Union Bancaire Privée (UBP) has prided itself on innovation since its foundation 50 years ago, by Edgar de Picciotto in 1969. The bank became a signatory to the UN Principles for Responsible Investing (UNPRI) in 2012 and in 2017 we integrated responsible investment within both our private banking and asset management divisions.
As co-managers of the UBAM Positive Impact Equity fund, Rupert Welchman and I share 35 years of investment experience. This knowledge helps us to identify attractive investment opportunities in equity markets. As with many of our investors, we strongly believe both our investment aspirations are powerfully fulfilled by an impact fund such as this.
We were encouraged to launch the fund by the strong demand among a broad cross-section of our client base. The UN Sustainable Development Goals have created a compelling foundation for this investment style and helped to focus minds on the future financial commitments required to deliver their implementation. The growing recognition that large swathes of the global corporate profit pool will need to be reinvested into new technologies and practices is beginning to hit home.
This transition will come through a mixture of sovereign policy changes, corporate re-prioritisation, investor pressure and consumer demand. Never has there been a more important time for investors to differentiate between those companies that stand to benefit and those that stand to lose from this change in capital flows.
UBP has reached a point of self-awareness in its constant reassessment of its long term strategic path of travel where responsibility and positive impact align closely with the aspirations of a family owned company.
To build our portfolio, we use bottom-up key performance indicators (KPIs) identified through direct engagement with each company in our portfolio and watchlist to evaluate the true impact of each idea. We sense check these direct interactions with associations and relevant industry bodies to identify common impact measurements. Due to the novelty of the approach, this KPI discovery is often a lengthy process, it cannot be expected to be a simple one shot Q & A.
We also use top down KPIs through selected databases to help normalise measurement as optimally as possible. Measurement remains one of the key challenges to this investment style.
Supporting an impact standard
There are few common standards of impact measurement within the listed equity industry, but we do not believe this should be a barrier to launching an impact fund, nor investing in one, so long as there is a commitment to transparency and improving disclosure over time.
Change is coming at pace and we collaborate wherever we can to improve measurement transparency and to celebrate listed companies that are leading the field.
UBP is one of 12 finance companies that make up the Investment Leaders Group (ILG), facilitated by the Cambridge Institute for Sustainability Leadership (CISL). CISL and the ILG dedicate resource to under-researched topics, where we can add a point of difference and a practical solution to our peers in the investment world (such as the long-termism toolkit and the recently launched impact measurement report).
The UBAM Positive Impact Equity fund was, in fact, the sample fund in the latest report and we worked closely with CISL in developing and testing the metrics used.
To an extent we can solve measurement through bottom-up engagement and the resulting KPIs, but for a broad adoption of impact across the investment community and among quoted companies, standardised and comparable impact data would be invaluable.
For us, success is strongly linked to the profile and rationale of the end investor. Some investors will choose an impact fund from a belief that it will generate superior returns, others through ethical alignment; a third group believe in impact for both reasons. One test of our success will be whether we have made our fund accessible to every type of end-client, whether that is the trustee of a large institutional fund or the man on the street who is interested in impact investing through his company pension scheme.
We also think of success as whether we have been capable of delivering on this twin aim of financial and impact performance. Listed equity is an excellent vehicle to provide the reach that some other asset classes can’t and the scale of secondary markets means that we can create big change if we work together.
We also take our role as stakeholders seriously – we hope that our engagement with our investee companies can help them to adapt and thrive. Being able to map and measure this evolution over time would be a great marker of success to us.
Our investment choices are made with a long-term time horizon. We want to provide supportive and constructive capital to companies which are trying to create positive change. We do not believe impact investing in listed equities requires a sacrifice in financial returns for doing good. Indeed, we believe the reverse will be true, doing good will enhance investment returns over the long term.
This article is taken from the Good Investment Review of Ethical and Sustainable Funds Spring 2019, your guide to the best sustainable investment funds on the market.