UBS UBS Group AG

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

Date: March 11, 2021

UBS Group AG

Commission File Number: 1-36764

UBS AG

Commission File Number: 1-15060

(Registrants' Name)

Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland

(Address of principal executive offices)

Indicate by check mark whether the registrants file or will file annual reports under cover of Form 20‑F or Form 40-F.

This Form 6-K consists of UBS Group AG and UBS AG's Sustainability Report 2020, which appears immediately following this page.

Sustainability Report 2020

Based on GRI Standards

Why sustainability is important to UBS

Our Chairman and CEO explain why UBS strives to extend its
leadership in sustainability and how we will achieve it.

Sustainability has become a catch-all phrase, covering everything from carbon emissions to human rights.
As leaders of UBS, what does it mean to you?

AAW: Sustainability means thinking and acting with the long term in mind. We have an obligation to our clients, shareholders and employees to apply a long-term lens – and we also have a responsibility to society at large.

RH: When we consider our own practices, investments, services or day-to-day operations, it should always be through the lens of, “will this support a long-term vision of a sound future?  What are the consequences tomorrow and many years down the road?” Sustainable thinking that weighs long-term opportunities and risks creates a more stable firm, ensures that we can continuously serve our clients well and drives our ambition to lead the financial sector in attaining commercial, environmental, and social change that benefits both economies and societies.

How high does sustainability rank in terms of our
firm’s priorities?

RH: Sustainability must be part of our DNA (core); it’s not something we do sporadically. We continuously challenge ourselves to do better and to focus on the long term. This is why I put in place a strategic workstream on sustainability that is focused on our future approach to this important area.

AAW: The COVID-19 crisis brought the vulnerability and interconnected nature of the environment, societies and economies to the forefront of all our minds and demonstrated that sustainability considerations must be firmly pursued. The crisis has demonstrated how years of sustainable thinking and acting delivered value for our firm, employees and clients. For example, technology investments that long preceded the COVID-19 outbreak allowed us to transition from the workplace to home office with ease.

What do our shareholders expect from UBS in terms of sustainability?

AAW: Sustainability is increasingly becoming the main theme in the conversations with our shareholders. The quality and depth of discussions has increased materially. Shareholders are very well prepared these days on these issues, and invest a lot of time and resources to understand ESG (environmental, social, governance) issues for their investee companies. Despite a strong focus on sustainable finance and climate, other themes also come up more often, such as diversity. Additionally, governance and corporate culture questions have always been and remain topics of interest to shareholders.

Where is UBS in terms of achieving its sustainable
finance ambitions?

RH: For over two decades, UBS has been at the forefront of sustainable finance – and we aim to extend our leadership. We aspire to do more to help clients transition to sustainable ways of doing business, to ensure their long-term success and to support them in fulfilling the commitments they've made to people and planet.

We became the first major global financial institution to make sustainable investments the preferred solution for private clients investing globally and attracted significant growth into our 100% sustainable portfolios. So, it’s fair to say we’ve again made significant progress on our ambitious goals. A key indicator is the development of our core sustainable investing assets, which – at USD 793 billion at the end of 2020 – have again risen substantially.

What about UBS’s leading role in philanthropy, driving funds into successful projects that support the most vulnerable and needy?

RH: We are committed to addressing racial and economic inequality through our considerable activities in client philanthropy and community investment. We support the most marginalized members of society in some of the world’s poorest countries. Last year, our firm, together with clients, increased commitments to the UBS Optimus Foundation, growing donations by 74% to USD 168 million.

One of the greatest aggravating factors in the pandemic has been inequality, which impedes testing and treatment while also worsening underlying health factors. UBS committed USD 30 million to various COVID-19-related initiatives around the globe. We matched client and employee donations for COVID-19-related programs and raised an additional USD 15 million for the UBS Optimus Foundation’s COVID-19 Response Fund, which supports various organizations, including those in the healthcare industry that facilitate testing and increase capacity for emergency treatment.

You’ve long emphasized the importance of addressing climate change. What do you think will be the greatest obstacles to achieving a less carbon-intense economy?

AAW: The COVID-19 crisis has shown that we must better prepare for global systemic risks, among them climate change. If we delay any longer, the eventual costs will only increase. It’s therefore critical to take action now. The financial sector has a central role to play, in particular, by converting savings into investments, since the transition to a low-carbon global economy requires huge investments.

One of the major challenges, both for financial institutions and the world as a whole, remains the disclosure of social and environmental factors. Many companies have made significant progress with voluntary reporting and setting energy transition targets, but comparing one company’s ambitions with those of another remains a challenge. Asset owners in particular want actual strategy changes, including quantifiable net zero targets and compensation tied to outcomes. We therefore engage on climate topics with the companies in which we invest.

Axel A. Weber

Chairman of the Board of Directors

What other steps are you taking at UBS to address
this challenge?

AAW: Our climate strategy supports an orderly transition to a low-carbon economy, as defined by the Paris Agreement. We support clients to align their investment and environmental goals. An excellent example in this regard is the broadening of our Asset Management’s Climate Aware suite of strategies based on its Climate Aware framework, which helps investors reduce the carbon footprint of their investments.

Our firm is committed to aligning its climate disclosure within the five-year pathway outlined by the Task Force on Climate-related Financial Disclosures. In 2020, we again strengthened transparency on our climate actions by further refining the disclosure of climate metrics. We developed a novel transition risk heatmap methodology and improved the granularity and accuracy of our disclosure of climate-sensitive sectors and carbon-related assets. Our exposure to carbon-related assets on our banking balance sheet went down to 1.9%, or USD 5.4 billion, at the end of 2020, compared with 2.3% in 2019.

When we talk about sustainability goals a little closer to home, how are you practicing what you believe in?

RH: We’ve taken steps to strengthen even further our sustainability disclosures to demonstrate measurably what we have achieved in 2020 as well as our future commitments. For instance, we have achieved ambitious goals in reducing our own carbon footprint. Beginning in 2020, our firm sourced 100% of its electricity from renewable sources. And we consider environmental factors throughout the lifetimes of all our buildings. Being a bank, these are especially important steps because they demonstrate that we are taking sustainability seriously across all our operations. And it’s also critical to our employees, present and future.

As a result of our actions, UBS regularly wins recognition from the most reputable organizations charged with measuring and ranking corporate sustainability achievements. For the sixth consecutive year, we were ranked a global industry leader in the Dow Jones Sustainability Index (DJSI), and we secured a place on the CDP’s prestigious “A List” for tackling climate change. That’s independent, external proof that we are indeed practicing what we believe in.

Ralph A. J. G. Hamers

Group Chief Executive Officer

Where do you see UBS’s focus and ambitions
going forward?

AAW: Sustainable finance is undoubtedly a growth area that sticks out for us, given our long-standing leadership and engagement on the topic as well as our competitive positioning. Our unique approach to sustainable and impact investing leverages all parts of UBS, from working with our corporate clients on their transition, through engaging with clients via our investment stewardship processes, to providing our individual clients with the options they need to effect the changes they want to see in the world. We must and will be even more strategic in this area, increasing our offerings around environmental, social and governance (ESG) factors so that clients’ investments are protected on more fronts. UBS is already strong in this area and we must continue to develop our position of strength.

RH: Acting with sustainability in mind is something we already firmly believe in across our firm. We know the entire area of sustainability is dynamic and continues to evolve. I will ensure that our firm remains focused on helping to tackle the growing environmental and social challenges people and planet face. These are clearly delineated in the UN Sustainable Development Goals (SDGs), and we will put even greater emphasis on shaping our efforts around this important framework. We are committed to the investments required in sustainability to ensure that UBS remains at the forefront of delivering against our objectives on behalf of all our stakeholders.

Board of Directors

Why we drive sustainability

We have a long-standing strategy to play a leading role in sustainability in our industry. We focus on driving positive change for our clients, our employees and society at large. Find out why we want to help attain change – for the benefit of people and planet.

Why we focus on sustainability

Our sustainability strategy is guided by our goal to be the financial provider of choice for clients who wish to mobilize capital toward the achievement of the 17 United Nations (UN) Sustainable Development Goals (SDGs) and the orderly transition to a low-carbon economy. This demonstrates our focus on making UBS a force for driving positive, long-term change for people and planet.

Why we focus on sustainable finance

We are conscious that the activities and decisions of our clients can have substantial impacts on society. That is the reason we strive to incorporate environmental, social and governance (ESG) impacts into the products and services we provide to clients and partner with them.

We believe that by considering sustainability factors, we, together with our clients, can enhance portfolios’ resilience without compromising risk-adjusted returns. We share our insights to help clients navigate some of the risks and opportunities ahead and to help mobilize capital toward achieving both the SDGs and the orderly transition to a low-carbon economy.

Why we focus on client philanthropy and community investment

We offer clients expert advice, carefully selected programs from UBS Optimus Foundation, and innovative social financing mechanisms, such as development impact bonds. In this way, we believe our clients can make a meaningful, and measurable, differences for their chosen causes.

We recognize that our firm’s long-term success depends on the health and prosperity of the communities we are part of. We therefore seek to address inequality and create opportunity through long-term investments in education and entrepreneurship.

We are focused on supporting the needs of the most marginalized in society in some of the poorest countries and in the countries where UBS operates. Last year, when we saw social inequalities grow even greater, we and our clients increased our commitment to this cause.

Why we focus on sustainable business practices

We view the proper firm-wide management of our environmental footprint and supply chain as important proof of how we do business in a sustainable manner for the benefit of society. This is equally true of our broad and wide-ranging environmental and social risk framework that governs client and vendor relationships and is applied firmwide. And we regard meaningful transparency of our firm’s sustainability activities as supporting a sustainable economy.

Why we focus on our people

We are committed to being a world-class employer and a great place to build a career. Our employees are key to delivering our business strategy. We therefore seek to attract, develop and retain employees who have the diverse backgrounds and capabilities to advise our clients, develop innovative and sustainable solutions, manage risk and adapt to evolving situations.

Our aim is to create long-term value for our stakeholders. To make this value creation measurable and tangible, we have established four sustainability ambitions, each with clear goals and clear timelines.

Our sustainability ambitions and goals (goals are cumulative figures, to be achieved by the end of 2025)

Ambition to be a leader in sustainable finance across all client segments, with the key goal of

–   adding USD 70 billion of invested assets classified as impact investing¹ or with sustainability focus.²

Ambition to be a recognized innovator and thought leader in philanthropy, with the key goals of

–   raising USD 1 billion donations to UBS’s client philanthropy foundations and funds³ and reaching 25 million beneficiaries, and

–   supporting one million beneficiaries to learn and develop skills for employment, decent jobs and entrepreneurship through our community investment activities.

Ambition to be an industry leader in sustainable business practices, with the key goals of

–   achieving net zero for scope 1 and 2 greenhouse gas (GHG) emissions,⁴

–   retaining favorable positions in key environmental, social and governance (ESG) ratings,

–   implementing the Task Force on Climate-related Financial Disclosures (TCFD) recommendations by the end of 2022, and

–   implementing the Principles for Responsible Banking (PRB) by September 2023.

Ambition to be an employer of choice, with the key goals of

–   maintaining our recognition as one of the world’s most attractive employers in key ratings and rankings,⁵ and

–   increasing the percentage of Director level and above positions filled by women (aspiration to reach 30%).

›   Refer to “How we measure our progress” in the “How” section of this report for more information about our progress on previously set goals

›   Refer to Appendix 8 for our sustainability objectives and achievements 2020 and sustainability objectives 2021

1 Strategies where the intention is to generate measurable environmental and social impact alongside financial return

2 Strategies where sustainability is an explicit part of the investment guidelines, universe, selection, and / or investment process

3 This includes the UBS Optimus Foundations, UBS UK Donor-Advised Foundation and UBS Philanthropy Foundation in Switzerland.

4 Scope 1 accounts for direct GHG emissions by UBS. Scope 2 accounts for indirect GHG emissions associated with the generation of imported / purchased electricity (grid average emission factor), heat or steam.

5 Indicators such as global and country-specific Universum rankings, peer-leading positions in human resources elements of the Dow Jones Sustainability Index, recognition by Bloomberg Gender Equality Index, market recognition in various new and established benchmarks / rankings

The changes we face

Sustainable Development Goals

Our role in the world

We are advancing toward 2030, the designated deadline to reach the United Nations (UN) Sustainable Development Goals (SDGs). The SDGs focus on issues like climate change, equality and healthcare – major challenges for our world now and over the coming years. Traditional financing mechanisms, such as grants and overseas development aid, are insufficient to tackle these growing challenges. The UN estimates the funding gap to achieve the SDGs by 2030 at USD 2.5–3 trillion annually1 – with some experts putting the number even higher.

