Can asset managers change the world?

Top investment executives say they are deploying capital to meet societal ends

When the top investment figure at a Swiss bank talks about deploying the “corrosive power of capitalism” and relates a story about how a doctor believes in the power of money over medicine you start to take note.

The Swiss bank in question is UBS and the investment figure is none other than Mark Haefele, the Global Chief Investment Officer at UBS Wealth Management who chairs UBS’s Global Investment Committee.

He’s one of UBS’s “Opinion Leaders” panel that sits just under the group executive board that is headed by CEO Sergio Ermotti.

The Opinion Leaders is comprised of 11 senior executives (though just one of them is a woman) from across UBS Asset Management, UBS Investment Bank, and UBS Wealth Management’s Chief Investment Office (CIO).

Asked by Responsible Investor whether asset managers were “part of the problem” as they aren’t credible performers on issues like tax justice, gender parity and executive remuneration, Haefele had this to say:

“One of the things that we deploy in the CIO office is that you use the corrosive power of capitalism to your advantage by investing in areas you see tremendous growth rates with regards to sustainability.

“But you need to keep in mind that for us as a firm we need to attract the best and the brightest. This is a people business and if they are going to Google and not UBS than we have a problem. In the CIO office we like to say “we shape richer lives in a better world” and that helps us attract some of the best young talent.”

Speaking at a UBS event on ESG in London yesterday, Haefele went on to say: “We recently had a summer intern from the UK, a doctor, and he said ‘Look, when I do my job as a doctor I can help one person at a time but by learning about sustainable investing I can help thousands of people in a day’.

“Although the best and brightest can work with anybody, they want to work with firms aligned with their values, which we think is a positive move.”

Michael Baldinger, Global Head of Sustainable and Impact Investing at UBS Asset Management and the former CEO at RobecoSAM, added: “I think you have to look at materiality and look at where a company will have the most impact, whether in its industry or sector.

“For UBS as a financial firm you have much more power through the products and services we advise our clients with.“Capital is one of the most powerful transmission mechanisms and UBS as the largest wealth manager in the world and a large-scale asset manager is focusing on making sure that corporations are able to meet society’s expectation of them. I think we can really be proud as a firm of what we have accomplished so far.”

UBS has been making a push in sustainable finance for some time, exemplified by the recruitment of Baldinger himself and numerous others and crystallised last month by the hiring of former Bank of England adviser Huw van Steenis in a role which will see him chair a new group-wide Sustainable Finance Committee.

Speaking at the event, van Steenis said: “This comes back to data because without the appropriate data, it’s very hard for investment professionals to adjudicate is this or is it not a winning strategy.

“I share your view that there has probably been less progress made on some of the S measurements but let give you an example of the gender pay gap which you could argue is probably the single most successful piece of legislation in the UK in the past decade, in all honesty, possibly aside from the sugar tax. This is because it helped make an opaque data source more transparent.”

Earlier in the day, UBS Chairman Axel Weber spoke via video-link and called for event attendees to bring “the entire weight of financial plumbing and engineering” behind sustainable finance.

He said: “It’s not enough to develop products and primary investment strategies, hedging and derivatives solutions need to be brought about so that you trade in and out of investments and make them more liquid. Derivatives can deepen liquidity and facilitate innovation, both are potentially helpful to institutional investors in the context of sustainable asset allocations.”

“This will open the [Responsible Investing] universe for other investors with less narrowly focused investment guidelines.”

His remarks come amid a flurry of ESG-focused activity in the derivatives market. A few weeks ago, Dutch banking group ING announced an interest rate swap contract billed as the world’s first derivative to encourage improved sustainability performance. And Eurex, the Deutsche Börse-owned derivatives exchange has said that it will expand its range of ESG contracts following the successful launch of its ESG Futures six months ago.