Swiss bank and asset manager UBS has trebled its ESG assets under management (AuM) during 2018 as part of an increased focus on sustainable investing.
The growth of its ESG – or environmental, social and governance – investments was one of the bright spots in the 2018 results published by the bank which also revealed large outflows in both its asset management and wealth management divisions amid falls in stock markets around the world.
According to its 2018 results, ESG-integrated assets grew from $63.5 billion at the end of 2017 to more than $200 billion in 2018.
UBS has also launched a number of ESG-themed funds including what it claims is the “the world’s first 100% sustainable investing cross-asset portfolio for private clients” as well as a “climate aware” rules-based fund for international investors that focuses on companies supposedly prepared for a low carbon future.
The sustainable investment drive has been especially strong in the Swiss market where UBS claims to have a 23% market share.
The ESG focus comes amid a mixed year for UBS’s asset management division in which net management fees increased by 2% but performance fees decreased, mainly due to declines in equities and hedge funds, thereby mirroring an industry-wide trend among hedge funds.
Operating expenses also decreased on lower personal expenses, driven by lower variable compensation, UBS stated. The adjusted cost/income ratio was 73% while invested assets were $781 billion and net new money excluding money market flows was $24.8 billion.
The market reaction to the latest quarterly results from UBS has been poor with pre-tax profit for the group rising by 2% to $862 million but falling short of analysts’ expectations and resulting in a 4.4% drop in share price.
Most analysts have focused on the $13 billion of client outflows during the last quarter, the majority ($7.9 billion) coming from its high profile wealth management unit with a further $4.9 billion of outflows coming from the asset management division.
UBS has blamed the outflows on unresolved geopolitical tensions, rising protectionism and trade disputes along with increased volatility, all of which has affected investor confidence, especially in the last quarter of 2018.
Furthermore, stated UBS, the negative sentiment is likely to carry over into the first quarter of 2019 and affect revenues in both global wealth management and asset management.
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