Financial institutions have a big part to play, notably when it comes to educating clients about the importance of the SDGs and mobilizing their assets toward achieving them. In doing so, we must ensure longevity and achievement of desired results. That is why we made a commitment to raise USD 5 billion of clients’ assets for impact investments related to the SDGs. We are proud to say that we have surpassed our goal one year early. This is a key achievement but, of course, our support for the SDGs extends well beyond this particular goal.

A growing number of our activities have an explicit or implicit SDG angle. Take, for instance, green, social and other sustainability bonds. As of 31 December 2020, we held green, social and pandemic bonds in the amount of USD 1.8 billion in our high-quality liquid assets portfolios under the management of Group Treasury. Year over year, Group Treasury effectively doubled its investments in securities that have a direct link to sustainable projects.

While our firm has touchpoints with all SDGs across its manifold sustainability activities, our firm-wide focus is on five SDGs. This is why:

1 un.org/sustainabledevelopment/sg-finance-strategy/

Climate change as a (financial) risk

Big-picture thinking

Recent developments, in particular the COVID-19 pandemic, have underscored the importance of addressing global challenges quickly. Often, these challenges go much deeper than their surface-level impact, which makes it even more important to take steps to manage the risks we know exist. Climate change is one such risk. By acting now, we can avert potentially catastrophic consequences in the future. If we delay any longer, the consequences will only become greater. It is why we have developed a multi-layered approach to addressing climate change, focusing not only on our own practices but also working to safeguard our clients’ investments and the interests of the communities we live in.

Weighing results – when addressing the changes we face

Measuring and analyzing impact has become a major focus of companies, investors, governments and regulators. Investors want to know how well investments align to their preferences, whether they are capturing significant long-term opportunities and whether they are aimed at addressing the challenges framed by the SDGs. A clear focus on sustainability outcomes and tangible impact is what will define and differentiate sustainable practices, in finance as well as in our own operations, in the coming years.

At UBS, we have been focusing on impact for years, both in the context of the investment space and of our own activities. We were among the very first banks to shine a light on the importance of the SDGs – and specifically on what it takes to make them investable. And we were one of the founding signatories of both the International Finance Corporation (IFC)-launched Operating Principles for Impact Management (Impact Principles2) and the UN-backed Principles for Responsible Banking (PRB3) in 2019. In late 2020, we also joined the Banking for Impact Working Group.

2  The Impact Principles are a framework for investors that ensures impact considerations are purposefully integrated throughout the investment life cycle.

3  The PRB are a framework for banks that supports integration of society’s goals into business strategy while also incorporating both the SDGs and the Paris Agreement.

Our sustainability track record

Sustainability is not new to us: our first steps date
back decades, and our journey includes many important
milestones to date.

What we do for our clients

The world is becoming more and more focused on sustainability, and there is no sign of this trend halting soon. This focus is reflected in consumer demand, public policy and industry regulation. Our client offering, direct lending exposure and our business model in general have been geared toward this trend for years. These developments play to our strengths, which benefits all stakeholders, including our shareholders.

Our clients’ changing needs

Society’s understanding of the world’s challenges is constantly evolving. Among our client groups, awareness of sustainability is rapidly growing. Sustainability is also helping to define our role in society, our corporate strategy and how we think about financial solutions overall.

Over the past years, clients have been making a shift in favor of investments that focus on, or more actively take into account, material environmental, social and governance (ESG) factors. And this shift is not isolated to individual institutional investors and private clients – corporate clients are transforming their operations to aim for ESG best practice and aligning their business models to the UN Sustainable Development Goals (SDGs). The COVID-19 crisis has both accelerated and solidified this trend by highlighting the consequences of not addressing challenges we are well aware of (such as climate change or social inequalities) as well as the interconnectedness of our world.

Our own research provides evidence of this shift. A global UBS Asset Management survey of 600 institutional investors found that European asset owner respondents predict that systemic environmental factors (i.e., climate crisis, biodiversity loss, etc.) will, in the next five years, be more material to their investments than financial factors.¹ Another survey showed that, among Swiss institutional investors, 49% of respondents have already invested sustainably, and out of these, two-thirds plan to increase their share of sustainable investing (SI).² In a UBS Investment Bank survey, 68% of corporate clients are considering or currently revising their sustainability strategy. And 70% stated they are considering including ESG targets as part of their compensation framework.³ In our Personal & Corporate Banking business, the newly introduced sustainability-linked loans are experiencing strong demand. And in the private wealth space, the majority of our clients believe SI will become the norm in the next decade.⁴

In terms of actual market movements, as of December 2020, global assets in sustainable funds had risen from around USD 600 billion at the end of 2018 to more than USD 1.65 trillion.⁵ If current growth rates persist, ESG mutual fund assets in the US alone are projected to grow from just over USD 150 billion at the end of 2019 to more than USD 300 billion at the end of 2021.⁶ In Europe, ESG assets under management are predicted to triple between 2019 and 2025, to reach EUR 5.5 trillion.⁷

Addressing new needs

Client surveys are not just about gathering evidence to support trends. They also tell us what is most important to our clients, which, in turn, helps us make sure we are supporting them in the right way. From this information, we have identified three areas where we should focus our efforts. These are:

–   understanding trends,

–   managing 21st-century risks and

–   taking advantage of new opportunities.

To help in understanding trends,  we share our knowledge and shed light on challenges that resonate strongly with our clients. For example, in 2020, our global Chief Investment Office (CIO) launched a thematic investment research series entitled the “Future of ….” The series highlights longer-term investment themes and opportunities for private investors, and some examples thus far have been the Future of humans (September 2020), Future of the tech economy (June 2020) and Future of waste (February 2020). In addition, we publish regular white papers on challenges and opportunities within SI, including a monthly review of key sustainability developments titled “Sustainable Investing Perspectives,” and provide associated investment solutions across public and private markets. Our research and insights have a strong sustainable component, but venture beyond pure sustainability considerations.

›   Refer to our “Sustainable Finance, Trends for 2021” white paper available at ubs.com/davos-agenda-2021 

1 Survey conducted in June 2019 among 600 institutional clients (ESG: Do you or Don’t you, UBS Asset Management and Responsible Investor) 

2  Survey conducted in August 2020 among 110 Swiss institutional investors

3  Survey conducted in October 2020 among 160 Investment Bank clients

4  UBS Investor Watch on the Year Ahead, November 2019.

5  Morningstar: Global Sustainable Fund Flows: Q4 2020 in Review

6  “ESG: Transforming asset management and fund distribution.” Broadridge, September 2020

7  “2022 The growth opportunity of the century. Are you ready for the ESG change?,” PwC, October 2020

In general terms, we believe the purpose of sell-side research is to support our clients in their investment decision-making by doing our best to help them understand how information and markets connect, through our research offering. This core purpose also drives Global ESG Research, which works in conjunction with over 250 macro, sector and company analysts to provide coverage focused on listed entities and thematic research.

Real world ESG-related impacts, when present, can potentially connect to the nuts and bolts of financial analysis: namely, ESG risk and opportunity, impact, likelihood, timing, connecting mechanisms and catalysts, competitive landscapes, and financial models. In 2020, we launched the UBS ESG Risk Radar, an important ESG integration project to understand how ESG factors and markets connect, and how markets can be leveraged to move capital with a clear purpose, in the direction of a more sustainable, equitable world.

To help our clients to the best of our ability, we need to stay current in research. We regularly publish a list of ESG definitions and SI strategies. Each SI strategy encapsulates a different approach to sustainable investing, based on a different set of ethical beliefs and market theories. This list is inevitably only a rough guide, because it is also important to recognize that the field of ESG and SI is constantly evolving and redefining itself.

In addition to the research and insights we produce within our firm, we have also teamed up with more than 50 Nobel laureates in economic sciences who share their answers to some of the toughest challenges, such as technological change, global warming and the future of work. This information is made publicly available through virtual events and podcasts.

When it comes to helping clients in managing 21th-century risks, we have long held the view that integration of ESG factors and active engagement can help identify risks that traditional fundamental analysis alone may not uncover. As the awareness of consumers and investors on sustainability issues increases, so does the pressure on companies to become better at managing their ESG risks, be it by addressing their carbon footprint and exposure to carbon taxation, by protecting human rights within their operations and supply chains, or by ensuring strong and transparent corporate governance.

Ample and strong academic and empirical evidence points out that ESG risks affect companies’ reputation and financial performance. More broadly, from the 1970s to the mid-2010s, over 2,200 empirical studies on the relationship between ESG criteria and corporate financial performance and valuation were published. According to a single meta-analysis of those reports, more than half reported positive findings, compared to just 7.5% that pointed to a possible negative correlation.¹ On balance, ESG integration within our investment processes and recommendations for clients need not be negative for financial performance, while also aligning clients' investments to their values.

And lastly, to support our clients in taking advantage of new opportunities, we are continuously developing our offering. Our intent is to help our clients generate measurable environmental and / or social impact as well as financial returns. In the following section, we have highlighted opportunities with high growth potential.

Broadening opportunities in sustainable finance

Sustainable finance refers to any form of financial service that integrates ESG criteria into business or investment decisions, including sustainable investing and sustainable financing. Sustainable finance has been a firm-wide priority at UBS for years and the COVID-19 pandemic is sharpening the market’s understanding of its importance. Our aim is to continue to help all our clients meet their investment and financing objectives through sustainable finance.

Sustainable investing

As implied by the name, sustainable investing (SI) focuses on investment decisions. SI strategies seek to better risk manage portfolios in alignment with 21st-century challenges and / or align investments with investor’s values regarding ESG topics, while also aiming to improve portfolio risk and return characteristics.

We identify three overarching SI approaches: exclusion (when individual companies or entire industries are excluded from portfolios because their activities conflict with an investor’s values); ESG integration (which combines ESG factors with traditional financial considerations); and impact investing.

Impact investments are made with the intention of generating positive, measurable social and / or environmental impact alongside a financial return. They are made in emerging and developed markets as well as across asset classes. Shareholder engagement can also contribute to positive impact, as investors may use their ownership stake in a company to drive measurable environmental and / or social change.

In 2020, SI strategies demonstrated comparable or better financial performance than conventional equivalents at the index, fund and instrument levels.

Core SI assets grew strongly in 2020 to reach 18.9% (USD 793 billion) of client-invested assets, up from 13.5% (USD 488 billion) in 2019. In addition to generally supportive markets, the growth was driven by client demand and our focus on advancing sustainable solutions.

Norms-based screening assets, i.e., assets that fall under the application of a UBS policy² and do not otherwise qualify as a core SI, amounted to USD 797.9 billion as of 31 December 2020. Total SI, including norms-based screening assets, accounted for USD 1,591 billion (2019: USD 1,306 billion), or 38.0% (2019: 36.2%), of our total invested assets.

1 Gunnar Friede, Timo Busch & Alexander Bassen. “ESG and financial performance: aggregated evidence from more than 2,000 empirical studies,” Journal of Sustainable Finance & Investment, 2015

2  The assets in discretionary mandates, in UBS’s actively managed retail and institutional funds, as well as in our firm’s proprietary trading book, are subject to our firm’s policy on the prohibition of investment in and indirect financing of companies involved in the development, production or purchase of anti-personnel mines and cluster munitions.

What sustainable finance means for clients

Our Global  Wealth Management (GWM) clients benefit from fully diversified sustainable portfolios as well as advisory options that offer investors choice on how to implement SI. In 2020, we became the first major global financial institution to make SI the preferred solution for private clients investing globally. Our differentiated 100% sustainable multi-asset portfolio, based on our Chief Investment Office’s dedicated SI strategic asset allocation, surpassed USD 17 billion under management in 2020, having grown from just over USD 1 billion roughly two years ago.

Our institutional clients benefit from the holistic integration of ESG factors into the investment decision-making process across UBS’s entire suite of investment funds and strategies. Underpinning our ESG integration activities is a robust stewardship program, comprising engagement and proxy voting. To that end, we are also an active participant¹ in key investor coalitions, such as Climate Action 100+, where we actively engage with the world’s largest corporate greenhouse gas emitters to drive progress on climate change.

Our retail clients in Switzerland benefit from access to appropriate and relevant SI products from Asset Management (AM) and GWM that follow our Group-wide approach to SI. This includes the UBS SI Strategy Fund as well as the UBS Manage SI mandate solution. As part of our sustainability roadmap, we are substantially expanding our offering. In 2020, our retirement savings funds were turned sustainable: all funds of the UBS Vitainvest family covering pillar 2 (occupational pension) and pillar 3 (private retirement savings) investments have undergone further development to follow ESG criteria defined by UBS. The repositioning of the funds gives clients an opportunity to combine the advantages of the well-known UBS Vitainvest retirement savings funds with the advantages of SI. Client interest in SI solutions continued to be strong in 2020, with almost 70% of Personal Banking’s mandate sales being UBS Manage SI. In addition, 29% of total custody assets in Personal Banking are being invested sustainably.

