain stable over the next four years at approximately 50% of global wealth, while the share of Europe, the Middle East and Africa is expected to further reduce as Asia Pacific grows. In particular, China’s share of global wealth is expected to grow to around 15% by 2023.

Wealth transfer

Demographic and socioeconomic developments continue to generate shifts in wealth. By 2030 for example, USD 15.4 trillion of global wealth is expected to be transferred by individuals with a net worth of USD 5 million or more, according to a 2019 report by Wealth-X.3 In addition, women now control more wealth than ever before: UBS’s 2019 report titled “The billionaire effect – Billionaires insights 2019” found that the number of female billionaires had grown by 46% in five years, outpacing the growth of male billionaires. We are responding to the evolving wealth landscape with a framework that addresses all aspects of our clients’ financial lives, called UBS Wealth Way. UBS Wealth Way begins with discovery questions and a conversation with clients about what is most important to them. We help clients organize their financial life along three key strategies: Liquidity  to help provide cash flow for short-term expenses; Longevity  for long-term needs; and Legacy  for needs that go beyond their own and help improve the lives of others, a key part of wealth transfer planning.

Shift into passive strategies

We note a continuing trend of separation between low-cost, passive strategies and high-alpha active and alternative strategies. Passive management is beneficial in an environment with rising stock markets, such as the equity bull markets of the last decade. At the same time, central banks’ monetary policies have kept interest rates at historically low levels, which has had an effect on bond yields and other asset classes. Investors searching for longer-term higher alpha than passive strategies can provide have been diversifying their portfolios into real assets and alternatives and we expect this trend to continue. We believe the breadth of UBS Asset Management’s investment expertise allows us to meet client demands across asset classes and strategies.

Retirement funding

Over recent years, the pension industry has faced two key challenges: fundamental demographic shifts, such as aging populations, and lower expected returns due to all-time low interest rates.

Beyond structural answers to these challenges, such as the progressive shift from defined benefit to defined contribution pensions, we believe pension funds are reassessing their asset allocation approach. Indeed, many pension funds are now allocating a higher share of their portfolios to alternative investments, such as private equity, hedge funds, real estate and infrastructure, in a search for higher-yielding exposures.

We see this development as positive for UBS, as these funds will likely need further support to define their investment strategy and target portfolio allocation. In addition, our private banking and wealth management clients are expected to need further financial and retirement planning advice, which we are able to provide holistically through our wealth planning services.

 

 

 

 

 

 

 

 

 

 

 

1 Based on BCG Global Wealth Report 2019.

2 The BCG Global Wealth Report 2019 defines wealth segmentation as follows: wealth of greater than USD 20 million to be classified as ultra high net worth individuals; USD 1–20 million for high net worth individuals; USD 0.25–1 million for affluent individuals.

3 A Generational Shift: Family Wealth Transfer Report, issued by Wealth-X in 2019.

  

24 


 

How we create value for our stakeholders

Stakeholder group

Stakeholder needs:

what do our stakeholders expect from us?

Value proposition:

how we create value for our stakeholders

Key topics discussed:

what was important to our stakeholders in 2019

Stakeholder engagement:

how did we engage with our stakeholders?

Clients

Advice on a broad range of products and services from trusted experts

 

The option of personal interaction with our advisors in combination with digital service anywhere, anytime (convenient digital banking)

 

Top quality solutions and the highest standards in terms of asset safety, data and information security, confidentiality and privacy

 

A combination of global reach and local service resulting in positive investment outcomes

 

Competitively priced products and services

Delivering tailored advice and customized solutions, using our intellectual capital and digital capabilities

 

Building long-term personalized relationships with our clients

 

Developing new products and services in response to clients’ evolving needs in the digital age

 

Providing access to the world’s capital markets and bespoke financing

 

Meeting increasing demand from clients for sustainable investments

Investment performance in light of current interest rate situation

 

Holistic goals-based financial planning

 

Sustainable finance and investing possibilities

 

Data privacy and security

 

Offerings for small enterprises in Personal & Corporate Banking

Individualized client meetings

 

Requests for regular client feedback, feedback monitoring and complaints handling

 

Specialized client events and conferences including information on key developments and opportunities

 

Client satisfaction surveys

Investors

Disciplined execution of our strategy leading to attractive capital returns through dividends and share repurchases

 

Comprehensive and clear disclosures on quantitative and qualitative data necessary to make an informed investment decision

 

Recognize and proactively address strategic opportunities and challenges

Executing our strategy with discipline and agility as the external environment evolves, while aiming to deliver cost- and capital-efficient growth

 

Providing transparent, timely and reliable public disclosures

Structural growth and return potential in our businesses

 

Cost efficiency and ability to generate positive operating leverage

 

Ability to protect or even grow revenues in a low-for-longer interest rate environment

Financial reports, investor and analyst conference calls, and/or webcasts, as well as media updates on our performance or other disclosures

 

General shareholder meetings

 

Investor and analyst meetings

Employees

A world-class employer providing an engaging and supportive workplace culture

 

Skill and career development opportunities and rewards for performance

 

An environment that provides a sense of belonging and of adding value to clients and to society

Attracting and developing great talent

 

Fostering a workplace culture that supports and engages our employees, enabling them to develop their careers and unlock their full potential

The three keys to a strong corporate culture

 

Our approach to hiring great people and supporting their growth

 

The importance of diversity and inclusion

Regular employee surveys

 

Group Franchise Awards program

 

Regular “Ask the CEO” events, along with senior leadership, regional and functional employee sessions

Society

Facilitation of economic development that is sustainable for the planet and humanity

 

Maximization of our positive effect and minimization of any negative effects on society and the environment

 

Proactive management of the environmental and societal impacts of our business

Promoting significant and lasting improvements in the well-being of communities in which we operate

 

Taking an active role in the transition of our economy toward environmentally and socially sustainable solutions

Sustainable finance

 

Our climate strategy

 

Our client and corporate philanthropy efforts

Dialogs with regulators and governments

 

Partnerships with social institutions

 

Community investments

 

Interaction with NGOs

 

Participation in forums and round tables, as well as industry-, sector- and topic-specific debates

25 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Clients

Our clients are the heart of our business. We are committed to building and sustaining long-term relationships based on mutual respect, trust and integrity. Understanding our clients’ needs and expectations enables us to best serve their interests and to create value for them.

Our clients and what matters most to them

There is no archetypal UBS client. Our clients have varying needs, but each of them expects outstanding advice and service, a wide range of choices, and an excellent client experience.

Global Wealth Management is focused on serving the unique and sophisticated needs of high net worth and ultra high net worth individuals, families, and family offices around the world, as well as affluent clients in selected markets. We provide these clients with access to outstanding advice, service, and investment opportunities from around the globe, delivered by experts they can trust. Using a holistic, goals-based approach to financial planning, we deliver a personalized wealth management experience and work side-by-side with clients to help them realize their ambitions

Our client-facing advisors and the global teams that support them are focused on developing long-term client relationships, which often span generations. Global Wealth Management clients look to us for our expertise in helping them to plan for, protect and grow their wealth, as well as helping them make some of the most important decisions in their lives. From significant liquidity events to professional milestones and personal turning points, we aim to give our clients the confidence to move forward and achieve their goals. Through extensive research into our clients’ preferences and goals, as well as broader analysis of investor sentiment globally, we are constantly evolving our offerings to meet the shifting priorities of today’s wealthy clients. This includes investing in digital capabilities and developing products that help clients fund their lifestyles and manage their cash flow, as well as offering guidance on how clients can create a lasting and positive impact for their communities and the causes about which they care the most. We have been recognized as the leading global wealth manager for clients interested in sustainable investing,1 with a commitment to developing solutions that allow clients to align their financial goals and their personal values.

®   Refer to “Our focus on ESG” in this section for examples of how sustainable finance solutions are used across our business divisions and for the benefit of our clients

 

Personal & Corporate Banking serves a total of approximately 2.6 million individuals and 128,000 firms. We provide services to companies ranging from start-ups to large multi-nationals, including specialized entities, such as pension funds and insurers, real estate companies, commodity traders, and
banks. Personal & Corporate Banking clients look for financial advice based on their needs at each stage of their individual or corporate journey. We aim to deliver outstanding advice to them via our client advisors and also through digital banking. Our clients demand convenience, 24/7 availability, security and value for money. We provide
clients with access to a broad range of services and products offered in all relevant areas: basic banking, investing, financing (including mortgages), retirement planning, cash management, trade and export finance, global custody, and company succession, among others.

In Asset Management, we deliver investment products and services directly to approximately 3,000 clients around the world – including sovereign institutions, central banks, supranational corporations, pension funds, insurers and charities – as well as to Global Wealth Management and its clients, wholesale intermediaries and financial institutions. Our clients seek global insights and a holistic approach to tailoring solutions. By building long-term, personalized relationships with our clients and partners, we aim to achieve a deep understanding of their needs and to earn their trust. We draw on the breadth and depth of our global investment capabilities – across traditional and alternative, active and passive categories – and provide seamless access to world-class platform services to deliver the solutions they need. We integrate sustainability into our financial analysis enabling us to help clients meet their sustainability objectives and their fiduciary duties.

The Investment Bank provides corporate, institutional and wealth management clients with expert advice, financial solutions, execution, and access to the world’s capital markets. Our business model is specifically built around our clients and their needs. Corporate clients can access advisory services, debt and equity capital market solutions, and bespoke financing through our newly reshaped Global Banking business. Meanwhile, our Global Markets business is focused on helping institutional clients engage with local markets around the world, offering equities and equity-linked products, foreign exchange, rates and credit.

®   Refer to “Investment Bank” in the “Our businesses” section of this report for more information about the structural changes in the Investment Bank

 

Our advisory and content offering is underpinned by the research we provide. The differentiated nature of this research, combined with UBS Evidence Lab Innovations, which offers access to insight-ready data sets for thousands of companies, aims to give clients an informational edge when it comes to understanding markets. As a new offering for 2019, we have established the UBS Research Academy, where our fundamental analytics team provides training for institutional investors on all aspects of fundamental investing, leveraging the best of the UBS Research  and UBS Evidence Lab Innovations platforms.

 

1 Euromoney Private Banking and Wealth Management Survey 2019: Global Results.

26 


 

Our clients place the highest priority on the confidentiality and security of their data. The protection of our clients’ data is of the utmost importance to us and we have comprehensive measures in place designed to ensure that data confidentiality and integrity are maintained. We are investing in our IT platform to preserve and improve our IT security standards, while enabling our clients to have secure access to their data via our digital channels. The volume, level of sophistication and impact of cyberattacks constantly increase, and we aim to maintain a robust and agile cybersecurity and information security program to manage cyber risk.

Enhancing the client experience through innovation and digitalization

We strive to streamline and simplify interactions with our clients through front-to-back digitalization and innovations.

In Global Wealth Management, we develop and deploy digital tools that preserve and enhance the value of human relationships. Clients expect the convenience and speed that technology offers but, simultaneously, consider personal communication with our advisors to be more important than ever. Modern technology that our advisors use enables them to spend more time with clients. And our clients appreciate digital tools that improve their experience, such as easy ways to view their portfolios, access to research that is tailored to their needs, and multiple ways to communicate with their advisors. In 2019, we introduced a number of new tools to help deliver on those expectations. For example, our Asset Wizard platform provides ultra high net worth clients in the US with consolidated and sophisticated performance and risk analytics for their assets held at UBS and across multiple banks, portfolios, managers, and locations. Also, in Asia, we launched the UBS Advisor Messaging for WhatsApp, allowing for real-time conversations between clients and advisors, to create a better client experience. And we continue to make progress by executing our multi-year strategy to serve clients globally from two platforms: the Wealth Management Americas Platform in the US and the Wealth Management Platform outside the US. Our core investment solutions consist of: UBS Manage a discretionary mandate solution where we use our expertise to invest clients’ assets according to a predefined investment strategy; UBS Advice, which adds portfolio monitoring and investment recommendations based on an agreed investment strategy to self-directed accounts; and UBS Transact, a self-directed account providing clients access to UBS execution capabilities and the UBS House View. All our solutions draw on our broad range of investment instruments across stocks, bonds, currencies, structured products, investment funds and alternative investments.


