Revealed: UBS Report Shines Light on Most Pressing ESG Challenge

Feb 2019
Global, February, 05 2019 - The over-riding picture is one of uncertainty for investors when it comes to climate change, as they will be faced with a complex web of legislation and idiosyncratic challenges.

That is according to Michael Baldinger, who is head of sustainable and impact investing at UBS Asset Management, and Francis Condon, sustainable and impact investing research analyst.

In the group’s 'Climate Primer' report, the pair said climate change is the most urgent and complex of all the ESG factors, and it is the one that raises the greatest degree of uncertainty.

Doubling efforts According to the latest US SIF report published in October, climate change is the single most important ESG issue considered by asset managers in asset-weighted terms, the UBS study pointed out.

‘Managers responsible for $3 trillion cited climate as their number one ESG concern—a doubling compared to 2016.’

As a key material issue across a wide range of sectors, investors will have to synthesize the effects and consequences of differing climate change scenarios.

‘Investors, and in particular, institutional investors, have much to grapple with in terms of understanding the raft of legislation and policy which exists, not just around climate change, but sustainable investing more broadly.’

Tips and tricks Scenario analysis is a key technique in understanding the changing dynamics according to UBS, which has taken part in a group formed by the Institutional Investors’ Group on Climate Change (IIGCC) to create a five-step framework to help asset owners and managers use the analysis.

‘By giving investors a structured way to think about climate change, what an effective climate change scenario analysis can offer is a starting point from which the early warning signs can be monitored.’

Commenting on the broad investment community, the UBS paper said: ‘Both asset managers and asset owners have the capability to drive positive long-term change by engaging with companies to influence their business models and activities as they impact on climate transition.’


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