Our corporate clients benefit from a range of financing and advisory solutions. It is our aim to meet clients wherever they are in their sustainability journey, with advice, support, products, expertise and execution. To this end, we support the issuance of green, social and sustainability bonds – and the raising of capital in international capital markets – in line with recognized market guidelines such as the Principles.2 We also extend sustainability-linked loans in line with the Loan Market Association (LMA). All transactions are vetted in adherence to our (continuously updated) ESR policy framework. For our Swiss corporate and institutional clients, supplier and producer transactions in Commodity Trade Finance are also monitored according to UBS ESR standards. Furthermore, our sustainable finance advisory extends to strategic positioning of business models, disclosure practices and benchmarking.

SI Advisory is an integral part of dialogue with our institutional clients, and our sustainability analytics offering enables institutional clients to achieve full transparency by screening their portfolio for industry exposure. Many of the institutional investor conversations taking place under the ESG and sustainable finance banner tend to be focused around equities and bonds, such as structured equity products with ESG overlays. However, the commodities asset class is attracting attention as well, including carbon markets. Emissions futures are increasingly topical, both as an investment asset as well as a carbon-hedging tool. The UBS commodities trading desk is now actively offering emissions futures for a variety of applications.

Transitioning to a low-carbon future

Climate change is one of the greatest challenges of our modern world. While corporate and institutional clients are increasingly transitioning to a lower-carbon future, much remains to be done. The developments we have made in finding new ways to finance the transition to a less carbon-intense future are spurred by two realities. First, there is still a significant finance gap in the climate sphere – the Organisation for Economic Co-operation and Development (OECD) estimates more than USD 90 trillion is needed in infrastructure investment alone if we are to meet the goals of the Paris Climate Agreement.3 Second, clients want to be able to align their investment goals with their environmental objectives while also mitigating climate-related risks in their portfolios.

We aim to give clients the actionable tools and techniques they need in order to act now in allocating their capital to help drive the low-carbon transition. One way we are doing this is through the Climate Aware framework, developed by AM. With the framework, we seek to help institutional clients reduce the carbon footprint of their portfolios and align their portfolios to their chosen climate glidepath. Based on the framework, we have created a suite of dedicated products across asset classes to provide the ideal solution for any climate investment need.

In 2020, we launched a suite of new strategies to build on our existing award-winning passive equity Climate Aware strategy. It includes equity and fixed income, and both active and passive approaches. Over the past twelve months, Climate Aware assets have increased almost five-fold to reach USD 15.3 billion.

Our private clients in Personal & Corporate Banking benefit from our renovation mortgage “eco,” which provides incentives to invest into sustainability measures around one’s home. Furthermore, we support Swiss small and medium-sized enterprises (SMEs) in their energy-saving efforts and transitions to a low-carbon economy. SMEs benefit from initiatives such as energy check-ups or leasing bonuses (financial contributions toward enhancing environmental performance) for production machines. In addition, we support Swiss start-ups in developing innovative circular economy solutions.

›   Refer to “What we do to act on a low-carbon future – our climate strategy” in the “What” section of this report for more information on our climate strategy and activities

›   Refer to the Core Sustainable Investment table on the
previous page

1  Refer to Appendix 7 “External commitments and memberships” for more information on UBS's commitments and memberships.

2  Green Bond Principles, Social Bond Principles, Sustainability Bond Guidelines, Sustainability-linked Bond Principles

3  OECD / IEA / NEA / ITF (2015), “Aligning Policies for a Low-carbon Economy,” available at http://dx.doi.org/10.1787/9789264233294-en 

Reimagining client philanthropy

With more than 60 philanthropy experts in eight countries, we support clients in maximizing their impact locally, nationally and globally, wherever their objectives lead. By partnering with clients and their families, we employ an investment-based approach that maximizes their impact and connects them to an international network of expertise and support.

Our award-winning¹ philanthropy offering began over two decades ago and we have come a long way since. Our approach is based on three core pillars: Advice  – such as advising clients who are considering establishing their first charitable fund and guiding them on how to ensure their giving is tax-efficient, thereby maximizing the value of charitable funds. Insights  – connecting our clients to a global network of experts, both within and outside UBS. This could be in the form of an insights trip to visit impactful programs on the ground, a report on the latest charitable-giving tax rules or an invitation to a networking event with fellow philanthropists. Execution  – providing clients with flexible options on how to manage their philanthropic giving, including structures like our Donor-Advised Fund (DAF) or the UBS Optimus Foundation that make it easier and more cost effective to put their strategy into practice.

1 Best Global Bank for Philanthropy Advice, Euromoney Private Banking Survey 2017–2020

 
Donor-Advised Fund

A Donor-Advised Fund (DAF) offers clients an easy, flexible and efficient alternative to setting up their own foundation. Quick to set up and simple in structure, a DAF can be managed in line with clients’ usual investment approach. Their charitable donations are invested within the parameters they select, such as capital, growth or income, so they can grow their fund to make grants at a later date. UBS has offered DAF services in the US for some time, and in 2014, we established a DAF in the UK, which has seen more than USD 400 million in donations. In 2020, the UBS Philanthropy Foundation was launched in Switzerland as well.

UBS Optimus Foundation

The UBS Optimus Foundation connects clients with inspiring entrepreneurs, new technologies and proven models that seek to make a measurable, long-term difference to the most serious and enduring social and environmental problems. The Foundation has a 20-year track record and is recognized globally as both a philanthropic thought leader and a pioneer in the social finance space, through which we leverage solutions to mobilize private capital in new and more efficient ways.

What started in 1999 with a small Swiss foundation in Zurich, has evolved into a global network
with seven locations. In 2020, the UBS Optimus Foundation raised almost CHF 150 million and surpassed its
CHF 100 million goal (including UBS contributions). Since its inception, UBS clients and employees have donated more than CHF 600 million – totaling more than CHF 700 million including UBS contributions.
This impacted the lives of more than 18 million people in the last seven years. 

The UBS Optimus Foundation takes an evidence-based approach and focuses on programs that have the potential to be transformative, scalable and sustainable. We conduct extensive due diligence and only recommend what we consider to be the most innovative programs that have the capacity to achieve long-term, measurable impact. UBS aims to give clients the reassurance that they are funding innovative projects that have a strong chance of achieving systemic change. In some cases, UBS also makes matching contributions to the Foundation, to help our clients’ donations go even further.

An evidence-based approach to philanthropy

–   The world’s largest education development impact bond (DIB), improving literacy and numeracy outcomes for more than 200,000 children in India, is showing exceptional results, with children learning twice as fast as others who are not part of this DIB.

–   The first equity investment was made to Rising Academies, a chain of low-fee private schools in West Africa with a track record of improving learning twice as much as their peers in other schools.

–   UBS Collectives brings together philanthropists to pool their funds, share their expertise and achieve more sustainable long-term impact. These collectives will also take philanthropists on a three-year learning journey with a tailor-made curriculum wherein they network with peers and funding programs toward the common goals of preventing family separation, mitigating climate change or funding programs linked to measurable results.

Expanding the scope toward climate and the environment

Since its establishment, the UBS Optimus Foundation has focused on children’s health, education and protection. In 2020, to ring in the Foundation’s 20-year anniversary and in light of the growing threat of climate change, we expanded our offering.

To make sure clients maximize their environmental impact with their philanthropy, we, together with experts, conducted an extensive landscape analysis. The outcome is a systematic approach for clients to assess where to invest philanthropically, and how to best contribute to accelerate environmental and climate action. Clients interested in this space can now get involved in:

–   sustainable land use, by contributing to land restoration, conservation, climate-resilient agriculture, and agroforestry; as well as

–   coastal and marine ecosystems, by contributing to wetland restoration and conservation, sustainable fisheries, as well as reduction of ocean waste and pollution.

What we do for our employees

UBS is a place where individuals with a wide variety of skills, interests, experiences and backgrounds can unlock their potential. With nearly 73,000 employees working in around 50 countries and a workforce that represents 141 nationalities and a broad range of ethnicities, we have the size, global presence, experience and range of business activities to make a difference for our employees, clients, shareholders and society.

Our employees are key to delivering our business strategy. We therefore seek to attract, develop and retain employees who have the diverse backgrounds and capabilities to advise our clients, develop innovative and sustainable solutions, manage risk and adapt to evolving situations. For our part, we’re committed to being a world-class employer and a great place to build a career. Our identity, management processes and businesses are all built on a strong cultural foundation. Sustainability and good corporate citizenship principles are embedded into our practices as an employer, for example, in how we market the firm to candidates, in our learning and development activities as well as in our philanthropy and volunteering activities.

›   Refer to "Workforce by the numbers" in Appendix 3 of this report for supplementary information to this sub-section

Helping employees navigate through an uncertain year

The global COVID-19 pandemic introduced an unprecedented situation for us, and for our employees. A key priority throughout 2020 was safeguarding the health and well-being of our employees and their families, and providing them additional support. We enabled 95% of employees to work remotely and enhanced procedures to protect employees whose roles required them to work on site.

Recognizing the additional pressure placed on employees by shuttered workplaces and schools, restricted activities and near-continuous change, we introduced a variety of measures throughout 2020 to help them adapt. For example, we offered extra flexibility to care for children and address other needs and implemented a variety of tools and resources to support employees’ physical, mental, financial and social well-being. We also entered into a partnership to offer an app-based solution for guided mindfulness techniques, sleep, nutrition and physical activity to all employees globally. Health and well-being, including resilience and positivity, were and will continue to be important focus areas to help our employees manage the pandemic situation, which is both professionally and personally demanding. Results from our employee and pulse surveys underline the positive impact of our well-being initiatives.

For their part, our employees consistently rose to the challenges of 2020, demonstrating resilience and dedication while ensuring excellent client service. In November, as a sign of appreciation for their contributions throughout the year and acknowledging that the pandemic may have had unexpected financial impact, employees at less senior ranks were awarded a one-time cash payment equivalent to one week’s salary.

Finally, following the pandemic’s ascent in early 2020, we did not pursue restructuring activities that would have led to redundancies in order to provide our employees and their families the necessary safety and stability and protect society from negative consequences, e.g., due to higher unemployment.

Our culture is the foundation for our sustainable success

Our three keys to success – Pillars, Principles and Behaviors – embody the foundation of our strategy and culture. They define what we stand for as a firm and individually, and help drive performance. The three keys have long been embedded in all of our people management processes; for example, hiring, onboarding, performance management, compensation, promotion, talent development, training and succession planning are all founded on three-keys values. Specific expectations are part of every management process to ensure we’re incentivizing and rewarding the excellent work and behavior that we expect from all employees.

In late 2020, we launched an initiative to define the company’s purpose, outlining why we do things the way we do. Once established, our purpose will guide all our actions. It will be a key element to success in the future and will continue to inspire and empower our employees.

We support culture building through divisional, regional and Group-wide initiatives, among which is the successful Group Franchise Awards (GFA) program that rewards employees for cross-divisional collaboration and operational effectiveness improvements. An interactive idea-sharing site lets employees collaborate on solutions and submit ideas for improvement. A peer-to-peer appreciation program that originated as a GFA idea was launched in late 2020 to empower employees to acknowledge colleagues’ collaboration, commitment and behavior. In addition to increasing collaboration across teams, peer appreciation reinforces our culture and improves retention of highly motivated employees. We also encourage continuous feedback among colleagues and with line managers to foster development and ongoing improvement and have seen a lot of engagement, with 44,000 recognitions in the first month.

›   Refer to the foldout pages of the UBS Annual Report 2020 for more information about our Pillars, Principles and Behaviors

›   Refer to "UBS's charitable contributions" in this section and “Charitable contributions” in Appendix 5 of this report for a discussion of our community affairs and employee volunteering activities

The importance of leadership

Leadership drives culture, and culture drives performance. It also plays a key role in increasing an organization’s agility and sustainability, which is why great leaders are game-changers for UBS. They are the key to growing our people, client relationships and results so that we can thrive and build the future of our business.

Our House View on Leadership defines the behavior that we expect from every leader toward employees, clients and business activities. Our House View is embedded in all of our leadership development programs, line manager training and performance management initiatives; firm-wide culture metrics promote accountability and ensure that we continually improve.

Our leadership development programs are oriented toward agility, transformation, growth and digitization, and they seek to address organizational challenges at multiple levels. For example, our Senior Leadership Program enables leaders to drive digital transformation and accelerate sustainable profitable growth in today’s complex and ever-changing environment.

In addition to training, our talent management processes include structured talent and succession reviews to help us identify future leaders, ensure business continuity for critical roles and proactively manage employee development.

Our employees have a voice

Our employees are engaged in shaping the firm’s identity, future direction and daily management, and we provide numerous opportunities for them to share their views. For example, we regularly solicit feedback on various topics, including engagement, enablement, workplace conditions, health, well-being and diversity.