Personal & Corporate Banking launched several initiatives in 2019. Effective 1 November 2019, we have established a new business area, Digital Platforms & Marketplaces, which reflects our commitment to engage in new digital business models. In addition to the mortgage platform UBS Atrium, which we launched in 2017 and is directed at corporate and institutional clients, UBS is set to introduce a mortgage platform for private clients in the first half of 2020. We launched new tools for our client advisors aimed at improving the in-branch advisory experience for clients, so that we are able to suggest the right products that match the clients‘ needs. Thanks to our new mortgage workflow, we have been able to reduce contracting time substantially, from 10–15 days for extensions to 24 hours. We also further simplified our digital banking platform (for both mobile and desktop) and added new services, in addition to expanding the number of possible payment transaction currencies to more than 120. Our clients can now pay in stores directly with their smartphones and a wide array of wearables via Mobile Pay and Swatch Pay. Furthermore, we have introduced the ability to pay parking fees via Twint, which has more than 1.5 million users in Switzerland. As of October 2019, our clients can access we.trade, a blockchain-based trade finance platform, which was the first such platform to be launched by a Swiss bank. Recognizing changing client needs and growing demand from start-up companies for a broader offering, we have launched UBS Start Business, which includes digital accounting, mentoring for business planning, and many other services in addition to the banking services UBS offers. The attractive offering aims to assist young entrepreneurs in every stage of their business’s journey. Similarly, we bundle our digital offering for small companies in UBS Digital Business, which provides the convenience and leading digital solutions that small companies look for. We have also introduced our vendor leasing solution, an online tool that allows vendors to provide leasing proposals directly to their clients (based on online credit decisions) and to generate contracts. For corporate clients, we have made available the new UBS Payment Tracking service (SWIFT global payments innovation).

In Asset Management, we are investing in new tools and technologies, as well as our alternative data capabilities, to support our teams’ investment decision-making processes and enhance client service. In addition, our operational excellence programs are focused on building a scalable and globally integrated operating platform to better enable our teams to deliver the full breadth of our capabilities to clients around the world.

 

 

27 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

The Investment Bank strives to be the digital investment bank of the future, with innovation-led businesses that drive efficiencies and solutions. We set up the UBS Investment Bank Innovation Lab to help connect business teams in order to leverage best practice, build and test proofs of concept safely and quickly, and inspire a culture of innovation. We see increasing interest from clients in financial and alternative data sets that they can incorporate into their models. In response, we set up UBS Data Solutions to meet those needs through a centralized robust data processing and distribution platform.

We strive to develop new products and solutions that are consistent with our capital-efficient business model. These are typically related to new technologies or changing market standards. Examples include FX spot & STIR tree E-pricing, which provides client-tailored pricing streams and hedging optimization, and Technology Enabled Sales, which enables faster delivery and distribution of tailored content matched to our clients’ interests. During 2019, we also launched the client portal of UBS Evidence Lab Innovations as part of the firm’s strategy to expand our value proposition in the alternative data space, which relates to innovative ways to capture data critical for investment decisions. We also set up UBS Neo, our multi-channel platform, and the One Client service model, which aims to drive superior client outcomes via collaboration, technology and data-driven client intelligence.

Engaging with our clients

Communication with our clients enables us to understand their needs and what matters most to them. We use a variety of channels to engage with clients, including regular client relationship / service meetings where we monitor feedback and satisfaction, as well as various corporate roadshows and dedicated events. We also engage with our clients while supporting cultural and sports events across Switzerland.

We conduct client events on a regular basis and on a wide array of topics. For example, in Personal & Corporate Banking, we have financing and retirement planning events, and a dedicated event for the CFO community. In the Investment Bank, we host around 350 conferences and educational seminars globally throughout the year, covering a broad range of macro, sector, regional and regulatory topics. More than 50,000 clients attended such events in 2019, providing insight and access to our own opinion leaders, policy makers and leading industry experts. In Global Wealth Management, we engage with clients in a range of ways, from personalized private briefings with subject matter experts, to segment-specific events, to large-scale gatherings such as UBS Wealth Insights, our flagship Pan-Asian investment forum series, which attracts more than 3,000 clients every year. In Asset Management, a consistent program of engagement takes place throughout the year. Thematic events, such as the UBS Reserve Management Seminar and the Sovereign Investment Circle, bring together institutional investors to debate relevant topics and share best practices. Our experts also produce insightful thought leadership on markets and assets that is regularly shared with clients, as well as frequently meeting investors to answer questions, clarify the investment strategy or discuss issues that can affect markets.

How we measure client satisfaction

We utilize different measures to regularly assess our achievements and the satisfaction of our clients.

Global Wealth Management is increasingly leveraging technology and analytics software to collect client feedback. In 2019, we began introducing a digital feedback tool to supplement more traditional survey methods. The tool allows Global Wealth Management to survey clients about their satisfaction with their advisors and UBS, as well as to identify additional financial needs. Advisors are provided with real-time access to client feedback, enabling them to address concerns and to follow up on new topics of interest. The tool was piloted in selected markets in 2019 and is expected to be rolled out more broadly throughout 2020.

We conduct an annual client survey in Personal & Corporate Banking. We have been conducting client surveys in Switzerland since 2011, consistently covering all private and corporate client segments annually since 2015. Clients assess their satisfaction with regard to various topics (e.g., UBS overall, branches, client advisors, products, services) and indicate further product or advisory needs. Survey responses are distributed to client advisors, who subsequently follow up with each respondent individually. In 2019, we introduced a new machine learning model which enables us to identify the importance of internal factors (e.g., advisors, products, prices) and external factors (e.g., media impact, market development) with regard to overall satisfaction scores.

In Asset Management, we conduct regular surveys, inviting institutional and wholesale clients across all our markets to participate. They are asked about their satisfaction with client service, products and solutions, as well as other factors relevant to their investments. The results are analyzed to identify focus areas to improve client satisfaction.

For the Investment Bank, client satisfaction is closely monitored by individual product coverage points. Relationship managers then collate and review feedback holistically, conducting regular internal review sessions to address specific areas of feedback. The Investment Bank also closely monitors external surveys, such as the Global Institutional Investor Survey, which provides feedback across a range of investment banking services.

We thoroughly evaluate the feedback we receive, including complaints from clients, and take measures to address key themes identified. In 2019, clients specifically raised sustainable finance as a key priority, which provided confirmation that we are aligned with our clients’ preferences in expanding our sustainable finance offering.

  

28 


 

Clients (additional information)

Quality feedback management system

We have a Quality Feedback system within Global Wealth Management (GWM) and Personal & Corporate Banking (P&C), which provides a comprehensive and systematic platform to receive and process feedback and suggestions from both clients and employees. Feedback is received in a wide range of formats, including written, electronic, verbal (e.g., comments made to employees in our branches), through social media and via the Swiss Banking Ombudsman.

Client feedback, including complaints and suggestions, is of crucial importance, as it supports the development and introduction of new products and services as well as the adaptation of our offering in a client-oriented manner. By addressing client feedback, we strive to strengthen client relationships, improve client satisfaction and make a tangible improvement to client service and overall banking services. Having a wide variety of quality feedback from our clients enables us to systematically evaluate and review our actions. By sharing their views, clients contribute to quality improvements at all levels.

We strive to respond directly to each individual who provides feedback. On significant topics and key developments, we also provide a collective response in our external reporting.
In 2019, key topics and enhancements included some targeted products and services that centered mostly around digital banking functionalities. These stemmed in particular from requests and improvement suggestions for existing and new features and queries regarding access and security.

Feedback from employees (i.e., quality tips and ideas) that is based on their knowledge and experience in improving and updating products, processes and services helps to foster creativity and innovation.

Suitability

Clients expect to be provided with products and services that are suitable for them. This is particularly the case in the divisions where we serve personal clients as opposed to institutions.

In nearly all of the countries where we do business, this expectation has been turned into a legal or regulatory requirement for banks acting as financial advisors. Most jurisdictions also require the systematic assessment and documentation of the suitability of products (including third-party products) and services, including compliance with applicable eligibility criteria and sales restrictions. These standards are reflected in local policies and procedures as well as in the respective local control framework. The European Union’s Markets in Financial Instruments Directive (MiFID) and the Swiss Financial Services Act (FinSA) are examples of our reflection and implementation of specific standards required by regulators as part of a local control framework. Other locations apply similar standards as required by the relevant local regulators.

To meet both client expectations and regulatory requirements, we have established comprehensive rules for assessing the suitability of products and services. These rules are designed to align the assets in a customer’s portfolio with their defined risk profile, and the customer is advised in line with his or her needs (i.e., client suitability). In addition, the rules require product documentation to contain appropriate and easily understandable information on its features, target audience and the scenarios in which the product can be used, as well as a balanced representation of the associated opportunities and risks (i.e., product suitability).

Suitability framework

In the GWM and P&C divisions, a comprehensive suitability policy framework is in place. This sets out the structured advisory process governing the way we advise and implement agreed solutions and also document the steps taken during this process. In addition to other purposes, it comprises requirements for monitoring and controlling activities that aim to capture tail risks. A revised version of this policy entered into force on
1 January 2018. The Investment Bank (IB) and Asset Management (AM) take their guidance from UBS's suitability principles and have implemented processes to ensure appropriate oversight of suitability requirements where applicable.

In this framework, we distinguish between client and product suitability. Client suitability refers to the alignment between the investor profile of the client and the products and services that are recommended or made available to the client (or already held in his or her portfolio), including risk information and disclosure. Product suitability refers to a consistent set of standards applied by a product management unit to define for which specific investors a product may be suitable.

Client suitability

GWM and P&C have established a structured advisory process with four distinct steps – understand, propose, agree and implement, and review. This process is supported by a number of forms and tools that are available to client advisors. In the first step (understand), these forms and tools support the initial identification of a client’s investor profile, including but not limited to investment objectives and risk ability. In the second step (propose), they serve to help client advisors identify an appropriate investment strategy for a specific client portfolio. Furthermore, a number of tools and platforms have been established to help client advisors match a client’s investment strategies with appropriate investment proposals and to support the review step. The IB and AM have established cross-functional governance committees to ensure oversight for client suitability where specific criteria or triggers are met.

Product suitability

Advisory platforms and tools divide products according to their risk characteristics and in doing so help clients and client advisors to properly assess the impact of investment products and services on a client’s portfolio. Additional processes are in place to make product documentation available to both client advisors and clients. Finally, specific legal documentation is required for certain products with specific risks (e.g., hedge funds).

 

29 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Divisional approach to suitability

Primary ownership of suitability risk and the responsibility for addressing it is owned by the business. The suitability policies applicable to GWM, P&C, IB and AM make this clear. Accordingly, we have pursued a divisional approach to ensure compliance with rapidly changing regulatory regimes, while also addressing particular suitability obligations and remediation of identified gaps relating to the divisions.

Monitoring and controls

Monitoring and controls for suitability follow a three-tiered approach. The first-level controls are conducted by the business risk management team under its Origination Control Framework, a set of controls designed to prevent and detect operational risks that arise within the front unit and to ensure that residual risk corresponds to risk appetite. The second-level controls are performed by Compliance & Operational Risk Control as Global Minimum Control Standards, which are part of the overall Operational Risk Framework. These controls focus on both a check-the-checker approach, and thematic, deep dive reviews. The third-level controls are exercised by Group Internal Audit, as part of its annual audit plan.


After-sales communications

The UBS client experience also includes after-sales communication. Again, this communication is, supported by a number of tools and platforms, including ready-to-use reporting and presentation material.

Accessibility

We ensure that our facilities and services are accessible to everyone regardless of disability, capability or technology. We are continuously optimizing our websites as well as our e-banking and mobile banking platforms to fit the requirements for an AA rating for accessibility (i.e., WCAG 2.0). All cash machines have access key buttons and PIN keypads that are equipped for the visually impaired. Additionally, all ATMs are enabled with voice output through clients’ headphones, covering all functions including cash deposits. Around 100 ATMs are positioned especially for people with restricted mobility. All 40 of our free-standing cash machines correspond to recommendations made by the Americans with Disabilities Act Accessibility Guidelines (ADAAG).

 

 

 

  

30 


 

Our focus on ESG

Our firm is in a powerful position to contribute toward achieving the 17 United Nations (UN) Sustainable Development Goals (the SDGs) by integrating sustainability in our mainstream offerings, through new and innovative financial products with a positive effect on the environment and society, and by advising our clients on their philanthropic works. Our goal is to be the financial provider of choice for clients who wish to mobilize capital toward the achievement of the SDGs and the orderly transition to a low-carbon economy. We are shaping the landscape of sustainable finance by using thought leadership, innovation and partnerships to support clients in their sustainability efforts.

Our clients are increasingly interested in sustainable finance, including sustainable investing (SI), which is especially attractive if it can reduce risk or improve returns. More than 80% of wealthy individuals are interested in sustainable investing and 45% already hold sustainable investments.1 With regard to asset owners across the globe, 78% are integrating environmental, social and governance (ESG) factors into their investment process.2 Switzerland, for example, saw an 87% asset growth in institutional sustainable investments in 2018 (compared with 2017),3 and the early indicators are that this growth continued throughout 2019.

Our key public commitments to sustainable finance

In 2019, we became a founding signatory of the UN Principles for Responsible Banking (the Principles). The Principles constitute a comprehensive framework for the integration of sustainability across banks. They define accountabilities and require each bank to set, publish and work toward ambitious targets.

Before signing up to the Principles, UBS had already been strongly committed both to maximizing positive effects through our sustainable business activities and to minimizing negative impacts. While our firm’s growing range of sustainable finance products and services supports the former, our environmental and social risk framework helps us to better understand and respond to potential risks to the environment and human rights.

