Bringing sustainability to the core at UBS

Bruno Bertocci from UBS has explained the asset manager’s approach to sustainable investments.

Sustainable, or responsible, investments are increasingly being approached through positive rather than negative screening, according to Bruno Bertocci, who heads UBS Global Asset Management’s activities in this area (see box).

UBS is increasingly focused on globalising the application of its skills garnered since its Sustainability Team was formed in 1996. From a focus on Swiss investors, then more broadly across Europe, the manager’s objective now is to appeal to as wide as possible an investor base looking for sustainable solutions.

Broadening the market

Across Europe there is a trend among advanced investors to turn toward positive screening. What also needs to happen, however, is a broadening of the market. Outside of public funds in Scandinavia, for example, in the space of UK retail funds, there is a need to grow the sustainable investing market, he suggests.

That said, Bertocci equally stresses that the factors involved in identifying the most sustainable companies are also those that can help identify the best investment opportnities – period.

“Our take on how to do it is that it is an extention of traditional market theory, that shines a light on the management of stock selection,” he says.

Bertocci cites the academic focus on sustainable investments, which point to competitive advantages and profit generating factors enjoyed by companies that set up their own businesses to be more sustainable over the longer term.

This may be in the area of workforce improvements among services companies in developed markets – where people can be seen as not a cost per se, but the asset that helps businesses compete with other businesses. To do this requires attracting the best and brightest workers – “smart people want to work with other smart people,” Bertocci says.

This type of example highlights the ‘S’ in ESG (environmental, social and governance). For example, supply chains can add value, but there is arguably also a need to manage ESG factors to avoid accidents that can affect the brand
value. It is about positioning companies to do better for shareholders, Bertocci says.

Again refering to the academic support for the idea of sustainability, he notes the suggestion that businesses identified as more sustainable are capable of generating better stock market returns.

“It is not hard to see why,” Bertocci says. This is because it ties up with the notion that sustainability is embedded in companies’ ability to generate a return on capital. Valuations and financial analyses cannot be ignored, but it considering sustainability factors can add incremental value for clients.

“The portfolio is about what you put in, not what you leave out,” he says, adding, “which 70 out of 7,000 global small cap stocks are you going to invest in? The ones with good sustainability metrics.”

UBS has built a proprietary database of metrics, Bertocci says. As a manager it does not want to have to rely on external ratings, given noted inconsistencies between them. This work is aided, however, by the likes of the Sustainability Accounting Standards Board (, which has been designing standards for mandatory filings to the US Securities and Exchange Commission. Alongside industry specific key performance indicators these help UBS quantify
the investment opportunities.

Future developments

Looking ahead, Bertocci believes that the ability to benchmark and track sustainability performances will improve. Additional developments in accounting will impact the ability to measure developments in thematic areas – including environment, energy efficiency, health and demographics, and social improvement – as they apply to companies that make up the universe of positively screened investments.

And as sustainability factors become a critical part of acceptable accounting standards, they will go from being an annex to being front and centre in annual reports, Bertocci believes. This will in turn influence capital allocation decisions.

Bruno Bertocci

Bertocci is a senior portfolio manager and managing director at UBS Global Asset Management He is head of the Sustainable Equities team and is the lead portfolio manager of the Global Equity Sustainable strategy.

He leads the cross-divisional Sustainability marketing strategy effort and is based in Chicago. Bruno represents UBS on committees such as the Global Initiative for Sustainability Ratings, US SIF (Social Investment Forum), and SASB (Sustainability Accounting Standards Board).


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