UBS Global Wealth Management is planning to launch a new ratings system, which will score funds on the firm's platform based on their ESG criteria.
Initially, the rating system will cover all long-only equity and bond mutual funds and ETFs on the firm’s non-US platform as well as approximately 150 funds and separately managed accounts that feature on the US platform's select list.
A spokesman for UBS said the non-US platform had fewer products on it than the US one, hence the complete coverage for that part of the business.
He added that the differences between the two platforms meant the framework could not be applied to the full US roster of products.
The rating system is expected to be completely implemented by the end of 2019 and updated depending on necessity afterwards.
Funds will be rated between one and 10 based on how they score on seven sustainability criteria. These are:
- Pollution / waste
- Climate change
- Water
- People
- Products/services
- Corporate governance
- Ethics
‘As the universe of sustainable investing strategies labeled as such continue to expand rapidly, it’s really important that we have a consistent approach to being able to describe what are the differences regardless of how these strategies are labeled or marketed,’ Andrew Lee, head of Americas sustainable and impact investing at UBS Global Wealth Management, told Citywire.
‘I think this assessment or research process goes a long way towards that.’
ESG scores will be assigned based on interviews with managers, questionnaires, data analysis and other due diligence processes, Greg Trinks, head of Americas fund investment solutions at UBS Global Wealth Management, told Citywire.
'We designed a series of questions that are really meant to lead you down a very specific path,' he said.
'It’s not just the answers to the questions but also analysts’ opinions and interpretation of that, that come through in in-person meetings, constant calls and interaction with management teams over time,' he explained.
The firm's Chief Investment Office and Investment Platforms and Solutions units are responsible for the overall ESG rating methodology.
Trinks said the methodology differed to the likes of Morningstar's sustainability ratings, which he said were a good starting point, but less detailed.
'The difference is while those processes tend to be built for scale, I think our processes are really bespoke and it’s built for detail and granularity,’ he said.