Our Asset Management business division is among the signatories of the PRI (the Principles for Responsible Investment). The PRI organization supports the signatories in incorporating ESG factors into their investment and ownership decisions. In 2019, UBS also became one of the inaugural members of the CEO Alliance on Global Investors for Sustainable Development, which is committed to scaling up and speeding up efforts to align business with the SDGs. The Alliance is aimed at harnessing the insights of private sector leaders on ways to remove impediments and
introduce solutions for scaling long-term investment for sustainable development in line with the SDGs.

Since 2017, we have presented white papers to the World Economic Forum (the WEF) putting forward recommendations for ways in which private capital can achieve the SDGs, while also outlining our own actions and pledges in that regard. For the WEF annual meeting in 2020, our white paper focused on climate action and the ways in which investors can mobilize private and institutional capital toward the orderly transition to a low-carbon economy. In response, UBS has developed a Climate Aware framework.

We actively support the development of industry standards. In 2019, we contributed to the writing of and signed the International Finance Corporation’s Operating Principles for Impact Management. These Impact Principles provide a standard for impact investing, in which investors seek to generate positive impact for society alongside financial returns. We also contributed to a report by the Sustainable Finance Working Group of the Institute of International Finance on sustainable investment terminology.

®   Refer to the Sustainability Report 2019, available from 5 March 2020 under “Annual reporting” at www.ubs.com/investors,  for our key documents, frameworks and external commitments, and for our climate disclosure following the recommendations of the Task Force on Climate-related Financial Disclosures

What is our governance on ESG?

Our governance framework on sustainability supports the creation of long-term value. Our firm’s sustainability activities, including sustainable finance, are overseen at the highest level of our firm and are founded in our Code of Conduct and Ethics.

®   Refer to the Sustainability Report 2019, available from 5 March 2020 under “Annual reporting” at www.ubs.com/investors for the sustainability governance chart

 

We regularly review whether our governance framework continues to reflect our ambitions with regard to sustainability. In 2019, we therefore decided to further sharpen our focus on sustainable finance and we are now establishing a Sustainable Finance Steering Committee. It will be comprised of senior business leaders engaged in our firm’s sustainable finance efforts, who will work together to ensure that we continue to drive innovation and develop expertise and thought leadership regarding sustainable finance. The Chair of the Sustainable Finance Steering Committee is a member of the UBS in society Steering Committee.

 

 

1  UBS Investor Watch on the Year Ahead, November 2019.

2  UBS Asset Management and Responsible Investor magazine, ESG: Do You or Don’t You?, June 2019.

3 Swiss Sustainable Investment Market Study 2019, June 2019.

 

31 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

How do we define sustainable finance?

Sustainable finance refers to any form of financial service that integrates ESG criteria into business or investment decisions. We provide sustainable finance solutions across all our business divisions and to all our client groups (as shown in the “Key achievements in 2019” chart on the next page), with a particular focus on sustainable investing.

Sustainable investing is an approach that seeks to incorporate ESG considerations into investment decisions. SI strategies seek to achieve a positive environmental or social impact and/or align investments with an investor’s values regarding ESG topics, while aiming to improve portfolio risk and return characteristics. In the main, we identify three approaches of sustainable investing: exclusion (individual companies or entire industries are excluded from portfolios if their areas of activity conflict with an investor’s values); ESG integration (which combines ESG factors with traditional financial considerations); and impact investing (which is designed specifically to help generate a positive social or environmental impact alongside financial returns).

We were among the early movers in developing terminology to describe our sustainable investing activities and to consistently report on them. We are, however, conscious of the need to simplify and standardize the terminology for sustainable finance, which will help to develop and expand that market. We are therefore actively involved in the relevant discussions and are committed to reflecting pertinent changes to terminology in our reporting.

 

 

Core sustainable investments1

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended

 

% change from

USD billion, except where indicated

 

GRI2

 

31.12.19

31.12.18

31.12.17

 

31.12.18

Core SI products and mandates

 

 

 

 

 

 

 

 

Integration – sustainability focus3

 

FS11

 

46.4

20.0

12.8

 

132.4

Integration – ESG integration4

 

FS11

 

372.3

224.5

63.2

 

65.9

Impact investing5

 

FS11

 

9.1

4.7

2.8

 

92.1

Exclusions6

 

FS11

 

52.2

50.3

93.0

 

3.7

Third-party7

 

FS11

 

8.5

13.4

9.8

 

(37.0)

Total core sustainable investments

 

FS11

 

488.5

312.9

181.7

 

56.1

UBS total invested assets

 

 

 

3,607.0

3,101.0

3,262.0

 

16.3

Core SI proportion of total invested assets (%)

 

FS11

 

13.5

10.1

5.6

 

 

1 All figures are based on information available in January 2020.    2 FS stands for the performance indicators defined in the Financial Services Sector Supplement of the Global Reporting Initiative reporting framework.    3 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and/or investment process.    4 Strategies that integrate environmental, social, and governance (ESG) factors into fundamental financial analysis to improve risk / return.    5 Strategies where the intention is to generate measurable environmental and social impact alongside financial return.    6 Strategies that exclude companies from portfolios where they are not aligned to an investor’s values. Includes customized screening services (single or multiple exclusion criteria).    7 SI products from third-party providers applying a strict and diligent asset selection process; the selection criteria have been reviewed for the end of 2019 reporting cycle, following a stricter approach from the provider of sustainability ratings. Excludes third-party products that went through a systematic GWM onboarding process, now counted under “Integration – sustainability focus.”

 

 

What do we offer?

We support clients’ sustainability efforts through thought leadership, innovation and partnerships, and we strive to incorporate ESG factors into the products and services we provide. We support corporate and institutional clients who want to generate positive environmental and societal impact using our corporate advisory expertise or by directing capital through our lending or investment capacity. We assist private and institutional clients with their desire to invest in accordance with their own social and environmental objectives, and we are proactive in discussing these issues with them.

Through our Philanthropy Services platform, we are partnering with clients to manage their philanthropy and maximize their impact, by offering expert advice, carefully selected programs from UBS Optimus Foundation, and innovative social financing mechanisms, such as development impact bonds.


In 2019, we noted strong momentum in our sustainable finance activities. A key indicator is the development of our core SI assets, where we managed to more than double penetration, from 5.6% of total invested assets in 2017 to 13.5% (USD 488 billion) in 2019 (2018: 10.1% or USD 313 billion). Core sustainable investments are SI products that involve a strict and diligent asset selection process through either exclusions (of companies / sectors from portfolios where the companies / sectors are not aligned to an investor’s values) or positive selections (such as best-in-class, thematic or ESG integration and impact investing).

Norms-based screening assets, i.e., assets that fall under the application of a UBS policy1 and do not otherwise qualify as a core sustainable investment, amounted to USD 818 billion as of 31 December 2019 (up from USD 797 billion in 2018). Total sustainable investments, including norms-based screening assets, accounted for USD 1,306 billion (2018: USD 1,110 billion), or 36.2% (2018: 35.8%), of our total invested assets.

 

 

1 The assets in discretionary mandates, in UBS’s actively managed retail and institutional funds, as well as in our firm’s proprietary trading book, are subject to our firm’s policy on the prohibition of investment in and indirect financing of companies involved in the development, production or purchase of anti-personnel mines and cluster munitions.

 

32 


 

  

33 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Investors

We generate long-term value for our investors by executing our strategy with discipline, striving for cost- and capital-efficient growth, long-term sustainable value creation, and attractive shareholder returns.

Investor base

Our investor base is well diversified. A substantial proportion of our institutional shareholders are based in the US, the UK and Switzerland.

®   Refer to the “Corporate governance” section of this report for more information about disclosed shareholdings

Cost- and capital-efficient revenue growth

We aim to drive higher and superior returns by growing and leveraging our unique, integrated and complementary business portfolio and geographic footprint. Our Global Wealth Management business is well positioned to take advantage of two secular trends: wealth transfer and wealth creation, partly driven by continued economic growth, particularly in Asia, where China is opening its financial markets. Each of our businesses has initiatives to achieve revenue growth and improve operating efficiency.

®   Refer to “Industry trends” in the “Our environment” section of this report for more information about wealth creation and wealth transfer

 

We aim to balance growth opportunities with cost and capital efficiency in order to drive attractive risk-adjusted returns and sustainable performance.

Our primary measurement of performance for the Group is return on common equity tier 1 capital (CET1), as regulatory capital is our binding constraint and drives our ability to return capital to shareholders.

®   Refer to the “Performance targets and measurement” section of this report for more information

Shareholder returns

We aim to increase our ordinary dividend per share by USD 0.01 each year, and to return excess capital through share repurchases. We consider business conditions and any idiosyncratic developments when determining excess capital available for share repurchases.


Alignment of interests

We aim to align the interests of our employees with those of our equity and debt investors. This is reflected in our compensation philosophy and practices.

®   Refer to “Our compensation philosophy” in the “Compensation” section of this report for more information

Communications

Our Investor Relations function serves as the primary point of contact between UBS and all shareholders. Our senior management and the Investor Relations team regularly interact with the institutional investors community, financial analysts and other market participants, such as credit rating agencies. Clear, transparent and relevant disclosures, together with regular and direct interactions with existing and prospective shareholders, form the basis for our communications. The Investor Relations team also relays the views of and feedback from institutional investors and other market participants on UBS to our senior management.

Investor Relations and Corporate Responsibility work together and interact with those investors focusing on sustainability topics relevant to UBS and society at large.

®   Refer to “Corporate governance” and “Information policy” in the “Corporate governance” section of this report for more information

®   Refer to “Society” in this section for more information about our sustainability efforts

Shareholders and investors (additional information)

Engagement with environmental, social and governance (ESG) rating and research agencies

We actively engage in dialogue with analysts at rating and research agencies. The assessment of specialized agencies helps to evaluate our sustainability performance and activities, and provides a useful means for benchmarking.

In 2019, we provided detailed information on our sustainability performance to a range of agencies, either
in response to questionnaires or via meetings or calls (with ESG analysts). Our
Sustainability Report regularly serves as a key source of information for these agencies.

  

34 


 

Employees

Our employees drive our success. Our employees work in 50 countries, are citizens of 136 nations and speak more than 150 languages. Their skills, experience and commitment enable us to deliver innovative solutions for our clients, foster sustainable business success, protect our reputation and drive the firm forward. As an employer, we attract, develop and retain a diverse range of talent and aim to ensure there is a workplace culture that supports and engages our employees, enabling them to build their careers and unlock their full potential.


The keys to a strong corporate culture

Our three keys to success remain the foundation of our strategy and culture. Together, they define what we stand for as a firm and as individuals, and they drive our business strategy. We set out on our cultural transformation in 2011, defining and then embedding our Pillars, Principles and Behaviors into our core people management processes. We conduct regular employee surveys to obtain feedback and ensure continuous improvement, discussing the findings and further actions with our employees. In 2019, responses indicated that employee engagement, appreciation for our talent management practices, and pride in working at UBS were all above the norm for financial services organizations.

®   Refer to the foldout pages of this report for more information about our Pillars, Principles and Behaviors

 

Engaging and enabling employees, instilling a strong risk culture and promoting sustainability were culture-building priorities in 2019. In this respect, our Group Franchise Awards program provided foundational support. This Group-wide initiative rewards employees for cross-divisional collaboration and operational effectiveness improvements.

We are convinced that leadership drives culture, and culture drives performance. Great leaders are the key to developing our people, client relationships and results. For many years, our House View on Leadership has outlined what effective leadership is at UBS, as well as what employees can expect. To help leaders better adapt to continuous change and digitalization, we updated our House View in 2019 and integrated its precepts into all of our core HR processes, including recruitment, performance evaluations, training, succession planning and promotions. Characteristics such as innovation, curiosity and agility complement our long-standing emphasis on inclusivity, sustainable profits, accountability, cross-firm partnership and putting clients first. It is an evolution of how we view leadership that creates an extraordinary experience for our clients and our people.

 

35 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Hiring, developing and retaining talent

We are widely recognized as an employer of choice and a great place to build a career. Key to our success is our long-standing commitment to investing in our employees at every career stage. It starts with recruitment, where our philosophy is to hire for potential, considering the individual’s experience and competencies, learning capabilities and agility, as well as digital and data savviness. We hired a total of 10,080 external candidates in 2019. Our junior talent programs hired more than 1,700 graduate and other trainees, interns and apprentices. We also continued our insourcing and hiring activities in our Business Solutions Centers in China, India, Poland, Switzerland and the US as part of our integrated workforce strategy.