Our anonymous survey of all permanent employees, conducted by an external, independent provider, measures views on key strategic and cultural measures, with several questions added this year to solicit feedback on remote working and employee well-being during the pandemic. A record 86% of employees participated in the survey and among respondents, 84% indicated high levels of engagement. In addition, 86% indicated they are proud to work at UBS, 83% agreed that their line manager(s) are effective, 83% recognized our positive work environment and 70% consider our talent management practices to be state of the art. All of these scores were above the norms for both financial services and high-performing companies.

Employees are informed of Group-wide survey scores, as well as divisional, regional and business area results, as applicable. Each year’s data is leveraged in future culture-building initiatives, as it is our ongoing ambition to have a highly motivated workforce that models integrity, collaboration and challenge in its daily work. We strive to be the clear employer of choice in the financial services industry and to maintain overall engagement ratings in the top quartile; both ambitions were achieved in 2020.

›   Refer to Appendix 7 of this report for more information about our employer ratings and recognitions

Engaging with our employees

We engage with employees through channels such as our intranet news and information sites, UBS Connections (our internal social network), UBS TV and directly, via individual and team meetings, emails, town halls and feedback tools. In 2020, employees in all businesses and regions attended numerous virtual town halls and small group meetings to discuss relevant issues directly with senior management. Regular “Ask the CEO” events allowed employees to learn about (and ask questions on) topics such as the firm’s strategy and direction. These events are broadcast live (and available via replay) on UBS TV.

Employee networks

Our employee networks are another avenue to listen to employees and influence the firm’s future. Sponsored by business leaders, these groups help employees build cross-business relationships and support an open and inclusive workplace. In 2020, we supported 46 employee networks globally, including ones focused on culture, gender, ethnicity, family, mental health, Pride / LGBTQ+, disability and veterans. Each of our networks plays an important role in helping UBS evolve its approach and provides valuable mentoring and development experiences for members through networking, connections and education.

Employee representation

As a responsible employer, we maintain an open dialogue with our formal employee representation groups. We have two pan-European forums – the UBS Employee Forum (which is our European Works Council) and the UBS Europe SE Works Council. These groups represent 17 countries and discuss issues that may affect our performance, operations or prospects. Local and regional work councils, like the Employee Representation Committee in Switzerland, consider topics such as business transfers, pensions, workplace conditions, health and safety, and redundancies. Collectively, these groups represent approximately 49% of our global workforce.

Grievances and whistleblowing protection, policies and procedures

We strive to maintain high ethical standards, and we have long-standing procedures in every region to help us resolve grievances of any kind. Employees are strongly encouraged to speak with their line manager or HR about any workplace concerns and immediately report any potential violations of our Code of Conduct and Ethics (the Code) to their line manager or local compliance officer.

Our global whistleblowing procedures offer multiple channels (including a whistleblowing and sexual misconduct hotline) for staff to raise concerns about any suspected breaches of laws, regulations, rules or other legal requirements, policies or professional standards, sexual misconduct or harassment, or any violation of the Code. UBS prohibits retaliation against any employee who reports a concern that they reasonably believe is a breach or violation.

We are committed to ensuring a workplace where employees are fairly treated, with equitable employment and advancement opportunities for all. We do not tolerate harassment of any kind, including sexual harassment, and we take measures to prevent all forms of harassment, bullying, victimization and retaliation. Our policies, procedures, employee education and awareness materials specifically encourage employees to raise concerns, openly or anonymously. An internal anti-harassment officer appointed by the Group Head Human Resources provides an independent view of the firm’s various processes and procedures to prevent harassment and sexual misconduct.

›   Refer to “Risk management and control” in the “Risk, capital, liquidity and funding, and balance sheet“ section of the UBS Annual Report 2020 for more information

Diversity, equity and inclusion

Continually increasing the diversity of our workforce and building an inclusive workplace is vital to our business success. Our strategy is to continue to shape a diverse and inclusive organization that is innovative, provides outstanding service to our clients, offers equitable opportunities and is a great place to work for everyone. We take a broad approach, focusing on gender, race and ethnicity, LGBTQ+, disability, veterans, mental health and other aspects. Awareness-raising, training and improved accountability for inclusive leadership have been clear focus areas for the past several years.

Raising the bar on gender diversity

Gender diversity has long been a strategic diversity, equity and inclusion priority for us. We want to enable women to build long and satisfying careers here, and we’re especially working to increase the representation of women at senior management levels. In this effort, we take a multi-pronged approach, analyzing and refining the various elements that support hiring, developing and retaining women at all levels across the firm. For example, our interview slates for open roles are expected to include qualified diverse candidates, along with questions to gauge inclusive leadership competencies for executive roles.

We also hold ourselves accountable for progress. In early 2020, for example, we stated an aspiration to increase the percentage of women in our Director level and above population to 30% by 2025, and our global gender diversity strategy and initiatives are designed to support that goal. In 2020, 26% of all employees in roles at Director level and above were women, up from 25.2% in 2019 and we are on track to achieve our target. In addition, 27% of senior managers who reported to GEB members in 2020 were female.

Our award-winning UBS Career Comeback program is a recruitment and retention initiative for female leaders. Professionals looking to return to corporate jobs after a career break are hired for permanent roles and supported with targeted onboarding, coaching and mentoring. We manage this global program out of hubs in the US, UK, Switzerland, India and Poland and since 2016, Career Comeback has helped 169 women and 14 men relaunch their careers.

Increasing ethnic diversity is a priority

In addition to gender diversity, increasing the ethnic diversity of our workforce and a commitment to underrepresented talent and communities is a key strategic diversity, equity and inclusion priority. We focus on four areas: accountability and transparency, investing in our talent, improving our culture and leveraging our business strengths in underrepresented communities. We are taking a country-by-country approach to these topics in close collaboration with relevant business and jurisdictional entities, as legislation, legal requirements and progress toward racial and ethnic equality vary significantly across the locations in which we do business.

Due to our significant presence in Switzerland, the US and UK and their complex individual histories, we are primarily focusing on initiatives in these countries in the short term. In these locations, we have been actively implementing strategies to increase representation of underrepresented ethnicities. In mid-2020, we set aspirations to have a 26% representation of underrepresented ethnicities at the Director level and above by 2025 in the US and to increase our ethnic minority senior management (Directors and above) headcount by 40% in the UK in the same time frame. Actions in 2020 to support these aims included refining our recruitment processes, designing new professional development programs and updating our training and mentoring programs. As of the end of 2020, we had achieved 20.7% of our aspiration and are on track to realize our ambition for ethnic diversity in the UK. In the US, representation of ethnic minorities at the Director level and above was 19.5% and we are likewise on track.

Our employee networks are strong partners and facilitators of our ethnic diversity strategy. In the spring of 2020, our MOSAIC ethnicity networks led a series of virtual conversations to enable colleagues from diverse racial and ethnic backgrounds to share their personal experiences – more than 6,000 UBS employees tuned into at least one of the conversations. One outcome has been the formation of a new global network of more than 140 Diversity & Inclusion Ambassadors who act as a resource for employee advice and coaching on conversations about various diversity- and inclusion-related topics.

›   Refer to our Americas Diversity & Inclusion Impact Report at ubs.com/diversity, for more details

›   Refer to our UK Gender Pay Gap Report at ubs.com/uk/en/gender-pay-report, for more details

Ensuring fair and inclusive workplaces

Fair and effective people management processes are key to our long-term success. Our global performance management process evaluates both performance and behavior. This dual emphasis helps us progress our culture by assessing how well integrity, collaboration and challenge (the firm’s expected behaviors) are demonstrated in daily business activities. For 2020, 99% of eligible employees received a performance review.

Pay equity is taken very seriously at UBS. Pay fairness principles are embedded in our compensation policies, and we conduct regular reviews with the aim of ensuring that we appropriately evaluate and reward employees. From a pay equity perspective, if we uncover any gaps that cannot be explained by business factors such as experience, role, responsibility, performance, or location, we explore the root causes of those gaps and address them.

In April 2020, UBS was one of the first banks to be certified by the EQUAL-SALARY Foundation for its equal pay practices in Switzerland. This review included an independent audit across our HR policies and practices and a statistical review of our pay levels. In late 2020, the US, UK, Hong Kong and Singapore received the same certification. These certifications are testament to our well-established equal opportunity environment and underline the strengths of our reward practices.

UBS is a strong supporter of the UN Standards of Conduct for Business anti-discrimination guidelines, and a signatory to the UN-backed Women’s Empowerment Principles, the UK government’s Women in Finance Charter, as well as the Race at Work Charter.

The future of work and the workforce of the future

We believe that the future of work will require an agile and connected workforce to respond to ever-changing circumstances, along with evolving client behavior and requirements. Building on our experience and capabilities, we embrace cultural and digital transformation to enable our employees to succeed in new environments and to remain a widely recognized employer of choice.

In response to the pandemic, we further accelerated the implementation of new ways of working.

To attract the right talent, we recruit for potential and cultural fit using innovative technologies and virtual interviews to assess the person’s experience, competencies, learning capabilities and digital aptitude. We hired a total of 9,296 external candidates in 2020, with our junior talent programs hiring more than 1,700 trainees, apprentices and interns. As part of our integrated workforce strategy, we continued our selective insourcing and hiring activities, primarily in our Business Solutions Centers in China, India, Poland, Switzerland and the US, while reducing external resources. For the 12th year running, we were named one of the Top 50 World’s Most Attractive Employers in 2020 by global employer-branding specialist Universum.

A key part of our sustainable talent management strategy is to offer career opportunities, not just jobs. Internal mobility supports higher employee engagement, improved collaboration, earlier productivity and reduced attrition, all of which benefit our employees, businesses and clients. To that end, our Career Navigator tool enables employees to explore career paths, search for jobs, and connect with colleagues working in roles that match their interests while allowing our recruiters to find internal talent more easily. The tool also identifies skill gaps with regard to new roles and provides recommended learning. Numerous virtual career events took place throughout 2020 to provide networking avenues and allow our employees to explore internal career avenues. In 2020, 35% of all our open roles were filled by internal candidates, 1,652 employees changed business divisions, and 437 changed regions. In addition, more than three-quarters of the positions at one level below the Group Executive Board were filled with internal candidates, underlining the strength of our internal talent bench.

Learning, health and well-being

Our in-house UBS University plays a central role in helping our employees build skills and capabilities for the future, enabling them to remain relevant in the labor market. Our offering includes employee and leadership development, advisory and sales training, industry-leading certification for client advisors, future skills development and health and well-being topics. Throughout 2020, we placed special emphasis on future skills development, and new ways of working, for example, by providing experiential online learning to help employees develop digital skills and embrace agile methodologies, but also to help them thrive in a virtual environment. Altogether, our permanent employees completed nearly 1,180,000 learning activities in 2020, including mandatory training on compliance, business and other topics. This averaged to more than 1.9 training days per employee. We invested more than USD 63 million in training our employees last year. Workplace restrictions, increased use of digital and virtual formats and a decrease in the use of external facilitators reduced both training time and spending versus previous years, while maintaining the total number of training activities.

Alongside our customary learning activities, we extended our global health and well-being program in 2020 to further improve our employees’ overall experience. This included a suite of programs, benefits and workplace resources, along with a curriculum featuring topics such as team building in a virtual set-up, relieving stress and preventing burnout.

Benefits that count

All employees have access to our competitive benefits, including offerings covering insurance, pension, retirement and personal leave. Benefits are aligned with local markets, often going beyond legal requirements or market practice, as was the case with our global influenza vaccination offering in 2020. A wide range of resources are available to help employees navigate work-life issues and personal challenges. We actively support flexible working arrangements, part-time roles, job sharing and partial retirement.

Our global Employee Assistance Programs offer support for various life challenges such as illness, conflict, bereavement, mental health issues, and care for elderly family members. In Switzerland, this support is provided by our in-house social counseling unit. In 2020, our global workforce recorded an absentee rate of 1.9% of total scheduled days, according to the number of absences due to illness or accident that employees entered in our self-service HR tool.

At UBS, all new parents can take paid time off after the birth or adoption of a child. Our parental leave policies meet the legal standards in all locations and exceed them in most. For example, in Switzerland, starting in 2021, fathers can take up to 20 days of paid paternity leave within the first year (an increase of 10 days), and then take up to 30 calendar days of unpaid leave or reduce their level of employment to 80% for up to six months. In the US, our gender-neutral parental leave policy enables employees to take up to twenty weeks of paid leave following the birth, adoption or foster care placement of the employee’s (or partner’s) child. And, new in 2020, employees in the US have enhanced options for in-home care for their child or adult / elder family member. In the UK, our shared parental leave policy enables parents to jointly take up to 26 weeks of paid time off during the first year of their child’s life.

We have clear policies and processes for handling redundancies in all businesses and regions should such circumstances arise, and we offer redeployment and outplacement initiatives to help employees find new roles. As an example, when restructurings in the Swiss labor market lead to job losses, we offer affected employees access to an internal COACH process that supports them in finding a new position within or outside UBS.

