For UBP’s Swiss and Global Equities team, ESG integration in fundamental stock selection aims to unlock value for investors by identifying companies well placed for the transformation ahead.
This year is going to be a defining one for sustainability, especially in view of climate change. World leaders are expected to gather in Glasgow in November for the COP26 summit, spearheading efforts to reach the goals of the Paris Agreement and the UN Framework Convention on Climate Change.
The European Union and the US administration alike have planned significant green investment packages this year to pursue their decarbonisation efforts. These developments are being accelerated by the falling cost of renewable energy. Last but not least, companies are facing increased scrutiny on their environmental practices, encouraging them to set clear emissions targets and communicate on them.
What about investors?
The expanding regulatory framework , notably the Sustainable Finance Disclosure Regulation, is shaping the landscape for investors in Europe. However, it is above all an increase in demand that is driving the shift towards sustainable investments.
Behind all these developments is the realisation that climate risks, whether direct, indirect or regulatory, can significantly impact a company’s cash flow. Stranded assets such as coal and hydrocarbon resources, for instance, can become liabilities that overshadow a company’s balance sheet for decades into the future.
The Swiss equity investment universe is notably strong in sustainability and ESG, having very little exposure to industries linked to high carbon emissions. However, some small and mid-sized Swiss companies can get penalised in the main ESG scores simply due to a lack of data coverage and the absence of published carbon reduction targets. As a result, investors risk missing out on some highly attractive and innovative companies.
The particularities of UBP’s approach to stock selection
This is where a consistent and proven investment process with ESG integration comes in. UBP’s Swiss & Global Equity team carries out up to 400 company meetings per year, engaging directly with companies to help improve their sustainability practices. Indeed, we consider good ESG practices to be a prerequisite for value-creating potential, helping companies maintain or improve the return on investment of their cash-flow. Similarly, in our view, a company’s environmental footprint – particularly its carbon footprint – is a key component of its investment case.
This results in a favourable ESG positioning across the franchise, particularly in terms of a low carbon footprint, along with an alignment with the Paris Agreement objective of limiting global warming Some of our strategies have been validated by third parties such as the Belgian “Towards Sustainability” label.
In conclusion, the goal of the Swiss and Global Equity team’s stock selection process is to offer portfolios adapted to changing consumer and investor habits, making them “future-proof” for the benefit of our clients.
Eleanor Taylor Jolidon
Co-Head of Swiss and Global Equity
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Martin Moeller
Co-Head of Swiss and Global Equity
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