Our in-house UBS University further updated its curriculum in 2019 to emphasize future-skills development and personal growth for all employees, with a new digital skills curriculum that builds knowledge about topics such as blockchain, cloud computing, robotics and artificial intelligence. We also launched a mobile learning app to enable employees to learn whenever and wherever they want. We revamped our leadership development offering in 2019 to ensure that our leaders have the skills they need to develop their businesses and their people, and to lead effectively in the digital transformation age. In 2019, our permanent employees completed more than 1,100,000 learning activities, including mandatory training on compliance, business and other topics. This averaged to more than two training days per employee.

Along with line manager effectiveness, having a wide range of learning and career development opportunities, as well as tools to facilitate professional growth, are key drivers of employee engagement. In this respect, our new Career Navigator tool, which was launched in June 2019, has been a game-changer. This online platform enables employees to explore career paths and search for open roles that match their interests while allowing our recruiters to find internal talent more easily. It also identifies skill gaps with regard to new roles and interests and directly links to learning opportunities to help fill these gaps.

We are committed to ensuring a workplace where employees are fairly treated, with equal opportunities for all. We do not tolerate harassment of any kind. Our global measures include employee and line manager training, specialist expertise in handling concerns raised, and a global employee hotline. A Harassment Guardian provides an independent view of the firm’s setup, procedures and behaviors to prevent harassment and sexual misconduct.

We pay for performance, and a strong commitment to pay equity is embedded into our compensation policies. We conduct regular internal, as well as independent external, reviews, with the aim of ensuring that all employees are paid fairly, and we seek to address any unexplained gaps.

®   Refer to www.ubs.com/employerawards, www.ubs.com/careers  and the “Compensation” section of this report for more information

 

 

Personnel by region

 

 

 

 

 

 

 

 

As of

 

% change from

Full-time equivalents

 

31.12.19

31.12.18

31.12.17

 

31.12.18

Americas

 

21,036

21,309

20,770

 

(1)

of which: USA

 

20,232

20,495

19,944

 

(1)

Asia Pacific

 

13,956

12,119

8,959

 

15

Europe, Middle East and Africa (excluding Switzerland)

 

12,918

12,620

11,097

 

2

of which: UK

 

5,704

5,782

5,274

 

(1)

of which: rest of Europe (excluding Switzerland)

 

7,048

6,670

5,662

 

6

of which: Middle East and Africa

 

166

168

161

 

(1)

Switzerland

 

20,691

20,840

20,427

 

(1)

Total1

 

68,601

66,888

61,253

 

3

1 The increase in workforce in 2019 and 2018 was mainly due to insourcing initiatives and was more than offset by a decrease in external staff.

 

 

 

36 


 

The importance of diversity and inclusion

A widely diverse workforce that reflects the experience of our global clients is important for our long-term success. We therefore strive to shape a diverse and inclusive culture across the firm to drive sustainable growth and innovation, deliver the best of UBS to our clients, and build a better place to work for all employees.

Our broad view of diversity encompasses a range of aspects, including gender, ethnicity, LGBTQ, disability, mental health and inclusive leadership. We remain committed to narrowing our gender representation gap, especially at the management level, through a global gender diversity strategy and a wide range of supporting initiatives to hire, promote and retain more women at all levels of the organization. We continue to make progress toward our stated aspiration of increasing the representation of women in management roles to one-third. In 2019, 25.2% of all employees in roles at Director level and above were women, up from 24.7% in 2018.

Our UBS Career Comeback program, which was launched in 2016, continues to help us increase our pipeline of female senior leaders. Professionals looking to return to corporate jobs after a career break are hired for permanent roles and supported with specialized onboarding, coaching and mentoring. In 2019, Career Comeback expanded beyond its four established hubs in the US, UK, Switzerland and India to become a global, year-round program. To date, Career Comeback has helped 142 women and 8 men relaunch their careers.

®  Refer to www.ubs.com/diversity  for additional information about our priorities and commitments, and the Sustainability Report 2019, available from 5 March 2020 under “Annual reporting” at www.ubs.com/investors  for our management practices and detailed employee data, including gender- and region-specific data


  

37 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Employees (additional information)

Engaging with our employees

Our employees are key to meeting our clients' needs and our long-term business success. We therefore invest in our employees by providing them with diverse learning opportunities, fostering internal mobility and creating a rewarding work environment. Having regular dialogue with employees helps ensure that we understand their needs.

Our senior leaders regularly update employees on our business strategy, priorities and policies, as well as people management topics such as goal setting, compensation, training, internal mobility, career development, new technologies, and risk and compliance topics. We use a variety of communication channels and events to ensure our employees are aligned with our corporate culture and the firm’s
three keys – the Pillars, Principles and Behaviors. We promote collaboration and efficiency efforts such as our Group Franchise Awards program, gender representation initiatives like UBS Career Comeback, and we have an ongoing focus on culture-building topics like inclusive leadership. We also support the global philanthropic projects managed by the UBS Optimus Foundation. On a regional and divisional basis, we celebrate and support involvement in our community engagement and employee volunteering activities. We interact with employees through a number of news and information channels such as our intranet, UBS Connections (our internal social network), UBS TV and a number of other interactive help and information sites.

Direct communication with employees also takes place through individual and team meetings, emails, all-staff sessions and the firm’s Quality Feedback system (see page 29). In 2019, employees in all businesses and regions attended numerous town halls and small group meetings to discuss relevant issues directly with senior management. For example, regular “Ask the CEO” events allowed all employees globally to learn about (and ask questions on) topics such as the firm’s strategy and direction. These events are attended in person by local employees and broadcast live (and via replay) on UBS TV. Additionally, an "Ask the GEB" event was held in New York in December 2019.

We want our employees to be engaged and share their views and have ample opportunities to influence the firm’s future. We therefore regularly survey all our permanent employees to capture feedback on how we are doing as a firm, and we use that feedback to improve as an organization. As such, in 2019, all employees were asked to participate in a global survey, and 83% did. We particularly wanted to know whether our firm’s principles and behaviors are being lived up to, how effective our line managers are and whether we are providing a positive and empowering work environment. This year, 78% of participating employees indicated high levels of engagement, 79% agreed that their line manager(s) are effective, and 81% recognized our positive work environment. All of these results are above the financial services industry norm.

Employees were informed of the Group-wide survey results, as well as divisional, regional and business area results, as applicable. Each year's data is analyzed and leveraged in future culture-building initiatives, as it is our ongoing ambition to have a highly motivated workforce that models integrity, collaboration and challenge in its daily work. We strive to be the clear employer of choice in the financial services industry and maintain overall engagement ratings in the top quartile; both ambitions have been achieved in 2019.

Our employee networks, which are sponsored by business leaders, are foundational to strengthening our culture. They help employees build cross-business relationships and support an open and inclusive workplace. In 2019, we sponsored 43 employee networks globally, including ones focused on topics around culture, gender, ethnicity, family, mental health,
Pride / LGBTQ, disability and veterans. Of particular note, our disability-focused networks in the US, UK, Switzerland and Asia Pacific raise awareness of visible and invisible disabilities in the workplace, as well as our management’s active support for hiring, developing and retaining employees with disabilities across the firm. Our women's networks in locations around the globe promote personal and professional development through networking, mentoring and education.

Employee representation

As a responsible employer, we maintain an open discourse with our formal employee representation groups. We have two pan-European forums – the UBS Employee Forum (which is 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 or prospects. Local and regional work councils, like 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.

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

 

 

38 


 

Managing our global workforce

Our employees’ skills, experience and commitment are key to delivering on our business strategy. Our human resources strategy therefore seeks to attract, develop and retain employees who have the diverse backgrounds and capabilities to advise our clients, develop new products, manage risk and adapt to evolving business trends and regulations. We invest in our employees, for example, through a comprehensive learning platform and career development programs, and we promote initiatives to build engagement and a cohesive, collaborative culture.

Further increasing the diversity of our workforce and ensuring an inclusive workplace is vital to our business success. In our experience, diverse teams better understand and relate to our equally diverse clients’ needs. Likewise, diversity of thought, opinion and experience helps us make better decisions and drives innovation, while an inclusive work environment attracts high-quality people and makes the firm a better place to work. Our human resources policies and procedures underscore our commitment to a diverse and inclusive workplace, with equal opportunities for all employees and a strong commitment to equal pay that is embedded in all our management processes.

We offer competitive benefits to all employees, including insurance, pension, retirement and personal leave, aligned with local market practices and focused on employee wellbeing. These benefits often go beyond legal requirements or market practice, and we regularly review them to ensure they meet our employees’ needs. When it comes to mental wellbeing we enable employees to build their careers while managing personal commitments. A wide range of resources are available to help employees navigate work-life issues and personal challenges. We support flexible working arrangements including telecommuting, working from home, part-time roles, job sharing and partial retirement.

Our Employee Assistance Programs offer support and counseling for challenges such as illness, conflict, bereavement, psychological health and elderly care. In the UK, for instance, we promoted World Mental Health Day in October with the launch of Mental Health Champions, made up of UBS volunteers accredited with specialist training by Mental Health First Aid England. While these volunteers are not therapists or counselors, they are trained to listen, reassure and respond in addition to being a point of contact for any UBS employee who may be experiencing a mental health issue or any type of emotional distress. We have also added a variety of new learning opportunities focused on health and wellbeing to our UBS University offering.

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 the US, our gender-neutral Child Care Leave policy enables the primary caregiver to take up to 20 weeks of paid leave during the period immediately following the birth, adoption or foster care placement of the employee's (or partner’s) child. In Switzerland, new fathers can take up to 10 days of paid paternity leave within the first year. In addition, they can either take up to 30 calendar days of unpaid leave or reduce their level of employment to 80% for up to six months.

In the US, just as we help our clients, our goal is to also help our employees make informed decisions so they can feel confident about their financial situation. That is why we have partnered with UBS Financial Wellness and from January 2020, employees will have access to educational content, digital tools and licensed Financial Wellness Advisors who can assist and guide them on their unique financial journey. UBS Financial Wellness strives to deliver education on a myriad of topics including budgeting, savings, debt management, insurance protection, big purchases, life changes, retirement planning, investing basics, estate planning and more.

We offer redeployment and outplacement initiatives to help employees find new roles, and we have clear policies and processes for handling redundancies. As an example, when job losses occur in the Swiss labor market due to restructuring, we offer affected employees access to our COACH process. This process supports employees in finding a new position internally or externally.

Our Code of Conduct and Ethics is the basis for all human resource policies, guidelines and procedures. It includes a commitment to the health and safety of employees and external staff.

®   Refer to the Health and Safety statement in the Appendix 1 for more information

®   Refer to the UBS in society constitutional document in the Appendix 1 for more information

 

39 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Our 2019 workforce at a glance1

We report in depth on our global workforce to give stakeholders a clear picture of our management philosophy and priorities. Our reporting covers key statistics relevant to full- and part-time employees, as well as relevant data about external staff. Both groups rely on us to provide a safe, respectful and collaborative workplace.

As of 31 December 2019, we had 68,601 employees (full-time equivalents / FTEs), 1,713 FTEs more than in 2018. This included Swiss apprentices on three-year limited contracts who received benefits equivalent to permanent employees.

A total of 16,408 external staff for core business services were active at the end of 2019, primarily in technology and operations roles. This included 2,215 FTEs employed through third parties on short-term contracts to fill positions on an interim basis. Additionally, a total of 11,647 external staff for non-core business services were active at the end of 2019, primarily in premises-related roles.

Also of note:

   Our workforce in 2019 was 39% female and 61% male; 25% of senior managers who reported to GEB members were female.

   Switzerland was our largest cross-border importer of employees from other countries; China was our largest cross-border exporter of employees.

   1,125 employees changed business divisions in 2019; 499 changed regions.

   Employees are asked to record their absences due to illness or accident in our self-service human resources tool. In 2019, our global workforce recorded an absentee rate of 1.7% of total scheduled days.

Our workforce by the numbers

To give the most accurate view of our global workforce, human resources reporting considers a person (working full time or part time) as one headcount. This accounts for the total UBS employee number of 69,966 as of 31 December 2019 (versus 68,338 as of 31 December 2018). These numbers exclude staff from UBS Card Center, Hotel Seepark Thun and Wolfsberg. The following tables are all reported on this basis, unless otherwise specified. The percentages in the tables may not total 100 due to rounding.