›   Refer to the Health and Safety statement in Appendix 6 of this report

›   Refer to the UBS in Society constitutional document in Appendix 6 of this report

›   Find out more about topics of interest to employees and potential employees at ubs.com/employees or ubs.com/careers 

Environmental, social and governance considerations in performance, reward and compensation

Our compensation philosophy is to align the interests of our employees with those of our investors and clients. Our Total Reward Principles establish a framework that balances sustainable performance while supporting our growth ambitions, sound governance and appropriate risk-taking, with a focus on conduct and sound risk management practices.

Environmental, social and governance (ESG) considerations are included in different phases of our compensation determination process, through objective setting, performance award pool funding, performance assessment and compensation decisions. At the beginning of the year, objectives related to Group, business division and our Pillars, Principles and Behaviors are set. ESG-related objectives have been embedded in our Pillars and Principles since they were established in 2011. To maintain focus on these important ESG topics, our Group CEO and all other GEB members have specific ESG-aligned goals under Pillars and Principles, including governance and risk management, talent management and diversity, client satisfaction and corporate responsibility. These include goals for reducing our carbon footprint and corporate waste, progressing our philanthropic efforts, and increasing diverse talent representation at senior ranks.

In the performance award pool funding, ESG is reflected through the assessment of risks, such as legal, compliance, reputational and operational risks. Therefore, ESG is taken into consideration when the Compensation Committee assesses not only what results were achieved, but how they were achieved. Achievements versus ESG-related goals are reflected in the qualitative performance assessment and affect the final compensation decision. Our peer-leading position in all workforce- and culture-related criteria in the Dow Jones Sustainability Index underlines our dedication and achievements.

›   See our Compensation Report 2020 for further information on our Total Reward Principles and related topics

What we do to act on a low-carbon
future – our climate strategy

Our climate strategy underpins our activities designed to support our clients and our firm in preparing for an increasingly carbon-constrained world. It underlines our commitment to the Sustainable Development Goals (SDGs) on climate action and on affordable and clean energy as well as the Paris Agreement. These key UBS commitments are embedded in the Principles for Responsible Banking (PRB). This global framework specifies the role of banks in supporting a sustainable future and scaling up their contribution to the achievement of both the SDGs and the Paris Agreement.

     We have reported on our climate strategy aligned with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations since 2017. The recommendations call on companies to disclose the impacts of climate change on their businesses. This will allow investors and financial institutions to make better investment decisions with a common set of data to assess the climate-related risks and opportunities of specific companies. We are committed to aligning our climate disclosure within the five-year pathway outlined by the TCFD (until end of 2022) and to collaborating within the industry to close gaps.

We publicly support international, collaborative action against climate change. Our Chairman is a signatory to the European Financial Services Round Table’s statement in support of a strong, ambitious response to climate change. Our Group CEO is a member of the Alliance of CEO Climate Leaders, an informal network of CEOs convened by the World Economic Forum and committed to climate action. We also continue to support the TCFD development with formal representation in the Task Force since 2016.

Our climate-related achievements have been widely recognized by external experts. In 2020, UBS underscored its leading position in sustainability by being ranked number one globally for the sixth consecutive year in the Diversified Financial Services and Capital Markets Industry of the Dow Jones Sustainability Index (DJSI). This is the most widely recognized corporate sustainability rating. CDP, which runs a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental impacts, awarded UBS with Leadership status and a Climate A List rating. In 2020, UBS participated in the Global Association of Risk Professionals (GARP) Climate Risk Survey and was recognized amongst the firms that are currently providing leading practice in climate financial risk management.

Climate governance

Our climate strategy is overseen by the Board of Directors’ (BoD) Corporate Culture and Responsibility Committee (CCRC), as embedded in the Organization Regulations of UBS Group AG. Within the parameters set by the CCRC, the UBS in Society Steering Committee ensures firm-wide execution of the climate strategy while our firm’s climate-related risk appetite is set at the Group Executive Board level. In joint meetings, the BoD’s CCRC and Risk Committee regularly and critically review the assessments and steps taken by these management bodies toward executing our climate strategy. The CCRC approves UBS’s annual climate-related objectives and oversees the progressive alignment of our climate disclosure with the TCFD recommendations. These annual plans and objectives are managed as part of our ISO 14001-certified environmental management system (EMS), with defined management accountabilities across the firm. The EMS helps us to systematically reduce environmental risks, seize market opportunities and continuously improve our environmental and climate performance and resource efficiency. 

›   Refer to the ”Sustainability governance” graph in the “How” section of this report

Climate strategy

As one of the world’s largest managers of private and institutional wealth, we play an active role in shaping a sustainable future. We aim to be a leading financial provider in enabling investors to mobilize private and institutional capital to climate change mitigation and adaptation while supporting the transition to a low-carbon economy. In 2020, we again saw a growth in investor appetite for directing capital into climate solutions. We address this by continuously developing our offering in sustainable finance and actively engaging with clients. Our climate strategy supports our clients and our firm in preparing for success in an increasingly carbon-constrained world.

We advance toward this goal through our innovative financial product offering and advisory, as well as through embedding climate risk in our firm-wide risk management framework and in our own operations. Our climate strategy focuses on four pillars:

–   Protecting our own assets: We seek to protect our assets by limiting our risk appetite for carbon-related assets and by estimating our firm’s vulnerability to climate-related risks using scenario-based stress-testing approaches and other forward-looking portfolio analyses. We have reduced carbon-related assets on our banking balance sheet to 1.9%, or USD 5.4 billion, as of 31 December 2020, down from 2.3% at the end of 2019 and 2.8% at the end of 2018.

–   Protecting our clients’ assets: We support our clients in assessing and managing climate-related risks and opportunities through our innovative products and services in investment, financing and research. We actively engage on climate topics with companies that we invest in. Asset Management (AM) has implemented an engagement program with 49 companies from oil and gas, and utilities sectors and we voted on 50 climate-related shareholder resolutions during 2020.

–   Mobilizing private and institutional capital: We mobilize private and institutional capital toward investments that facilitate climate change mitigation and adaptation, and we also support the transition to a low-carbon economy as corporate advisor, and / or with our lending capacity. In 2020, our climate-related sustainable investments rose to USD 160.8 billion, from USD 108 billion at the end of 2019, and the deal value in equity and debt capital market services, and in financial advisory services, related to climate change mitigation and adaptation, rose to USD 98.9 billion, from USD 87.2 billion in 2019.

–   Reducing our direct climate impact: We continue to drive the reduction of our GHG emissions and therefore have committed to achieving net zero emissions in our own operations (scope 1 and 2) by 2025. In 2020, we achieved the target of using 100% renewable electricity. This reduces our firm’s GHG footprint by 79% compared with 2004 levels.

›   Refer to “What we do for our clients” in this section for more information on our sustainable finance activities

›   Refer to “Reducing our environmental footprint“ in this section and Appendix 4 of this report for more information

Climate risk management

The physical and transition risks from a changing climate contribute to a structural change across economies and therefore affect banks and the financial sector as a whole. In order to protect our clients’ and our own assets from climate-related risks, we continue to drive the integration of climate-related risk into our standard risk management framework.

UBS manages climate risks in our own operations, balance sheet, client assets and supply chain. We are embedding climate risk into the UBS risk appetite framework and operational risk appetite statement. In 2020, we further integrated climate risk in risk identification, management stress testing methodology and reporting processes across the organization. We have consistently reduced our exposure to carbon-related assets and continued our multi-year efforts to develop methodologies that enable more robust and transparent disclosure of climate metrics. This work will continue our efforts to ensure we are prepared to respond to increased regulatory requirements on climate risk, are aligning our disclosure with the TCFD recommendations and collaborate within the industry to close gaps.

In 2020, we also refined our ability to estimate the firm’s vulnerability to climate-related risks using forward-looking scenario-based approaches, and developed a climate transition risk heatmap.

›   Refer to the subsequent ”Climate-related standards in the energy and utilities sectors” table

›   Refer to ”Scenario analysis” in this section

1 Greenfield means a new mine / well or an expansion of an existing mine / well which results in a material increase in existing production capacity.

Scenario analysis

We have been using scenario-based approaches since 2014 to assess our exposure to physical and transition risks stemming from climate change. These early in-house scenario analyses have been followed by a series of assessments performed through industry collaborations in order to harmonize approaches in addressing identified methodological and data gaps.

We have performed both top-down balance sheet stress testing (across the firm), as well as targeted, bottom-up analysis of specific sector exposures covering short-, mid-, and long-term time horizons. The table below summarizes the UBS scenario assessments performed to date.

1 ST= short term, 0–3 years; MT = medium term, 3–10 years; LT = long term, over 10 years.    2  International Energy Agency (IEA), World Energy Outlook.    3  Beyond 2-Degrees Scenario    4  Sustainable Development Scenario    5  New Policies Scenario    6  Current Policies Scenario.

Note: Climate scenario analysis is a novel area of research, and we expect the methodologies, tools and data availability to evolve and improve over time. This overview summarizes the key scenario assessments and pilots conducted at UBS since 2014, which we will build upon to deepen our understanding of climate risks and opportunities.

Our initial (2014) top-down approach consisted of a scenario- based stress test to assess UBS’s balance sheet vulnerability across the firm. Leveraging our existing firm-wide top-down stress-testing methodology, we developed a climate change scenario (which assumes that severe weather events result in governments around the world agreeing to implement carbon-pricing mechanisms to assess the impact on financial assets, operational income and physical assets). The scenario anticipated that these mechanisms will prompt a shift away from coal and other fossil fuels to cleaner alternatives and adversely impact markets and gross domestic product.

Our subsequent (2015) bottom-up analyses of oil and gas utilities’ as well as electric utilities’ loan portfolios consisted of a forward-looking analysis to assess impacts of a long-term low fossil fuel price scenario resulting from policies promoting greater use of renewables, enhancing efficiency standards and limiting emissions. We calculated the impact this scenario would have on company probability of default and aggregated company-level results at the portfolio level to assess changes to expected loss. We also assessed the vulnerability of loan portfolios secured by real estate in Switzerland and the US to physical risk by mapping the location of collateral in over 6,000 postal code areas against Swiss Re’s CatNet tool, which aggregates a large dataset of observed natural hazards such as wildfire, river and pluvial flooding and tropical cyclones.

From both top-down and bottom-up approaches, our internal stress tests suggested no immediate threat to UBS’s balance sheet. However, we identified methodological challenges ranging from the suitability of climate scenarios for banking risk modeling to data availability.

UNEP FI TCFD Working Group for Banks

In 2018, UBS began a multi-year collaboration with a peer group of up to 35 banks, the UNEP FI, the IAMC, and risk consultancies Oliver Wyman and Acclimatise. Now entering its third iteration, our objective is to develop analytical tools to help banks define and disclose climate-related risks and opportunities, as recommended by the TCFD. This includes developing and standardizing how we quantify climate-related risks, addressing data gaps in the process, including Paris-aligned scenarios, and further refining scenario-based stress-testing methodologies. These advancements aim for banks to more robustly identify and disclose exposure to climate-related risks and opportunities.

Phase I: Power utilities

UBS pilot tested a methodology developed with Oliver Wyman and 16 banks, as part of the UNEP FI TCFD working group, on its power utilities portfolio (power). The methodology combines quantitative bottom-up borrower-level analysis with top-down portfolio segmentation, to analyze for credit-rating impacts under a 2 degree climate scenario. A sample of over 30 counterparties headquartered in the US and the EU was analyzed. The main results showed minimal impacts to UBS, primarily due to the financial strength of our borrowers and the ability for them to adapt to climate-related policy and technology risks. Counterparties in UBS’s portfolio were quantitatively analyzed based on the narrative that a high carbon price under the climate scenarios would result in reduced revenue from high carbon-based assets (e.g., coal-fired power plants). Meanwhile, low-carbon capital expenditure would increase as these companies invest in renewable technologies to maintain production capacity. Capital would be raised based on a mixture of debt and equity, based on the companies’ capital structure today. Increased revenues from the renewable capacity would offset lost revenues.

Most of UBS’s counterparties tested at the time were investment grade large-cap names, many of whom were already planning on their own low-carbon transition strategies. These companies are most able to adapt to the shock of carbon pricing and low-carbon capital expenditure risk factors, and included a handful of winners in the transition (rating upgrades). The graph below reflects that credit-rating impacts were more pronounced in small-cap names.

Phase II: Oil and gas

In 2020, UBS pilot tested the methodology on its 2020 oil and gas (O&G) portfolio. This time, testing against a range of 1.5˚C pathways, including an orderly and immediate transition, a disorderly and delayed transition, and a disorderly transition that assumed low reliance on carbon dioxide removals (CDR). The scenarios were developed in partnership with the IAMC and were also the basis for the reference scenarios issued by the Network for Greening the Financial System (NGFS).

Close to 50 counterparties were analyzed in the US and EU – including both lending and traded products exposure to corporate entities classified in the O&G sector. Upstream O&G extraction, midstream O&G processing and transport, and integrated O&G companies were included in the analysis. The total exposure analyzed was around USD 1.4 billion³ (sectoral credit exposure in the Investment Bank).

After segmenting the credit portfolio according to the heatmap methodology (see climate risk heatmap section), credit officers were asked to determine ratings impacts on our counterparties, based on scenario data. To do so, they were given the three different transition risk scenarios and the nationally determined contributions (NDC) scenario (considered as a baseline scenario). Scenario variables included O&G demand, price, electricity technology use and pricing, and other macroeconomic data. Regional (US and EU) and global views were created to accommodate the geographic focus of the portfolio and the upstream segments.

Credit officers discussed and debated the relative risk factors within each scenario and re-rated each company in their respective portfolio according to an approximate order of magnitude of credit ratings downgrades, for projected years 2030 and 2040. Both 2030 and 2040 were chosen to analyze impacts from both an immediate and delayed transition. Existing defaults during COVID-19 and the oil price shock in 2020 were considered within their determinations. Ratings estimates based upon mitigants (e.g., transition strategies) were also factored in.

According to our assessment, integrated O&G, as large-cap companies, are well equipped to forecast and strategize for their role in the transition to a low-carbon economy. Large integrated O&G companies are also considered to have control over major reserves, making them some of the last oil drillers in 2040 that supply residual oil demand.

Key findings supported earlier analyses: no significant risk to UBS was identified. Expected loss impacts to UBS exposure in the sector ranged from 0.4% to 1.1% of the total sectoral exposure in a delayed transition scenario and low-CDR scenario respectively, in 2040. In addition, the weighted average profitability and default (PD) impacts by scenario show greater credit impacts in a CDR scenario, followed by an immediate action scenario, as shown in the next graph.

3 UBS corporate lending to climate-sensitive sectors, see page 42

Losses were found to be lower in a delayed (disorderly) transition as certain companies may continue to produce over the next 10 years, which would generate additional cash flow. A delayed action scenario also gives integrated companies time to adapt, such as implementing stated net-zero commitments.

The exercise highlighted that improving the granularity of scenarios to capture regional dynamics of energy production and O&G prices would yield a more robust analysis. Further efforts are required to continue to bridge methodological and data gaps (e.g., capturing systems impacts and downstream impacts). As companies continue to develop their own TCFD disclosures, we can expect better quality counterparty-level data as well.

Climate risk heatmap

To inform the further development of its climate risk management strategy, UBS has piloted a transition risk heatmap, developed in collaboration with the UNEP FI TCFD working group. The heatmap enables UBS to take a materiality-driven approach to further inform its climate risk management strategy by:

–   helping to identify concentrations of exposure with high climate risk vulnerability, which, in turn, enables resource prioritization for detailed bottom-up risk analysis;

–   supporting a client-centric strategy that prioritizes clients who may benefit from UBS products and services in support of their transition strategies; and by

–   providing decision-useful information in internal reports to executive and board leadership and external disclosure to stakeholders.

The heatmap rates cross-sectoral credit risk exposure to climate sensitivity, from high to low, through a risk segmentation process. These ratings are based upon climate risk ratings determined by ratings agencies, regulators and expert consultants. The working group discussed how to group companies with similar risk characteristics into risk segments and rate those segments according to their vulnerability to climate policy, low-carbon technology risks, and revenue / demand shifts under an aggressive approach to meeting the well below 2˚C Paris goal. The next steps for UBS are to pilot the physical risk heatmap methodology, also developed with the UNEP FI TCFD working group, and to examine the applicability of the heatmap methodology in other traditional risk categories.

The graph below shows UBS’s year-end climate risk exposure across the Investment Bank and Personal & Corporate Banking through the heatmap methodology.

Paris Agreement Capital Transition Assessment (PACTA)

In addition to the UNEP FI TCFD working group for Banks, between 2019 and 2020, UBS has been one of the pilot banks testing the PACTA methodology. In the context of the PACTA pilot, we studied the alignment of select climate-sensitive sectors in our corporate credit portfolio with Paris Agreement benchmarks. The methodology provides an assessment of a bank’s credit-financed activities in relation to the global shift to a low-carbon economy. Among other results, the PACTA for lending assessment showed that the fuel mix in UBS’s power utilities credit portfolio is significantly less carbon-intensive than the global corporate economy as of 2019. As an outcome of the collaboration between UBS and 16 other international banks, academia and experts, a PACTA for Banks Methodology Document was published.

In 2020, UBS participated in the PACTA 2020 climate alignment test that focused on assessing listed investments, mortgage and direct real estate portfolios. In this occasion, the PACTA methodology was applied to the listed investments portfolios. The UBS results for this portfolio were compared with the aggregated results of all participating banks’ portfolios.

The graph below shows the sector exposure (% of portfolio value) in selected sectors (power, automotive and fossil fuels). The upper bar graphs refer to corporate bonds and the lower ones to equity. The bar colors indicate low carbon exposure (dark grey) and high carbon exposure (light grey). The output below suggests that UBS has a relatively low exposure to the three sectors overall, compared with the aggregated results of all participating banks’ portfolios.

A detailed report of the PACTA 2020 climate alignment test for the Swiss financial market is available online on the Federal Office for the Environment webpage.

Both UNEP FI and PACTA pilots promote industry learning and have provided guidance for disclosing climate-related risks and opportunities in line with the TCFD recommendations. Overall, the results of the past climate risk pilots have confirmed findings from our previous in-house assessment on climate risk. We have, so far, not identified significant climate-related financial risk on our balance sheet. We explain this by UBS’s relatively small lending book in climate-sensitive sectors (see “UBS corporate lending to climate-sensitive sectors 2020“) and availability of insurance where we have relevant exposures to such sectors (e.g., Swiss mortgage lending book).

Protecting our clients’ assets

As a global financial institution, it’s our responsibility to help clients navigate through the challenges of the transition to a low-carbon economy. We help our clients assess, manage and protect their assets from climate-related risks by offering innovative products and services in investment, financing and research.

UBS Asset Management (AM) has developed a suite of products, termed Climate Aware, to help investors align their portfolios toward a lower-carbon future. The first Climate Aware passive equity strategy was launched in 2017. In 2020, we launched a broader Climate Aware suite of investment strategies based on the original Climate Aware methodology, including active and passive, equity and fixed income.

This expanded offering is delivering on the commitment our firm made at the World Economic Forum (WEF) Annual Meeting 2020 to support clients in their own climate change transition. It enables clients to reduce the carbon footprint of their portfolios in line with their sustainability goals while meeting their financial objectives.

Furthermore, AM empowers equity portfolio managers to examine the carbon footprint of their portfolios and compare the relative carbon footprints of their company holdings to that of the benchmark.

In December 2020, UBS became a founding signatory of the Net Zero Asset Managers Initiative alongside 30 other asset managers representing over USD 9 trillion of assets under management (AUM). This leading group of global asset managers has committed to supporting the goal of net zero GHG emissions by 2050 or sooner, in line with global efforts to limit global warming to 1.5°C.

As part of the initiative, asset manager signatories have committed to:

–   working in partnership with asset owner clients on decarbonization goals, consistent with an ambition to reach net zero emissions by 2050 or sooner across all assets under management;

–   setting an interim target for the proportion of assets to be managed in line with the attainment of net zero emissions by 2050 or sooner; and

–   reviewing their interim target at least every five years, with a view to ratcheting up the proportion of AUM covered until 100% of assets are included.

The commitment recognizes an urgent need to accelerate the transition toward global net zero emissions and for asset managers to play their part to help deliver the goals of the Paris Agreement and ensure a just transition.

In terms of financing, we help clients implement and execute their sustainability strategies though innovative capital-raising and global advisory services, which offers them seamless and sustainable access to capital markets. On the markets side, we develop and offer products and services relevant to climate change mitigation and adaptation (and in line with client demand), such as access to EU emissions allowances via futures and structured solutions, and portfolio tracker solutions providing exposure to stocks identified as best positioned to benefit from the EU deals and initiatives.

Engagement

On behalf of clients, AM engages with companies it invests in to discuss approaches to mitigating climate-related risk. AM also actively votes on shareholder resolutions to improve transparency and disclosure around climate-related reporting. Specifically in the context of its Climate Aware strategy, AM has implemented an engagement program with 49 oil and gas companies as well as utilities companies underweighted in the strategy. Communication with these companies aims at improving their disclosure and performance alignment with the TCFD recommendations. Engagement also makes it possible to share the results of the quantitative and qualitative assessments included in the fund methodology with investee companies. This allows for the verification of company performance with additional information collected before and after meetings. It also means AM can collect feedback, explicitly communicate objectives for change in corporate practices and further enhance the model used to inform the under- / overweights in the strategy.

AM is a member of Climate Action 100+, a collaborative engagement initiative launched in December 2017. Its aim is to engage with high-level GHG emitters, and other companies across the global economy that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement. It has the support of 545 investors, representing more than USD 52 trillion of assets under management (at end of 2020). AM is directly involved in 21 coalitions of investors (at the end of 2020) within Climate Action 100+ and leads eight of the company dialogues across regions. Whether AM is a lead or participating investor, it is an active member of these coalitions, providing feedback on the climate change performance of companies, the discussion agenda, engagement goals and the progress of these dialogues.

AM is also a member of the Institutional Investors Group on Climate Change (IIGCC) Climate Action 100+ European Advisory Group, which advocates for the world’s transition to a low- carbon economy.

Climate-related opportunities

As one of the world’s largest managers of private and institutional wealth, UBS plays an active role in shaping a sustainable future. We were among the first banks to shine a light on the importance of the SDGs – and specifically on what it takes to make them investable for clients. We are keen to help develop solutions in this regard, building on our successful and, in many cases, pioneering work aimed at mobilizing private and institutional capital toward the SDGs.

This includes investments that facilitate climate change mitigation and adaptation, notably through the Climate Aware suite of strategies.

A Climate Aware framework for investors

The Climate Aware framework is built on the methodology that underlies AM’s Climate Aware strategy. The main characteristics of the framework are:

–   Portfolio mitigation: lowering investment exposures to carbon risk

–   Portfolio adaptation: increasing investment exposure to climate-related innovation and solutions

–   Portfolio transition: aligning portfolios to an investor’s chosen climate glidepath

Portfolio mitigation

Based on our experience, maintaining a balance between required investment returns and minimizing climate risks works most effectively when investors integrate climate change considerations into a diversified portfolio. Similar to ESG integration, this is an important element in understanding the specific effects of climate change. As the TCFD has highlighted, these can be viewed as regulatory, market, technology and physical risks. How they play out at the level of markets, industry sectors and individual issuers depends on an interplay of:

–   regulation; 

–   commercial considerations; and

–   impact of technology on business models, revenues, costs and capital requirements.

Integrating these three aspects puts the focus on the most material issues relating to the reduction of emissions generated by the most carbon-intensive sectors. It also leads to a deeper and more investment-relevant understanding of the physical risks.

Portfolio adaptation

Supporting a low-carbon future translates into investing in, and funding of, new technologies and solutions. The key investment areas relate to GHG emissions reduction, energy transition, and energy efficiency. They include companies that manufacture and deploy these technologies as well as the infrastructure and services that make them achievable at scale. There are a variety of developments in business structure, asset ownership, supply chains and delivery models that may be deployed as part of the climate change transition. It is also important to recognize that there are different kinds of investors that are better-placed for certain kinds of investments. Venture capital, private equity, real estate, public equity and public fixed income all have different appetites for technology risk.

Portfolio transition

It is important for investors to understand the difference between where they are now and the possibilities of the climate transition. Scenario analysis is emerging as a response to the uncertainties of climate change. Engagement, meanwhile, provides an opportunity for investors to encourage good corporate practice and, together with voting, keep management accountable for the actions needed to keep pace with the climate transition. It also allows investors to understand the investment dynamics in individual sectors and countries and determine the overall direction of travel. By applying the tools of scenario analysis and engagement, investors are better able to manage the transition to a climate-smart future.

Our other business divisions also translate this strategic thinking on climate into concrete products and services. UBS supports the orderly transition to a low-carbon economy as corporate advisor, and / or with its lending capacity. UBS also offers 100% sustainable discretionary mandates and asset allocation funds based on an innovative dedicated Sustainable Investing Strategic Asset Allocation for private clients in Global Wealth Management (GWM) and Personal & Corporate Banking (P&C). These include an explicit allocation to strategies that aim at mitigating climate change, such as green bonds and thematic investments, but also others that contribute indirectly to climate change mitigation such as multilateral development bank bonds, ESG leaders and ESG improvers. GWM developed a new advisory solution that includes an explicit climate change dimension, allowing clients to tilt their portfolios toward the issues they care about. Ultimately our goal in developing new products and services is to ensure that all material risks and opportunities are addressed, and to allow clients to select sustainable investments aligned to their interests while receiving financial returns in line with traditional investment approaches.