 

 

 

1  All data was calculated on/as of 31 December 2019, unless otherwise noted.

 

UBS employees: full-time and part-time employees

Employees: full time / part time

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Male

 

 

 

 

 

Full Time

 

41,324

96%

40,298

96%

Part Time

 

1,506

4%

1,473

4%

Total

 

42,830

100%

41,771

100%

 

 

 

 

 

 

Female

 

 

 

 

 

Full Time

 

23,364

86%

22,800

86%

Part Time

 

3,772

14%

3,767

14%

Total

 

27,136

100%

26,567

100%

Grand Total

 

69,966

 

68,338

 

 

40 


 

UBS employees: permanent and “limited employment period” employees (by gender and by region)

Employees: employment term / region

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Americas

 

 

 

 

 

Permanent

 

21,288

100%

21,563

100%

Limited Term

 

0

0%

0

0%

Total

 

21,288

100%

21,563

100%

 

 

 

 

 

 

APAC

 

 

 

 

 

Permanent

 

13,944

100%

12,095

100%

Limited Term

 

11

0%

38

0%

Total

 

13,955

100%

12,133

100%

 

 

 

 

 

 

EMEA (excluding Switzerland)

 

 

 

 

 

Permanent

 

13,259

100%

12,960

100%

Limited Term

 

1

0%

0

0%

Total

 

13,260

100%

12,960

100%

 

 

 

 

 

 

Switzerland

 

 

 

 

 

Permanent

 

20,296

95%

20,466

94%

Limited Term

 

1,167

5%

1,216

6%

Total

 

21,463

100%

21,682

100%

Grand Total

 

69,966

 

68,338

 

 

 

 

 

 

 

Employees: employment term / gender

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Male

 

 

 

 

 

Permanent

 

42,160

98%

41,050

98%

Limited Term

 

670

2%

721

2%

Total

 

42,830

100%

41,771

100%

 

 

 

 

 

 

Female

 

 

 

 

 

Permanent

 

26,627

98%

26,034

98%

Limited Term

 

509

2%

533

2%

Total

 

27,136

100%

26,567

100%

Grand Total

 

69,966

 

68,338

 

 

41 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

UBS employees: external hires

External hires by age group

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Under 30

 

4,676

46%

5,723

43%

Between 30 and 50

 

4,985

50%

6,928

52%

Over 50

 

419

4%

598

5%

Total external hires

 

10,080

100%

13,249

100%

 

 

 

 

 

 

External hires by gender

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Male

 

6,073

60%

8,143

61%

Female

 

4,007

40%

5,106

39%

Total external hires

 

10,080

100%

13,249

100%

 

 

 

 

 

 

External hires by region

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Americas

 

2,328

23%

2,959

22%

APAC

 

3,620

36%

4,207

32%

EMEA (excluding Switzerland)

 

1,998

20%

3,062

23%

Switzerland

 

2,134

21%

3,021

23%

Total external hires

 

10,080

100%

13,249

100%

 

42 


 

UBS employees: employee turnover

Turnover by age group

 

 

 

 

 

31.12.19

31.12.18

 

 

%

%

Under 30

 

19%

18%

Between 30 and 50

 

11%

11%

Over 50

 

10%

9%

Overall turnover

 

12%

12%

 

Turnover by gender

 

 

 

 

 

31.12.19

31.12.18

 

 

 

%

Male

 

12%

12%

Female

 

13%

12%

Overall turnover

 

12%

12%

 

Turnover by region

 

 

 

 

 

31.12.19

31.12.18

 

 

%

%

Americas

 

12%

11%

APAC

 

14%

14%

EMEA (excluding Switzerland)

 

13%

13%

Switzerland

 

11%

11%

Overall turnover

 

12%

12%

 

Note: The turnover rate is calculated by dividing the number of employees (in FTE) who left by the average number of employees (in FTE) over the full year period.

UBS employees: age group

Employees by age group

 

 

 

 

 

31.12.19

31.12.18

 

 

%

%

Under 30

 

19%

20%

Between 30 and 50

 

60%

59%

Over 50

 

21%

21%

Total

 

100%

100%

 

43 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

UBS employees: employee category (rank group)

Distribution by employee category and gender

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Officers (Director and above)

 

 

 

 

 

Male

 

18,425

75%

18,513

75%

Female

 

6,223

25%

6,079

25%

Total

 

24,648

100%

24,592

100%

 

 

 

 

 

 

Officers (other officers)

 

 

 

 

 

Male

 

16,447

61%

15,464

61%

Female

 

10,583

39%

10,060

39%

Total

 

27,030

100%

25,524

100%

 

 

 

 

 

 

Employee rank

 

 

 

 

 

Male

 

7,958

44%

7,794

43%

Female

 

10,330

56%

10,428

57%

Total

 

18,288

100%

18,222

100%

Grand Total

 

69,966

 

68,338

 

 

 

Distribution by employee category and age group

 

 

 

 

 

 

 

31.12.19

31.12.18

 

 

Number

%

Number

%

Officers (Director and above)

 

 

 

 

 

Under 30

 

143

1%

126

1%

Between 30 and 50

 

16,402

67%

16,774

68%

Over 50

 

8,103

33%

7,692

31%

Total

 

24,648

100%

24,592

100%

 

 

 

 

 

 

Officers (other officers)

 

 

 

 

 

Under 30

 

4,075

15%

3,951

15%

Between 30 and 50

 

18,801

70%

17,507

69%

Over 50

 

4,154

15%

4,066

16%

Total

 

27,030

100%

25,524

100%

 

 

 

 

 

 

Employee rank

 

 

 

 

 

Under 30

 

9,287

51%

9,253

51%

Between 30 and 50

 

6,369

35%

6,231

34%

Over 50

 

2,632

14%

2,738

15%

Total

 

18,288

100%

18,222

100%

Grand Total

 

69,966

 

68,338

 

 

44 


 

UBS employees: average training days (gender)

Training by gender

 

 

 

 

 

Average training days

 

 

31.12.19

31.12.18

Female

 

2.16

1.83

Male

 

2.12

1.71

Total average training days

 

2.14

1.76

UBS employees: average training days (rank group)

Training by rank group

 

 

 

 

 

Average training days

 

 

31.12.19

31.12.18

Officers (Director and above)

 

2.36

1.88

Officers (other officers)

 

2.02

1.61

Employee rank

 

2.01

1.80

Total average training days

 

2.14

1.76

Note: Employee development activities include on-the-job experience and internal mobility (changing roles within the firm), exposure to senior leaders, new teams and experiences (e.g., through networking and mentoring) and education (both voluntary and required). Experience and exposure generally account for approximately 90% of an employee’s development activities. It is also important to note that in 2018 and 2019, our in-house university revamped its offering to better prepare for future global trends and enable employees to choose the depth of learning to meet their voluntary learning goals based on their needs. We also increased the efficiency of mandatory trainings in both 2018 and 2019.

UBS employees: parental leave taken

Parental leave taken (by gender)

 

 

 

 

 

2019

2018

Male

 

2,557

2,196

Female

 

3,439

2,951

Total number of employees

 

5,996

5,147

All employees are entitled to take parental leave as indicated in the respective local human resources policies. This table shows number of employees who took parental leave as recorded in the UBS HRi system; data aggregation is subject to limitations such as the disparate definitions and permutations of parental leave across the firm and the various leave and absence tools used in the 50+ countries in which we operate.

  

45 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Society

As expressed in the 17 United Nations Sustainable Development Goals (the SDGs), the world faces enormous societal and environmental challenges. 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.

As the world’s largest truly global wealth manager, we have a responsibility to take a leading role in shaping a positive future, for everyone, including the generations to come.

Code of Conduct and Ethics

In our Code of Conduct and Ethics (the Code), the Board of Directors and the Group Executive Board set out the principles and practices that define our ethical standards and the way we do business. These principles apply to all aspects of our business.

All employees must confirm annually that they have read and will adhere to the Code and other key policies, supporting a culture where ethical and responsible behavior is part of our everyday operations.

In the Code, we make a commitment to integrating financial and societal performance for the mutual benefit of our clients and our firm – and that we are constantly looking for better ways to do business in an environmentally sound and socially responsible manner.

®   Refer to the Code of Conduct and Ethics of UBS, available at www.ubs.com/code, for more information

Engaging with society

We engage with representatives of wider society on a regular basis and on a wide range of topics. This engagement yields important information about society’s expectations and concerns and makes a critical contribution to our understanding and management of issues with potential (positive and negative) relevance to our firm – and to society. By actively fostering such interactions, we are in a position to address expectations and concerns in an informed and effective manner.

UBS in society

UBS in  society  is  dedicated  organization  within  the  firm,  focused on maximizing our positive effect and minimizing any negative effects UBS has on society and the environment. It covers all of the activities and capabilities related to sustainable finance (including sustainable investing), philanthropy, environmental, climate and human rights policies governing client and supplier relationships, our environmental footprint, human resources, and community investment. It is through this cross-divisional organization that we leverage our expertise across all of these areas to drive sustainable performance. UBS in society is committed to making UBS a force for driving positive change in society and the environment.

The activities  driven  by  UBS  in  society  are  overseen,  at  the  highest  level  of  our  firm,  by  our  Board  of  Directors’  Corporate  Culture  and  Responsibility  Committee  (the CCRC). The Group CEO supervises the execution of the UBS in society strategy and annual objectives and informs the Group Executive Board and CCRC about UBS in society updates as appropriate. Reporting to the Group CEO,  the  Head  UBS  in  society  is  UBS’s  senior-level  representative  for  sustainability issues and, on behalf of the Group CEO, proposes the UBS in society strategy and annual objectives to the CCRC for approval.

®   Refer  to “Board  of  Directors” in  the “Corporate  governance”  section  of  this  report  for  more  information  about  the  CCRC 

Driving change in finance

As a major financial institution, we are conscious that the activities and decisions of our clients can have a substantial impact on society. It is for that reason that we strive to incorporate environmental, social and governance (ESG) impacts into the products and services we provide to clients and partner with them to help mobilize capital toward the achievement of the SDGs and the orderly transition to a low-carbon economy.

We know that ESG topics are increasingly important to our clients. That is why we have dedicated a separate section in this report to highlight our commitment to serving the growing sustainable finance needs and expectations of our clients, and to the key activities associated with our commitment.

®      Refer to “Our focus on ESG” in this section  for more information

Driving change in philanthropy

We believe our clients can make a meaningful, and measurable, difference for their chosen causes with advice from our philanthropy experts and the more than 200 global programs that have been carefully selected through our UBS Optimus Foundation. We increase social impact by combining our expertise with capital and networks. Through our Philanthropy Services platform, we offer clients unique access to social and financial innovation and philanthropic advice, as well as tailored program design, co-funding and co-development opportunities.

®   Refer to www.ubs.com/optimus  for more information

 

 

46 


 

Driving change in communities

We recognize that our firm’s long-term success depends on the health and prosperity of the communities of which we are a part. We seek to redress disadvantages through long-term investments in education and entrepreneurship. We provide strategic financial commitments and targeted employee volunteering to drive impact across a number of the SDGs.

®   Refer  to the Driving change in communities”  section in  the  Sustainability Report 2019, available from 5 March 2020 under “Annual reporting” at www.ubs.com/investors  for  more  information 

Driving change in business

We view the proper, firm-wide management of our firm’s own environmental footprint and our supply chain as important proof of how we do business in a sustainable manner for the benefit of society.

This is equally true of our comprehensive environmental and social risk management and framework that governs client and vendor relationships and is applied firm-wide to all activities. We have set environmental and social risk standards pertaining to environmental and human rights topics in product development, investments, financing and supply chain management. We have identified certain controversial activities that we will not engage in at all, or only under stringent criteria. As part of this process, we engage with clients and vendors to better understand their processes and policies, and to explore how any environmental and social risks may be mitigated.

We have set ambitious targets relating to our use of energy, water and paper, as well as to our travel and the amount of waste we produce, and we aim to increase the awareness of environmental and social matters among our employees and foster a long-term sustainable mindset in all our activities. In 2019, the year in which we celebrated 20 years since becoming the first bank to gain global environmental management system certification (ISO 14001), we ran major campaigns on key environmental themes.

Our campaigns demonstrate our strong commitment to reducing UBS’s environmental footprint and further raising our employees’ awareness of key environmental challenges. The “Go drastic. Cut the plastic.” global campaign, which was launched in July 2019, aims at encouraging behavioral change to help tackle, reduce and phase out single-use plastic items across our firm. In October, we held our first Zero Waste Day at 22 sites across the globe, which featured numerous sustainability-themed activities. Additionally, at five major offices across the globe, we hosted events featuring subject matter experts talking about their life’s work and passion, including speakers from innovative companies.

®   Refer to the Sustainability Report 2019, available from 5 March 2020 under “Annual reporting” at www.ubs.com/investors, for full descriptions of our environmental management, our responsible supply chain management and our environmental and social risk management and framework


Reporting to our stakeholders on our sustainability strategy and activities

Information about all our sustainability efforts and commitments is provided in the UBS Sustainability Report,1 available under “Annual reporting” at www.ubs.com/investors The content of the Sustainability Report has been prepared in accordance with the Global Reporting Initiative (GRI) Standards (“comprehensive” option) and with the German rules implementing the EU directive on disclosure of non-financial and diversity information (2014/95/EU). Our reporting on sustainability has been reviewed on a limited assurance basis by Ernst & Young Ltd against the GRI Standards. Our Sustainability Report 2019 also includes our full climate disclosure, which we have been aligning with the recommendations provided by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures since their introduction in 2017.

 

 

 

1 The UBS Sustainability Report is available from 5 March 2020, and is not deemed incorporated by reference into the SEC Form 20-F filing.