GWM integrates sustainability assessments, focusing on the sustainability intentionality of fund managers, into all fund and exchange-traded fund (ETF) onboardings. We have surpassed our commitment of directing USD 5 billion of client assets into SDG-related impact investments by the end of 2021 by contributing USD 6.9 billion in 2020 – more than one year early.

These investments include a significant climate component. GWM’s mutual fund and ETF offering includes climate-focused investment strategies, comprising those focused on clean / alternative energy.

Our AM and GWM businesses have a comprehensive approach in place to address environmental, social and corporate governance factors across investment disciplines. For example, sustainability themes are embedded in GWM’s equity research processes, while AM’s Real Estate and Private Markets has developed a Responsible Investment Strategy to enhance investment performance of mandates for direct and indirect real estate and infrastructure investments.

Our Investment Bank provides capital-raising and advisory services globally to companies that make a positive contribution to climate change mitigation and adaptation, including those in the solar, wind, hydro, energy efficiency, waste and biofuels, and transport sectors. In 2020, the deal value in equity or debt capital market services and of financial advisory services related to climate change mitigation and adaptation, rose to USD 98.9 billion, from USD 87.2 billion in 2019.

We strive to be the preferred strategic partner for advisory and financing transactions related to Switzerland’s Energy Strategy 2050. In this context, we support energy utilities in raising capital on international capital markets to progress their quest for renewable energy. In 2020, P&C supported 11 strategic transactions in support of the strategy. In our P&C business, we have also integrated Sustainable Investing Advisory into the strategic dialogue with our institutional clients.

Furthermore, we support Swiss small and medium-sized enterprises (SMEs) in their energy-saving efforts and transition to a low-carbon economy. SMEs benefit from initiatives such as energy check-ups or leasing bonuses (financial contributions toward enhancing environmental performance) for production machines. The UBS Clean Energy Infrastructure Switzerland strategy offers institutional investors unprecedented access to a diversified portfolio of Swiss infrastructure facilities and renewable energy companies.

Since its establishment, the UBS Optimus Foundation has focused on children’s health, education and protection. In 2020, to ring in the Foundation’s 20-year anniversary and in light of the growing threat of climate change, we expanded our offering. To make sure clients maximize their environmental impact with their philanthropy, we, together with experts, conducted an extensive landscape analysis. The outcome is a systematic approach for clients to assess where to invest philanthropically and how to best contribute to accelerate environmental and climate action. Clients interested in this space can now get involved in i) sustainable land use, by contributing to land restoration, conservation, climate-resilient agriculture, and agroforestry; and ii) coastal and marine ecosystems, by contributing to wetland restoration and conservation, sustainable fisheries, as well as reducing ocean waste and pollution.

Climate-related metrics

In 2020, we continued our multi-year efforts to develop methodologies that enable more robust and transparent disclosure of climate metrics. This includes the development of a novel transition risk heatmap methodology, improved granularity and accuracy of climate-sensitive sectors and carbon-related assets disclosure and expansion of the weighted carbon intensity metric.

The climate-sensitive inventory now applies to sectors captured by the transition risk heatmap. Following the enhanced methodology, our exposure to climate-sensitive sectors has remained relatively static – lending to high-risk sectors has been reduced and lending to low-risk sectors has increased.

UBS exposure to carbon-related assets was revised to analyze underlying commodities in our commodity trade finance business. We have recalculated all previous years’ exposure figures using the enhanced approach. In 2020, we have again reduced our exposure to high-carbon sectors (as defined by the TCFD and those rated higher risk on the heatmap) to 1.9%, down from 2.3 % in 2019 (and 2.8% in 2018). The weighted carbon intensity of our Climate Aware strategies went down to 68.2 tonnes carbon dioxide equivalent (CO2e) per USD million of revenue (from 74.5 tonnes in 2019). This is 51% less when compared against the weighted carbon intensity of the composite benchmark.

Climate-related sustainable investments increased to USD 160.8 billion, up from USD 108 billion in the previous year. At the end of 2020, we reached our goal of using 100% renewable energy and reduced our firm’s own GHG emissions by 79% compared to baseline year 2004.

UBS corporate lending to climate-sensitive sectors 2020

UBS has led an effort, together with UNEP FI and peer banks, to define an inventory of climate-sensitive activities based on TCFD, regulators’ and rating agencies’ climate risk definitions. The current inventory of UBS’s exposure to climate-sensitive activities is summarized in the table below at the sector level.

What we do for societies
and the environment

Environment and human rights

Our environmental management system covers the entire scope of UBS products, services and in-house operations that may give rise to an environmental impact. It is externally audited annually and recertified every three years.

We view the proper management of our firm’s own environmental footprint and our supply chain as important proof points for how we do business in a sustainable manner. This is equally true for our comprehensive management of environmental and social risks (ESR). Our in-house environmental management, responsible supply chain management (RSCM), and ESR standards and management are aligned with the UBS in Society constitutional document and enforced across the firm.

We constantly strive to reduce our greenhouse gas (GHG) emissions, waste production, energy and paper consumption as well as water usage.

By engaging with vendors to promote responsible practices, we look to reduce negative environmental and social effects of the goods and services UBS purchases. Our RSCM principles embed UBS’s ethics and values in our interactions with our vendors, contractors and service partners. Since 2008, firm-wide guidelines have provided systematic assistance on identifying, assessing and monitoring vendor practices in the areas of human and labor rights, environmental protection and corruption. A central component of this guideline is the UBS Responsible Supply Chain Standard to which our vendors are bound by contract.

We apply an ESR framework to identify and manage potential adverse impacts to the environment and / or human rights, as well as the associated environmental and / or social risks that our clients’ and our own assets are exposed to. We support the orderly transition to a low-carbon economy. Our climate strategy underlines our commitment to the UN Sustainable Development Goals (SDGs) on climate action and on affordable and clean energy  –  and  to  the  Paris  Agreement  on  Climate  Change (Paris Agreement). We regularly report on the implementation of our climate strategy and follow the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

In assessing UBS’s potential human rights impacts, we focus on three key stakeholder groups: employees, clients and vendors.

With regard to employees, we commit to respect and promote human rights standards through our human resources policies and practices. We review these policies and practices on a regular basis to ensure that human and labor rights continue to be respected. We are committed to meeting the obligations that a responsible company is expected to comply with. This includes our commitment to promote a diverse and inclusive workplace, with equal opportunities for all employees and a strong commitment to pay fairness that is embedded in our compensation policies. We offer certain benefits for all employees, such as health insurance and retirement benefits. These vary depending on the employee's location and are reviewed periodically for competitiveness.

With regard to clients, we provide them with innovative investment solutions in themes related to the environment and human rights. We offer a range of sustainable and impact investments to meet different client interests, values, risk profiles, return expectations and regional needs. We also aim to take sustainability risks into account when evaluating investment decisions. We conduct ongoing reviews of our business relationships to assess whether they might lead to potential negative impacts on rights holders. Client relationships that are considered important from an ESR point of view are subject to enhanced ESR due diligence. 

With regard to our vendors, we identify high-risk vendors when establishing new contracts or renewals based on the vendors’ provision of goods and services that have either a substantial environmental and social impact or are sourced in markets with potentially high social risks. We also regularly screen active vendors as part of our ESR control processes.

Both our firm’s approach to the environment and human rights as well as our commitment to our employees (as reflected in our HR processes and policies) are overseen by the Board of Directors, notably by the Corporate Culture and Responsibility Committee (CCRC) and implemented through our firm’s sustainability governance.

›   Refer to “Governance on sustainability” in the “How” section of this report

›   Refer to “What we do to act on a low-carbon future – our climate strategy” in this section and to the “Environmental and social risk policy framework“ in Appendix 6 of this report for more information

›   Refer to “Reducing our environmental footprint” in this section for more information

Reducing our environmental footprint

The transition to a low-carbon economy starts at our firm’s own doorstep. And our clients and other stakeholders want to understand what we as a firm are doing about our own environmental impact. In 2020, we continued to take many steps to further reduce our firm-wide environmental footprint. Above all, we reached our ambitious 2020 target on sourcing 100% of our electricity consumption from renewable sources and reduced our greenhouse gas (GHG) footprint by 79% compared with 2004.

We manage our environmental management system in accordance with ISO 14001. In 1999, we were the first bank to obtain this ISO certification for our worldwide environmental management system, which covers the entire scope of UBS products, services and in-house operations that may cause an environmental impact. In 2020, we successfully passed the ISO 14001:2015 recertification audit of our global environmental management system. Additionally, 38 locations in the EU and the UK were recertified against the requirement of ISO 50001:2018.

Information on both our environmental indicators (energy, water, paper, waste, recycling and travel) and associated GHG emissions is externally verified on the basis of the ISO 14064 standard. These comprehensive audits confirm not only that appropriate policies and processes are in place to manage environmental issues but also that they are applied on a day-to-day basis.

›   Refer to “Assurance and certification” in Appendix 7 of this report for our ISO certificates

›   Refer to Appendix 4 of this report for details on our firm’s environmental footprint

Objectives and targets

We have established environmental objectives at relevant levels and functions. To continuously improve our environmental performance, we have set quantitative targets related to our significant environmental aspects since 2006. We have continuously and successfully reduced our environmental impact over the years. In 2020, our quantitative targets set in 2016 expired and we developed new, ambitious targets for 2025. We are targeting achieving net zero for scope 1 and 2 emissions and ensuring that our 100% renewable electricity is supporting new renewable installations. Additionally, we have set quantitative targets addressing our impact on the environment from energy, travel, paper, waste and in our supply chain.

Managing our supply chain responsibly

We embed environmental and social standards into our sourcing and procurement activities. Our firm-wide responsible supply chain management (RSCM) framework is based on identifying, assessing and monitoring vendor practices in the areas of human and labor rights, the environment, health and safety and anti- corruption, in line with our commitment to the UN Global Compact and the UBS in Society constitutional document.

In 2020, remediation measures were established with 56 vendors that provide UBS with goods and services with high risk. Improving their adherence to UBS’s RSCM standards has a potentially high positive impact.

Committing our vendors to our standards

We aim to reduce negative environmental and social effects of the goods and services UBS purchases and we engage with vendors to promote responsible practices. A central component of our RSCM framework is the UBS Responsible Supply Chain Standard to which our direct vendors are bound by contract. The standard defines our expectations toward vendors and their subcontractors regarding legal compliance, environmental protection, avoidance of child and forced labor, non- discrimination, remuneration, hours of work, freedom of association, humane treatment, health and safety and anti- corruption issues and a whistleblowing mechanism to support and protect employees.

›   Refer to the “Our documents” page on ubs.com/insociety  to download the Responsible Supply Chain Standard in various languages

Identifying, assessing and monitoring high-impact vendors

The RSCM framework includes an impact assessment of newly sourced goods and services that takes into account potential negative environmental and social impacts along the life cycle of a product or a service, and all purchased goods and services are categorized accordingly.

We identify high-impact vendors when establishing new contracts or renewals based on the vendors’ provision of goods and services that have either a substantial environmental and social impact or are sourced in markets with potentially high social risks. Such high-impact vendors are requested to fulfill further requirements toward product and service provision and are assessed against the UBS Responsible Supply Chain Standard. If this assessment reveals any non-compliance with our standard, UBS defines and agrees, together with the vendor, on specific improvement measures, which we monitor. Lack of improvement may lead to the termination of the vendor relationship. We also regularly screen active vendors as part of our environmental and social risk control processes.

In 2020, we established a reassessment process for vendors after every 24 months to ensure that even in long-term contracts, UBS’s expectations regarding environmental and social aspects are met and supervised continuously. We also reviewed our vendor assessment approach and included climate change as a focus area. We challenge our vendors and require them to provide information about their public commitment to take action on sustainability and climate change.

Vendors of potentially high-impact goods or services are requested to conduct a self-assessment on their management practices and to provide corresponding evidence. Actual and potential negative impacts that are considered in the impact assessment of purchased goods and services include:

–   Adverse environmental impacts due to inefficient use of resources (e.g., water, energy, biomass) and emissions during the life cycle of the product

–   Hazardous substances, emissions, pollutants and limited recyclability of products, adversely affecting people and the environment

–   Unfair employment practices, such as low wages, excessive overtime, absence of occupational health and safety measures

–   Risks for consumer health and safety

–   Procurement and use of materials with a strongly negative environmental and / or social impact

–   Insufficient management of subcontractors regarding sustainability aspects

In 2020, 221 vendors were classified as vendors that provide UBS with goods or services with potentially high impacts. This included both newly sourced as well as ongoing engagements, which are regularly re-assessed. 29% of these vendors were considered as in need of improving their management practices. Specific remediation actions were agreed upon with all of them and the implementation progress has been closely monitored.