 

47 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Aims and progress

We work with a long-term focus on providing appropriate returns to all of our stakeholders in a responsible manner. To underline our commitment, we provide transparent goals and report on progress made against them wherever possible. In 2019, we made good progress in delivering against the Group’s aims.

 

We aim to be / Our key goals1

Our progress

A leader in sustainable finance across all client segments

2017–2020

     Double the penetration of core SI assets from 5.6% (USD 182 billion) of total invested assets2

 

     Achieved our goal one year early, reaching USD 488.5 billion in core SI assets representing 13.5% of total invested assets2,3

2016–2021

     Direct at least USD 5 billion of client assets into SDG-related impact investments

 

     USD 3.9 billion of client assets directed into SDG-related impact investments4

A recognized innovator and thought leader in philanthropy

2017–2020

     Achieve 40% of employees volunteering with 40% of volunteer hours being skills based

     Increase donations to UBS Optimus Foundation to
CHF
 100 million in 2020

 

     38% of global workforce volunteered and 48% of volunteer hours
 were skills based
5

     UBS Optimus Foundation: USD 89.5 million (CHF 86.9 million) in donations raised; USD 109.5 million (CHF 106.3 million) in grants approved

2020–2025

     Support 1 million young people and adults (beneficiaries) to learn and develop skills for employment, decent jobs and entrepreneurship through our community investment activities

     Improve the lives of 5 million children globally by engaging at least 1,000 clients in UBS Optimus Foundations collective giving platforms

 

     Progress against these goals will be reported for the financial year 2020 onward

An industry leader in sustainable business practices

     Retain favorable positions in key ESG ratings

     Maintained leadership position (Dow Jones Sustainability Indices / DJSI)

     AA rating maintained (MSCI ESG Research)

     Industry leader rank maintained (Sustainalytics)

     A–  rating and included in Leadership band (CDP)

2017–2022

     Implement the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)

 

     First TCFD reporting introduced for the financial year 2017, continuous improvements ever since

2019–2024

     Implement the requirements of the
Principles for Responsible Banking (PRB)

 

     Among the founding signatories of the PRB (September 2019)

An employer of choice

     Being recognized as one of the worlds most attractive employers in key ratings and rankings

     Included in Global Universum ranking of Top 50 Worlds Most Attractive Employers

     Peer-leading position in human resources elements of DJSI

     Score above financial services norm in employee engagement and work environment (based on employee survey results)

     Recognized by Bloomberg Gender-Equality Index

1 Refer to the UBS in society constitutional document (in the Sustainability Report 2019) for  more  information about all aims. Goals are to be achieved by the end of the target year.     Core SI are SI products that involve a strict and diligent asset selection process through either exclusions (of companies / sectors from the portfolio where the companies are not aligned to an investor’s values) or positive selections (such as best-in-class, thematic or ESG integration and impact investing). Refer to the “Core sustainable investments” table in “Our focus on ESG” in this section.    The increase in core SI assets was mainly driven by the ESG integration strategy of Asset Management. Refer to the “Core sustainable investments” table in “Our focus on ESG” in this section.    Strategies where the investment has the intention of generating measurable environmental and social impact alongside a financial return.    5 Refer to the “Driving change in communities” section in the Sustainability Report 2019.

 

  

48 


 

Stakeholder relations (additional information)

Governments and regulators

Financial market stability is largely dependent on the overall economic, regulatory and political environment and the conduct of the firms within the sector. We actively participate in political discussions to share our expertise on proposed regulatory and supervisory changes. The regime set out by the post-2008 regulatory reform agenda is now largely completed with focus shifting to final national implementation of key prudential rules such as the Basel III standards.

With regard to corporate responsibility and sustainability issues, we actively participated in governmental discussions concerning the implementation of commitments made at the Paris Climate Change Conference and in the United Nations Sustainable Development Goals. In addition, we contribute to the Task Force on Climate-related Financial Disclosures (TCFD). On a regional basis, we contribute to various fora to engage with policymakers on the European Commission’s Sustainable Finance Action Plan. In our home country Switzerland, we continue to actively contribute to pertinent sustainability discussions with various government bodies. We also contribute our experience and knowledge to supervisors in their efforts to further thinking on new topics, such as the appropriate regulatory environment for digital finance and the financial risks of climate change.

®   Refer to UBS’s quarterly reports and annual reports available at www.ubs.com/investors  for more information on regulatory topics

Politicians and political parties

We maintain a regular dialogue with politicians globally and strive to establish long-term relationships with political representatives.

We comply with legal requirements on disclosing political donations, as applicable in the relevant jurisdictions. Outside of Switzerland, we do not provide financial support to political parties. In the US, eligible employees may make financial contributions through a federal Political Action Committee (PAC), the UBS Americas Fund for Better Government. The PAC makes contributions to federal candidates. These employee contributions do not constitute political donations by UBS.

Support of the Swiss militia system

Swiss citizens actively and voluntarily engage in political institutions at all three levels of the Swiss state (federal, cantonal and local) as public officials (e.g., members of parliament, members of commissions and executive mandates), while they continue to pursue other professional activities. This arrangement – citizens taking on public tasks and mandates on a part-time basis – is referred to as the militia system.

In this system, members of parliament in Switzerland are (usually) not professional politicians and political parties do not receive state funding. It is for this reason that we view the support of the militia system as a crucial component of our societal responsibility in our home market. In recognition of the vital function of Switzerland’s political parties, we provided a total of CHF 1 million to political parties in 2019 as a contribution to their operational costs. Financial contributions are calculated based on the number of parliamentary seats the respective party holds at the federal and cantonal level. Swiss parties are eligible to apply for a financial contribution if they commit to free competition, the market economy and to the Swiss financial center. They should also have a national focus and either form a parliamentary group in the federal parliament or be represented in at least one cantonal government. We view our contribution to political parties in Switzerland as a long-term commitment, which is, however, subject to regular reviews.

Annual political forum for employees who hold elected public office in Switzerland

We expressly support the political involvement of our employees. About 250 employees currently hold political office at the federal, cantonal and local level. If necessary, employees may spend a certain amount of their working time on their public duties. We organize an annual political forum at which senior management and political office holders discuss topics of relevance to UBS in Switzerland.

®   Refer to www.ubs.com/gov  for more information on governmental topics pertaining to Switzerland

Peers

We actively engage in regular discussions on corporate responsibility and sustainability issues with specialists in peer banks, and more widely through trade bodies and associations. Sharing experiences and assessments of corporate responsibility and sustainability issues helps us to compare and improve our strategy, approach and tools.

We are a founding member of the Wolfsberg Group, an association of global banks that aims to develop financial services industry standards regarding anti-money laundering, Know Your Client and counter-terrorist financing policies. Meeting regularly, the Wolfsberg Group also works closely with the Financial Action Task Force.

With regards to climate risk, UBS is cooperating on two fronts. Firstly, we are part of the United Nations Environment Programme Finance Initiative (UNEP FI) TCFD working group for banks to refine methodologies, scenarios and data sources to assess climate-related financial risk in loan portfolios and secondly, we are pilot-testing the Paris Agreement Capital Transition Assessment (PACTA) to shape the development of methodologies and study the alignment of corporate lending portfolios with the Paris Agreement benchmarks.

In 2011, we were a driving force behind the establishment of the Thun Group of Banks. The group has published two papers that propose a framework to help identify key challenges and best practice examples for the banking sector’s implementation of the UN Guiding Principles on Business and Human Rights. The Thun Group maintains regular discussions, both in calls and in annual meetings at the UBS Conference Center in Thun, Switzerland.

 

49 


Our strategy, business model and environment (section from the UBS 2019 Annual Report)
How we create value for our stakeholders
 

Communities

At UBS, we recognize that our long-term success depends on the health and prosperity of the communities that we are a part of. Our approach is to build sustainable and successful partnerships with non-profit organizations and social enterprises to help our contributions have a lasting impact. Our Community Affairs programs seek to overcome disadvantage through long-term investment in education and entrepreneurship in the communities within which we operate.

Through local execution and partnerships, which operate under a global framework and with coordination across regions, we endeavor to deliver business and community impact by identifying innovative and high-quality programs that are aligned to the business. We provide focused financial and human support, including skills-based employee volunteering programs and client participation where appropriate. We are an active member of the London Benchmarking Group, an internationally recognized standard for measuring corporate community investment.

®   Refer to the “Driving change in communities“ section for further information and data of relevance to the communities we do business in

Vendors

In 2019, we spent USD 9.01 billion on a broad range of products and services. A large proportion of this expenditure comprises real estate, outsourcing, IT as well as consultancy and legal fees. Our sourcing and procurement services are provided by an external company, Chain IQ, which applies our responsible supply chain management (RSCM) framework and processes. The experienced procurement and sourcing specialists at Chain IQ perform vendor due diligence and establish remediation measures, supported by a centralized team of experts within UBS.

We aim to ensure that our social and environmental values are being followed throughout the supply chain. A firm-wide RSCM guideline provides systematic assistance on identifying, assessing and monitoring vendor practices in the areas of human and labor rights, environmental protection and anti-corruption. A central component of this guideline is the UBS Responsible Supply Chain Standard, to which our direct vendors are normally bound by contract. We expect our vendors to apply these same standards to relationships with their vendors.

®   Refer to “Responsible supply chain management“ in the “Driving change in business” section for more information

Non-governmental organizations

We regularly interact with non-governmental organizations (NGOs) and appreciate their input and insight, as it helps us consider our approach to, and understanding of, societal issues and concerns.

NGOs have long established themselves as critical watchdogs of companies, both scrutinizing and challenging how we address a broad range of environmental, social and human rights concerns. In 2019, discussions with NGOs were particularly focused on climate change (notably on fossil fuels). Other topics discussed included sustainable finance and human rights.

Media

Our media teams maintain direct and long-term relations with media representatives across all our business regions and provide them with timely information on a wide range of global, regional and local topics. Senior management (at the Board of Directors and Group Executive Board level) also regularly provide accounts to journalists, predominantly through interviews. In addition to interviews at our corporate events (i.e., via quarterly and annual reporting and at the Annual General Meeting), senior management conducted many other interviews in 2019.

We also communicated with media representatives – through interviews or background talks – on a broad range of corporate responsibility and sustainability topics such as climate change, human rights and environmental and social risks in general.

®   Refer to www.ubs.com/media  for further information on UBS media relations

  

50 


 

Our governance and principles

Our firm’s societal and corporate culture activities are overseen at the highest level of our firm and are founded in our Principles and Behaviors.

Sustainability governance

The Board of Directors (the BoD) of UBS Group AG decides on the strategy of the Group upon recommendation by the Group Chief Executive Officer (the Group CEO) and is responsible for the overall direction, supervision and control of the Group and its management, as well as for supervising compliance with applicable laws, rules and regulations. The BoD exercises oversight over UBS Group AG and its subsidiaries and is responsible for establishing a clear Group governance framework to provide effective steering and supervision of the Group, taking into account the material risks to which UBS Group AG and its subsidiaries are exposed. The BoD has ultimate responsibility for the success of the Group and for delivering sustainable shareholder value within a framework of prudent and effective controls.

The BoD of UBS Group AG is responsible for setting our firm’s values and standards to ensure that the Groups  obligations to our stakeholders are met. Both the Chairman of the BoD and the Group CEO play a key role in safeguarding our reputation and ensuring we communicate effectively with all our stakeholders.

All BoD committees have responsibilities and authorities of direct relevance to our goal of creating sustainable value. The Governance and Nominating Committee, for instance, supports the BoD in fulfilling its duty to establish best practices in corporate governance across the UBS Group. The Compensation Committee supports the BoD in its duties to set guidelines on compensation and benefits. The Risk Committee oversees and supports the BoD in fulfilling its duty to supervise and set an appropriate risk management and control framework (in the areas of risk management and control, treasury and capital management, as well as balance sheet management).

The Corporate Culture and Responsibility Committee (CCRC) is the body primarily responsible for corporate culture, responsibility and sustainability. The oversight role of the CCRC has been embedded in the Organization Regulations of UBS Group AG.

In view of the many environmental and social challenges globally, as encompassed by the Sustainable Development Goals (SDGs), these topics will continue to increase in relevance for banks. These developments therefore require regular and critical assessment of our policies and practices, based on an accurate monitoring and analysis of societal topics of potential relevance to UBS. This process is the responsibility of a committee at Group Executive Board-level, the Global Environmental and Social Risk (ESR) Committee, which sets the overall risk appetite for the firm and resolves transactional and policy matters relating to environmental and social risks and their associated reputation risks. It is chaired by the Group Chief Risk Officer, who is responsible for the development and implementation of principles and appropriate independent control frameworks for environmental and social risks within UBS.

The GEB oversees our efforts to combat money laundering, corruption and terrorist financing. These efforts are led by a dedicated financial crime team of anti-money laundering compliance experts. The GEB also oversees our approach to diversity and inclusion. Our global head of diversity and inclusion drives a group-wide strategy complemented by divisional and regional initiatives.

®   Refer to the “Sustainability governance” graph below

®   Refer to the Appendix 1  for the CCRC charter and the ESR policy framework

Key policies and guidelines

Code of Conduct and Ethics 

The Code of Conduct and Ethics of UBS (the Code) sets out the principles and practices that UBS expects all of its employees and directors to follow both in form and intention. The principles and standards set out in the Code should characterize all of UBS’s business activities and all its dealings with the firm’s stakeholders including clients, colleagues, shareholders, regulators and business partners. It is the basis for all UBS policies, guidelines and statements relating to each of the firm’s employees’ personal commitment to appropriate and responsible corporate behavior.

®   Refer to www.ubs.com/code  and the Appendix1 of this document for the full text of the Code

UBS in society constitutional document

It is our goal to be the financial provider of choice for clients wishing to mobilize capital towards the SDGs and the orderly transition to a low-carbon economy (the Paris Agreement). The UBS in society constitutional document defines the principles and responsibilities for promoting this commitment systematically across all relevant businesses and for implementing the ethical standards defined in the Code  that govern UBS’s interaction with society and the environment.

®   Refer to the Appendix 1 for the full text of the UBS in society constitutional document

 

51 


Our governance and principles 

Policies to combat financial crime

We have developed policies intended to prevent, detect and report money laundering, corruption and terrorist financing. These policies seek to protect the firm and our reputation from those who may be intending to use UBS to legitimize illicit assets.

At UBS, we apply a risk-based approach and have a framework in place to identify and manage potential money laundering risks associated with customers and transactions. With our systematic assessment of money laundering risks we strive to arrive at the appropriate level of initial and ongoing due diligence and monitoring of transactions throughout the course of a relationship. For certain higher risk clients, face-to-face due diligence requirements are mandatory. Our anti-money laundering (AML) policy sets out the processes and risk criteria pertaining to politically exposed persons (PEPs). Global PEP clients are reviewed and reapproved on an annual basis by the responsible member of each divisional Executive Committee.

Our Code focuses on preventing the misuse of the financial system, including in relation to bribery. The specific anti-corruption standards of conduct that apply to all employees are also set out in the Group Policy Against Corruption. The policy sets out our zero-tolerance stance toward corruption and prohibits all forms of bribery by the firm and our employees, including facilitation payments.

Anti-corruption policies and procedures that aim to prevent bribery occurring throughout our operations apply to all business divisions. These policies are derived from the standards set out in the Group Policy Against Corruption and the Group Policy on Gifts and Business Entertainment.

®   Refer to the “Driving change in business” section for more information about how we are combating financial crime

Grievances and whistleblowing protection, policies and procedures

We strive to maintaining high legal, regulatory and ethical standards. We have longstanding procedures in every region to help us resolve employee grievances, and employees are strongly encouraged to speak with their line manager or HR about any concerns.

Our global whistleblowing policy and procedures offer multiple channels (including a whistleblowing and sexual misconduct hotline) for staff to raise concerns about any suspected breaches of laws, regulations, rules or other legal requirements, sexual misconduct or harassment, or any infringement of our Code, policies or professional standards. They may raise concerns openly or anonymously.

Our policies do not tolerate harassment of any kind, including sexual harassment, and our whistleblowing policies, procedures, employee education and awareness materials specifically encourage employees to raise concerns.

As set out in the Code, employees are required to immediately report any potential violations of the Code to their line manager or local compliance officer. Employees may also report them confidentially to their Legal or Compliance teams, or using our whistleblowing procedures. UBS prohibits retaliation against employees for reporting a concern that they reasonably believe constitute a breach or violation of this kind.

®   Refer to “Risk management and control” in the “Risk, treasury and capital management“ section of the UBS Annual Report 2019 for more information

Human Resources policies

Human Resources has global and country-specific policies designed to ensure effective management practices, a strong culture and a safe and respectful working environment. An overarching global employment policy sets the minimum hiring and employment standards for all UBS locations. It provides fair, consistent and transparent treatment for our employees while taking into account local legal requirements, market best practices and shareholders’ interests. This policy is supplemented by Employee Handbooks providing local information and clarification. Along with the individual employment contract / offer letter, Employee Handbooks are the primary source of information for employees on the terms and conditions of employment and human resources programs, policies and procedures applicable to them. 

UBS policies and principles pertaining to (political, charitable, sponsorship) contributions

UBS has in place appropriate policies on political donations, which set out the principles (including by referencing UBS’s anti-corruption standards) and approval processes for corporate political donations made on behalf of UBS or its entities and their respective approval processes.

UBS’s community interaction (i.e., charitable contributions and employee volunteering) is guided by a global policy, which governs the responsibilities for Community Affairs activities within UBS and represents the official guidelines for all employees to follow. It defines the governance, principles, responsibilities, focus themes, criteria (including on anti-corruption and anti-bribery), financial planning framework as well as due diligence requirements applicable to all Community Affairs activities and all financial contributions to non-profit organizations and social enterprises made by UBS.

Our sponsorship activities are guided by a group-wide governance document which describes how the UBS policy on brand & marketing should be implemented in sponsorship and events. The document clarifies roles and responsibilities (including as regards anti-corruption and anti-bribery), describes ways of working and is intended to ensure effective and efficient cooperation among the various stakeholders.

 

52 


 

Sustainability governance

 

53 


Our governance and principles 

Our climate strategy – taking action towards a low-carbon future

 

 

Climate action – a snapshot

Nearly five years have passed since the adoption of the Paris Agreement on Climate Change (the Paris Agreement). Collective progress towards achieving the goals of the Paris Agreement will be assessed in a global stocktake in 2023, acknowledging the
2 °C benchmark and the more recent 1.5 °C limit in global warming urged by the Intergovernmental Panel on Climate Change (IPCC) in its 2018 special report. Achieving the Paris Agreement goals demands unprecedented levels of investment. In terms of the current state of climate action, there is a recognized climate finance gap as well as a Sustainable Development Goals (SDGs) investment gap – to meet the low-carbon transition targets. At the same time, we see a clear investor appetite for directing capital toward a low-carbon future. To support in scaling up collective action, UBS assists private and institutional clients in their desire to invest in accordance with their social and environmental objectives, thus helping to close the gap.

 

 

We aspire to drive positive change in society and the environment for future generations. Our climate strategy underlines our commitment to the SDGs on climate action and on affordable and clean energy as well as the Paris Agreement. These key UBS commitments are embedded in the United Nations (UN)-backed Principles for Responsible Banking (PRB). This global framework specifies the role of banks in supporting a sustainable future and scaling up their contribution to the achievement of both the SDGs and the Paris Agreement. UBS became a founding signatory of the PRB in September 2019.

We regularly report on the implementation of our climate strategy and follow the recommendations provided by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). The recommendations call on companies to disclose the impacts of climate change on their businesses. This will allow investors and financial institutions to make better investment decisions with a common set of data to assess the climate-related risks and opportunities of specific companies. We are committed to aligning our climate disclosure within the five-year pathway outlined by the TCFD (until end of 2022) and to collaborating within the industry to close gaps.

We publicly support international, collaborative action against climate change. Our Chairman is a signatory to the European Financial Services Round Table’s statement in support of a strong, ambitious response to climate change. Our Group CEO is a member of the Alliance of CEO Climate Leaders, an informal network of CEOs convened by the World Economic Forum and committed to climate action. Our Head Sustainable Equity Team within UBS Asset Management (AM) is a member of the TCFD.

Our climate-related achievements have been recognized by external experts. For the fifth year running, UBS has been named the best performer in the Diversified Financial Services and Capital Markets Industry of the Dow Jones Sustainability Indices (DJSI), the most widely recognized corporate sustainability rating. CDP, which runs a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental impacts, has awarded UBS with Leadership status and a A- rating on climate change. In 2019, ShareAction, an international organization focused on advancing responsible investment, awarded UBS as the best performing asset manager in climate proxy voting in its report, "Voting matters – Are asset managers using their proxy votes for climate action?"

 

 

Climate-related highlights

   Our climate strategy underlines our commitment to the SDGs on climate action and on affordable and clean energy and supports an orderly transition to a low-carbon economy, as defined by the Paris Agreement.

   Our exposure to carbon-related assets on our banking balance sheet is low, at 0.8% or USD 1.9 billion as of
31 December 2019, decreasing further from 1.6% at the end of 2018 and 2.8% at the end of 2017.

   Our climate-related sustainable investments increased to USD 108 billion in 2019 from USD 87.5 billion in 2018.

   We actively engaged on climate topics with 50 oil & gas and utilities companies, and voted on 44 climate-related shareholder resolutions.

   We reduced our firm’s greenhouse gas (GHG) footprint by 71% by 2019 compared with 2004 levels. We were awarded top ratings and rankings by external experts; climate industry group leader (Dow Jones Sustainability Indices); Climate A- rating (CDP) and best performing asset manager in proxy voting (ShareAction, 2019).

 

54 


 

Climate governance

As embedded in the Organization Regulations of UBS Group AG, the Board of Directors’ (BoD) Corporate Culture and Responsibility Committee (CCRC) oversees our climate strategy. Within the parameters set by the CCRC, the UBS in society Steering  Committee ensures firm-wide execution of the climate strategy while our firm’s climate-related risk appetite is set by the Global Environmental & Social Risk (ESR) Committee. In joint meetings, the CCRC and the BoD’s Risk Committee regularly and critically review the assessments and steps taken by these management bodies towards executing our climate strategy. The CCRC approves UBS’s annual climate-related objectives and oversees the progressive alignment of our climate disclosure with the TCFD recommendations. These annual plans and objectives are managed as part of our ISO 14001-certified environmental management system (EMS) with defined management accountabilities across the firm. The EMS helps us to systematically reduce environmental risks, seize market opportunities and continuously improve our environmental and climate performance  and resource efficiency.

®   Refer to the ”Sustainability governance” graph in this section

Climate strategy

As one of the world’s largest managers of private and institutional wealth, we play an active role in shaping a sustainable future. As with the SDGs, we aim to be a leading financial provider in enabling investors to mobilize private and institutional capital to climate change mitigation and adaptation while supporting the transition to a low-carbon economy. At UBS we see a clear investor appetite for directing capital in climate solutions. We address this by continuously developing our offering in sustainable finance and actively engaging with clients. Our climate strategy supports our clients and our firm preparing for success in an increasingly carbon-constrained world.

We support this goal through our innovative financial product offering and advisory, as well as through embedding climate risk in our firm-wide risk management framework and in our own operations. Our climate strategy focuses on four pillars:

   Protecting our own assets: We seek to protect our assets by limiting our risk appetite for carbon-related assets and by estimating our firm’s vulnerability to climate-related risks using scenario-based stress testing approaches and other forward-looking portfolio analyses. We have reduced carbon-related assets on our balance sheet to 0.8% or USD 1.9 billion as of 31 December 2019, down from 1.6% at the end of 2018 and 2.8% at the end of 2017.

   Protecting our clients’ assets: We support our clients’ efforts to assess, manage and protect them from climate-related risks by offering innovative products and services in investment, financing and research. We actively engage on climate topics with companies that we invest in; AM has implemented an engagement program with 50 companies from oil and gas and utilities sectors and we voted on 44 climate-related shareholder resolutions during 2019.

   Mobilizing private and institutional capital: We mobilize private and institutional capital towards investments facilitating climate change mitigation and adaptation and in supporting the transition to a low-carbon economy as corporate advisor, and/or with our lending capacity. In 2019, our climate-related sustainable investments rose to USD 108 billion from USD 87.5 billion at the end of 2018, and the deal value in equity and debt capital market services, and in financial advisory services, related to climate change mitigation and adaptation, rose to USD 87.2 billion, from USD 56.5 billion in 2018.

   Reducing our direct climate impact: We continue to reduce our greenhouse gas (GHG) emissions and increase the firm’s share in renewable energy. We have committed to using 100% renewable electricity by mid-2020. This will reduce our firm’s GHG footprint by 75% compared with 2004 levels. At the end of 2019, we had reduced our GHG emissions by 71% compared to baseline year 2004.

®   Refer to “ “Our focus on ESG” in the “How we create value for our stakeholders” section for more information about our sustainable investments

®   Refer to “In-house environmental management“ in the “Driving change in business” section for more information

 

 

55 


Our governance and principles 

Climate risk management

The physical and transition risks of climate change contribute to a structural change affecting banks and the financial sector at large.  In order to protect our own and our clients’ assets from climate-related risks, we continue to drive the integration of climate-related risk into our standard risk management framework. This framework involves procedures and tools for identifying, assessing and monitoring environmental and social risks in our standard risk, compliance and operations processes. These include client onboarding, transaction due diligence, product development and investment decision processes, own operations, supply chain management and portfolio reviews. These processes are geared toward identifying clients, transactions or suppliers potentially in breach of our standards or otherwise subject to significant environmental and human rights controversies, including climate change. 

In 2019, we embedded climate risk into our risk taxonomy and operational risk appetite statement, further reduced our exposure to carbon-related assets and, more broadly, to climate-sensitive sectors. We also refined our ability to estimate the firm’s vulnerability to climate-related risks using forward-looking scenario-based approaches, and revised our standards in the energy and utilities sectors.

®   Refer to the ”Climate-related standards in the energy and utilities sectors” table below

®   Refer to ”Scenario analysis” further  below  

 

 

 

 

 

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

 

56 


 

Scenario analysis

We have been using scenario-based approaches since 2014 to assess our exposure to physical and transition risks associated with climate change. We have performed both top-down balance sheet stress testing (across the firm), as well as targeted, bottom-up analysis of specific sector exposures in short, mid-, and long-term horizons. The table below summarizes the UBS scenario assessments performed to date.

 

 

1  International Energy Agency (IEA), World Energy Outlook    Beyond 2 Degrees Scenario    Sustainable Development Scenario   4   New Policies Scenario    Current Policies Scenario

 

 

Our initial (2014) top-down approach 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 (which assumes that severe weather events result in governments around the world agreeing to implement carbon pricing mechanisms to assess the impact on financial assets, operational income and physical assets). The scenario anticipated that these mechanisms will prompt a shift away from coal and other fossil fuels to cleaner alternatives and adversely impact markets and gross domestic product. Our subsequent (2015) bottom-up analyses of oil and gas utilities as well as electric utilities loan portfolios consisted of a forward-looking analysis to assess 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 company 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 by mapping the location of collateral in over 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.

 

57 


Our governance and principles 

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 modelling to data availability. To address these challenges,
16 banks, including UBS, the UN Environment Programme Finance Initiative (UNEP FI), the Integrated Assessment Modelling Consortium (IAMC), and risk consultancies Oliver Wyman and Acclimatise began a collaboration of several years in 2018. The objective is to develop analytical tools that help banks define and disclose climate-related risks and opportunities as envisioned by the TCFD. This includes developing and further refining scenario-based stress-testing methodologies. Now in its second phase, the UNEP FI TCFD working group for banks has grown to 35 banks and has expanded the development of these analytical tools to include a range of possible scenarios, further advancement on scenario-based stress testing methodologies, and standardization between institutions on what defines climate-sensitive activities. 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, UBS is one of the pilot banks testing the Paris Agreement Capital Transition Assessment (PACTA). In the context of the PACTA 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. For example, the assessment showed that the fuel mix in UBS’ s power utilities credit portfolio, according to the PACTA methodology, is significantly less carbon intensive than the global corporate economy, as of 2019 (see “PACTA methodology for power generation“ further below). However, the limitations of the outputs from this assessment are very similar to the other pilots and we will continue to work on improving methodology, data availability and scenario applicability.

Both pilots promote industry learning and provide guidance for disclosing climate-related risks and opportunities in line with TCFD recommendations. Overall, the results of the 2019 climate risk pilots have confirmed findings from our previous pilot stress tests on climate, which started in 2014: we have so far not identified significant climate-related financial risk on our balance sheet. We explain this by UBS’s relatively small lending book in climate-sensitive-sectors (see “UBS corporate lending to climate-sensitive sectors 2019“ further below) and availability of insurance where we have relevant exposures to such sectors (e.g., Swiss mortgage lending book).

Protecting our clients’ assets

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. AM has developed a suite of products allowing clients to identify the carbon intensity of their investments and/or to align them with the Paris Agreement: In 2017, AM together with the New Employment Savings Trust launched a strategy called Climate Aware with an aim to do more than manage investments based on carbon foot-printing. In 2018, AM followed its successful UK Climate Aware rules-based fund with an Irish-based fund that is available for international investors outside of the UK. The portfolio is oriented towards companies that are better prepared for a low-carbon future while reducing exposure to, rather than excluding, companies with higher carbon risk, in order to pursue strategic engagement with these companies. The strategy involves not only a reduction of the CO2 footprint of the portfolio but also an innovative approach to aligning the portfolio with the 2 °C carbon reduction scenario.

Finally, AM empowers equity portfolio managers to examine the carbon footprint of their portfolios and compare the relative carbon footprints of their company holdings to that of the benchmark.

Engagement

On behalf of clients, AM engages with companies it invests in to discuss approaches to mitigating climate-related risk. AM also actively votes on shareholder resolutions to improve transparency and disclosure around climate-related reporting. Specifically in the context of its Climate Aware fund, AM has implemented an engagement program with 50 oil and gas companies as well as utilities companies underweighted in the fund. Communication with these companies aims at improving their disclosure and performance alignment with the TCFD recommendations. Engagement also makes it possible to share the results of the quantitative and qualitative assessments included in the fund methodology with investee companies. This allows for the verification of company performance with additional information collected before and after meetings. It also means AM can collect feedback, explicitly communicate objectives for change in corporate practices and further enhance the model used to inform the under- / overweights in the strategy.

 

58 


 

AM is also involved in Climate Action 100+, a collaborative engagement initiative launched in December 2017. Its aim is to engage with high-level greenhouse gas emitters, and other companies across the global economy, that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement. It has the support of 320 investors, representing more than USD 33 trillion of assets under management (at end of 2019). AM is directly involved in 30 coalitions of investors (at the end of 2019) within Climate Action 100+ and leads seven of the company dialogues across regions. Whether AM 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.


Opportunities

We mobilize private and institutional capital for investments that facilitate climate change mitigation and adaptation. UBS supports the orderly transition to a low-carbon economy as corporate advisor, and/or with its lending capacity.

As we outlined in our 2020 white paper for the World Economic Forum annual meeting, "Becoming climate aware: Mobilizing capital to help meet climate change goals", we have formulated a Climate Aware framework which helps investors align their portfolios towards a climate-smart future. The framework is built on the methodology which underlies UBS-AM’s Climate Aware strategy. The main characteristics of the framework are:

   Portfolio mitigation: Lowering investment exposures to carbon risk

   Portfolio adaptation: Increasing investment exposure to climate-related innovation and solutions

   Portfolio transition: Aligning portfolios to an investor’s chosen climate glidepath

 

A Climate Aware framework for investors  

 

 

59 


Our governance and principles 

Portfolio mitigation

Based on our experience, maintaining a balance between required investment returns and minimizing climate risks works most effectively when investors integrate climate change considerations into a diversified portfolio. Similar to ESG integration, this is an important element in understanding the specific effects of climate change. As TCFD has highlighted, these can be viewed as regulatory, market, technology and physical risks. How they play out at the level of markets, industry sectors and individual issuers depends on an interplay of:

   regulation;  

   commercial considerations;

   impact of technology on business models, revenues, costs and capital requirements.

 

Integrating these three aspects puts the focus on the most material issues relating to the reduction of emissions generated by the most carbon-intensive sectors. It also leads to a deeper and more investment-relevant understanding of the physical risks.

Portfolio adaptation

Investing for a low-carbon future hinges on the ability to invest in, and fund, new technologies and solutions. The key investing areas relate to GHG emissions reduction, energy transition, and energy efficiency. They include companies that manufacture and deploy these technologies as well as the infrastructure and services that make these achievable at scale. There are variety of developments in business structure, asset ownership, supply chains and delivery models that may be deployed as part of the climate change transition. It is also important to recognize that there are different kinds of investors that are better-placed for certain kinds of investments. Venture capital, private equity, real estate, public equity and public fixed income all have different appetites for technology risk.

Portfolio transition

It is important for investors to understand the difference between where they are now and the possibilities of the climate transition. Scenario analysis is emerging as a response to the uncertainties of climate change. Engagement, meanwhile, provides an opportunity for investors to encourage good corporate practice and, together with voting, keep management accountable for the actions needed to keep pace with the climate transition. It also allows investors to understand the investment dynamics in individual sectors and countries and determine the overall direction of travel. By applying the tools of scenario analysis and engagement, investors are better able to manage the transition to a climate-smart future.

AM is also a member of the Institutional Investors Group on Climate Change (IIGCC) Climate Action 100+ European Advisory Group, which advocates for the world’s transition to a low-carbon economy.


Our other business divisions also translate this strategic thinking on climate into concrete products and services. UBS offers 100% sustainable discretionary mandates and asset allocation funds based on an innovative dedicated Sustainable Investing Strategic Asset Allocation for private clients in Global Wealth Management (GWM) and Personal & Corporate Banking (P&C). These include an explicit allocation to strategies that aim at mitigating climate change, such as green bonds and thematic investments, but also others that contribute indirectly to climate change mitigation such as Multilateral Development Bank bonds, ESG leaders and ESG improvers. GWM developed a new advisory solution that includes an explicit climate change dimension, allowing clients to tilt their portfolios towards the issues they care about. Ultimately our goal in developing new products and services is to ensure that all material risks and opportunities are addressed, and to allow clients to select sustainable investments aligned to their interests while receiving financial returns in line with traditional investment approaches.

GWM integrates sustainability assessments, focusing on the sustainability intentionality of fund managers, into all fund and ETF onboardings. We have set a target of directing USD 5 billion of client assets by the end of 2021 into new impact investments contributing to the SDGs. These investments include a significant climate component. GWM’s mutual fund and ETF offering includes climate-focused investment strategies, comprising those focused on clean / alternative energy.

We participated in launching, and have an ongoing partnership with, Align17, an independent, third-party digital marketplace. Align17 stands out in connecting a wider range of public, institutional, and private wealth investors with SDG-related investment opportunities. These opportunities are available to qualifying UBS clients and often serve to finance climate-related projects.

Our AM and GWM businesses have in place a comprehensive approach to address environmental, social and corporate governance factors across investment disciplines. For example, sustainability themes are embedded in GWM’s equity research processes, while AM’s Real Estate and Private Markets has developed a Responsible Investment Strategy to enhance investment performance of mandates for direct and indirect real estate and infrastructure investments. The 2019 GRESB (formerly Global Real Estate Sustainability Benchmark) awarded 15 out of 20 of AM’s submitted real estate and infrastructure funds 5-star ratings with the remaining funds achieving a 4-star rating.

Our Investment Bank provides capital-raising and strategic advisory services globally to companies that make a positive contribution to climate change mitigation and adaptation, including those in the solar, wind, hydro, energy efficiency, waste and biofuels, and transport sectors. In 2019, the deal value in equity or debt capital market services, and of financial advisory services, related to climate change mitigation and adaptation, rose to USD 87.2 billion, from USD 56.5 billion in 2018.

 

60 


 

We strive to be the preferred strategic financial partner relating to Switzerland’s Energy Strategy 2050. In 2019, P&C supported 12 strategic transactions in support of the strategy. The UBS Clean Energy Infrastructure Switzerland strategy offers institutional investors unprecedented access to a diversified portfolio of Swiss Infrastructure facilities and renewable energy companies. Due to clients’ demand, a successor strategy was launched in September 2017. In our P&C business we have also integrated Sustainable Investing Advisory into the strategic dialogue with our institutional clients.

To support philanthropists entering the climate space, UBS Optimus Foundation and the Climate Leadership Initiative (CLI) have developed four principles for effective climate philanthropy. CLI was created by six of the top climate donors this year with the express goal of making it easier for new philanthropists to learn, become connected to peers and experts and join the fight.

The four principles are Understand Climate Solutions and Impact; Collaborate and Take Action Swiftly; Be Prepared to Stick With It; Marshall All Your Resources.

Climate-related metrics

In 2019, we have again significantly reduced the share of our carbon-related assets to 0.8%, down from 1.6% in 2018 (and 2.8% in 2017). More broadly, our share of exposure to climate-sensitive sectors has reduced in 2019 to 15.5% from 19.6% in 2018 (% of total gross banking exposure across IB and P&C).

Climate-related sustainable investments increased to USD 108 billion, up from USD 87.5 billion in the previous year. At the end of 2019, we had reduced our GHG emissions by 71% compared to baseline year 2004.

 

 

Climate-related metrics 2019

 

 

 

 

 

 

 

 

For the year ended

 

% change from

 

 

31.12.19

31.12.18

31.12.17

 

31.12.18

Risk management

 

 

 

 

 

 

Identified significant climate-related financial risk on balance sheet1

 

None

None

None

 

 

Carbon-related assets (USD bn)2

 

1.9

3.2

5.8

 

(41)

Proportion of total banking products exposure, gross (%)

 

0.8

1.6

2.8

 

 

Total exposure to climate-sensitive sectors (USD bn)3

 

37.6

38.6

42.6

 

(3)

Proportion of total banking products exposure, gross (%)

 

15.5

19.6

20.5

 

 

Weighted carbon intensity of the Climate Aware equities strategy (in tons CO2e per million of USD revenue) 4

 

74.8

95.6

117.5

 

(22)

    Compared to benchmark (FTSE Developed World Index) (%)

 

(56.0)

(55.7)

(44.0)

 

 

Number of climate-related shareholder resolutions voted u