In 2020, no UBS vendor relationship was terminated as a result of RSCM assessments. This is partly considered to result from the fact that we assess the vendor’s potential risks before entering into a contract with them.

In 2020, UBS formalized a supplier diversity program that drives greater support for our communities, particularly in the US, where we included at least one diverse supplier in 62% of our tenders and increased our spend with US diverse suppliers to 23% of US vendor spend.

We have also undertaken a global review of our purchase catalogues and introduced environmentally friendly alternatives to products where available. All plastic and single-use items have been removed.

UBS’s charitable contributions

Direct cash contributions from the firm, including support through our community affairs program, UBS’s affiliated foundations in Switzerland, the UBS Anniversary Education Initiative and contributions to the UBS Optimus Foundation amounted to a total of USD 83.2 million in 2020.

›   Refer to Appendix 5 of this report for an overview of UBS’s charitable contributions in 2020

Our community affairs program

At UBS, we are committed to supporting the communities in which we work. Our employees, clients and shareholders expect us to play our part in addressing social issues – and we believe it is the right thing to do. We deliver on this commitment through our community affairs program, which distributed USD 22.1 million in grants during 2020.

Community affairs has two key drivers:

–   The first is to address issues in our local communities. While our community affairs program is global, it is delivered through a local focus on addressing inequality and creating opportunity.

–   The second driver is building our corporate culture. We connect our employees to our local communities through volunteering activities that promote development of a positive business culture. Supporting the community and our business go hand-in-hand.

Three core principles underpin the operation of our global program:

–   We form long-term partnerships focused on education and entrepreneurship.

–   We deliver depth of impact through employee volunteers.

–   We respond to the issues that are relevant to our local communities.

With the onset of the COVID-19 pandemic and lock downs in place across many of our communities, our core principle of responding to issues relevant to our local communities became of central importance during 2020.

The pandemic exacerbated existing social inequalities and, for the most vulnerable members of our communities, posed life-changing challenges – such as food insecurity, poverty, access to education, health and isolation. Our community affairs teams supported grass-roots organizations working directly with the most vulnerable to distribute USD 10.6 million of the USD 30 million UBS committed to support COVID-19 relief. During the early stages of the pandemic, grants supported a range of emergency relief interventions. As the impact of the pandemic continued, community affairs partnerships also supported recovery and rebuilding efforts through support for entrepreneurship, tackling educational disadvantage and future-proofing our community partners.

Employee volunteering

In 2018, we made a commitment to our local communities by setting a target to achieve 40% of employees volunteering by the end of 2020, of which 40% of volunteer hours would be skills-based. The onset of the global pandemic meant that from March to December 2020 we had to cancel all face-to-face volunteering to protect the health and welfare of our employees, our community partners and their beneficiaries. Our paid employee volunteering allowance was doubled to four days during 2020 to enable employees to support COVID-19 relief efforts in their home communities. We also worked with our community partners to increase opportunities for our employees to support the local community working remotely and online.

The achievement of our regional teams in pivoting to remote / online volunteering wherever possible successfully engaged 22% of our global workforce. Community affairs significantly exceeded the target to achieve 40% of skills-based volunteer hours – in 2020, 58% of total volunteer hours were skills-based. 

Measuring Impact

Community affairs uses a global framework, based on the industry-leading Business Investment for Societal Impact framework (or B4SI, formerly known as the London Benchmarking Group (LBG) framework), for measuring and reporting. Use of such a standardized model across our global strategy ensures that we are able to effectively focus our approach and resources.

Our strategic focus is on education and entrepreneurship, as these are areas where we know our resources can make an impact. We offer programs that support young people to increase their educational attainment and acquire workplace skills. We also work with entrepreneurs to help them build and scale businesses that tackle unemployment and revitalize underserved communities. Many of our offices focus on social entrepreneurship, supporting businesses that have social impact at the heart of their business model.

In 2020, 50% of UBS’s community affairs grants were made in these two areas. This was down from 88% in 2019 in light of the urgent need to support our local communities across a broader range of social issues in the face of COVID-19 challenges.

 
Individual beneficiaries in 2020

Our community affairs program benefited 4.53 million young people and entrepreneurs across all regions in which we operate. This significant increase in beneficiaries from 2019 is a direct result of increased community affairs funding during 2020 to support the distribution of COVID-19 emergency relief grants in our local communities.

We also measure the extent to which our support has benefitted individuals (i.e., by using the B4SI / LBG depth of impact scale). Measuring based on this model has shown that UBS’s support has improved or transformed the lives of 108,686 individuals in 2020. While this is an increase on the 107,389 beneficiaries whose lives were “improved” or “transformed” in 2019, it represents 2.1% of the number of beneficiaries for whom depth of impact was reported. We did not meet our 2020 target to maintain 38% of beneficiaries whose lives are “improved” or “transformed” by UBS’s support as a result of the proportion of community affairs grants that were distributed to provide emergency COVID-19 relief.

›   Refer to Appendix 5 of this report for the B4SI / LBG depth of impact scale model

Supporting intermediaries and VCSOs

We also work with intermediary organizations that are building the capacity of voluntary and community sector organizations (VCSOs). Using the B4SI framework, we measure the number of intermediary organizations we work with and the number of third-party organizations they reach with our support, as well as the ways in which those organizations are helped to develop. We worked with 45 intermediaries to support 8,339 third-party organizations during 2020.

2025 Community affairs goal

We know that long-term change can only be achieved by setting long-term and impactful targets. In 2020, for the first time, we set a long-term target on the change that we want to make.

Community affairs aims to support 1 million young people and adults to learn and develop skills for employment, decent jobs and entrepreneurship by 2025. While we recognize this is best achieved through strategic grant funding and by engaging our employees in skills-based volunteering, the need to respond to acute need in our local communities was our overriding principle when the pandemic hit. We nonetheless reached 519,534 beneficiaries in support of our 2025 goal during 2020. As the pandemic abates and the focus switches to rebuilding and recovery efforts, we will renew our focus on our core strategy of supporting education and entrepreneurship aligned to three UN Sustainable Development Goals (SDGs) specifically: SDG 4 Quality education, SDG 8 Decent work and economic growth and SDG 10 Reduced inequalities.

We will continue to use our depth of impact scale to report both the number of beneficiaries we have reached and the extent to which our support has changed lives.

›   Refer to Appendix 5 of this report for a description of the depth of impact scale

How we measure our progress

Our aims and progress

We work with a long-term focus on providing appropriate returns to all of our stakeholders in a responsible manner. To underline our commitment, we provide transparent goals and report on progress made against them wherever possible. In 2020, we made very good progress in delivering against the Group’s ambitions.

1 Refer to the UBS in Society constitutional document (in Appendix 6 of this report) for more information about our ambitions. Goals are to be achieved by the end of the target year. For our updated key goals refer to the “Why” section of this report.   2  Core SI are SI products that involve a strict and diligent asset selection process through either exclusions (of companies / sectors from the portfolio where the companies are not aligned to an investor’s values) or positive selections (such as best-in-class, thematic or ESG integration and impact investing). Refer to the “Core sustainable investments” table in the “What” section of this report.       3  The increase in core SI assets was mainly driven by the ESG integration strategy of Asset Management. Refer to the “Core sustainable investments” table in the “What” section of this report.    4  Strategies where the investment has the intention of generating measurable environmental and social impact alongside a financial return.    5  Refer to "UBS's charitable contributions" in the “What” section of this report.

Our commitment to the Principles for Responsible Banking

The Principles for Responsible Banking (PRB) provide a framework for a sustainable banking system with the aim of aligning the industry with the Sustainable Development Goals (SDGs) and the Paris Agreement. The PRB will embed sustainability at the strategic, portfolio and transactional levels, across all business areas.

UBS was among the very first banks to shine a light on the importance of the SDGs – and specifically on what it takes to make them investable. And we were also an early mover in committing to raise clients’ assets for impact investments related to the SDGs. This demonstrates that we have been focusing on impact for years, in the context of the investment space as well as of our own activities.

As a founding signatory of the PRB, we have committed to taking three key steps that enable our firm to continuously improve its impact on and contribution to society:

–   to assess our positive and negative impacts on society and the environment;

–   to set SDGs-aligned global targets where we can have the most significant impact; and

–   to publicly report on progress.

Signatory banks must meet all PRB requirements within four years (which, for UBS, means in 2023). We have undertaken a first self-assessment of our firm against the six Principles. Our well established sustainability strategy, governance structure, client offering, stakeholder engagement activities and goal-setting processes mean that we already largely meet the requirements of the Principles.

In 2020, we took or commenced the following additional steps toward further implementation of the PRB:

–   We are using the UN Environment Programme Finance Initiative (UNEP FI) impact identification tool to conduct a pilot impact analysis in our Personal & Corporate Banking business division in Switzerland. This is coming on top of already existing impact analyses, such as our annual Group-wide materiality assessment, Paris Agreement Capital Transition Assessment (PACTA), various environmental and social risk reviews and an assessment of which SDGs are of particular pertinence to our firm.

–   We are co-leading a PRB sub-group alongside UNEP FI to develop a tool for signatories to conduct an impact analysis of investment portfolios (core to our key business activities in wealth and asset management).

–   We defined new goals to 2025 and beyond, replacing our older set of mid-term goals, which we achieved.

–   We have undertaken a first public reporting on our progress in implementing the PRB.

We continue to analyze and understand where we have significant positive and negative impact associations in our business. Impact analyses will be conducted in these areas and the results will be used to inform our sustainability strategy and goals.

›   Refer to “PRB Reporting and Self-Assessment” at ubs.com/gri  for our initial PRB reporting

›   Refer to the UBS in Society constitutional document in Appendix 6 of this report for an overview of our target setting processes

›   Refer to Appendix 1 of this report for an overview of the SDGs in our focus

›   Refer to “The changes we face” in the “Why” section of this report for more information on the importance of SDGs, climate and impacts

How we monitor our actions

Governance on sustainability

Our firm’s sustainability and corporate culture activities are overseen at the highest level of our firm and are founded in our Principles and Behaviors.

The Board of Directors (the BoD) of UBS Group AG decides on the strategy of the Group upon recommendation by the Group Chief Executive Officer (the Group CEO) and is responsible for the overall direction, supervision and control of the Group and its management, as well as for supervising compliance with applicable laws, rules and regulations.

The BoD is responsible for setting our firm’s values and standards to ensure that the Group’s obligations to our stakeholders are met. Both the Chairman of the BoD and the Group CEO play a key role in safeguarding our reputation and ensuring we communicate effectively with all our stakeholders.

All BoD committees have responsibilities and authorities of direct relevance to our goal of creating sustainable value, as set out in the Organization Regulations of UBS Group AG. The Governance and Nominating Committee, for instance, supports the BoD in fulfilling its duty to establish best practices in corporate governance across the UBS Group. The Compensation Committee supports the BoD in its duties to set guidelines on compensation and benefits. The Risk Committee oversees and supports the BoD in fulfilling its duty to supervise and set an appropriate risk management and control framework (in the areas of risk management and control, treasury and capital management, as well as balance sheet management).

The BoD’s Corporate Culture and Responsibility Committee (CCRC) is the body primarily responsible for corporate culture, responsibility and sustainability. The CCRC oversees our sustainability strategy and activities.

The Group CEO supervises the execution of the UBS in Society strategy and annual objectives and informs the Group Executive Board and CCRC about UBS in Society updates. Reporting to the Group CEO, the Head UBS in Society is UBS’s senior-level representative for sustainability issues and, on behalf of the Group CEO, proposes the UBS in Society strategy and annual objectives to the CCRC for approval.

Our Sustainable Finance Committee (the SFC) was founded in 2020, and the Chair of the Committee reports to the Group CEO. The SFC brings together senior business leaders with relevant expertise from across the firm in order to collaborate on the further development of our commercial sustainable finance business. The Committee’s objective is to help UBS achieve its ambition of being a leader in sustainable finance for its clients and, in particularly, to assist in providing leadership for cross-divisional work streams and opportunities.

Our management of environmental and social risks (ESR) is steered at GEB level. It defines the ESR framework and independent controls that align UBS’s ESR appetite with that of UBS in Society. 

›   Refer to the “Sustainability governance” graph below

›   Refer to the Charter of the CCRC and to the UBS in Society constitutional document in Appendix 6 of this report

The GEB oversees our efforts to combat money laundering, corruption and terrorist financing. These efforts are led by a dedicated financial crime team of anti-money laundering compliance experts. The GEB also oversees our approach to diversity and inclusion. Our global head of diversity and inclusion drives a Group-wide strategy complemented by divisional and regional initiatives.

How we manage societal risks

Managing environmental and social risks (ESR)

We apply an ESR framework to identify and manage potential adverse impacts on the environment and / or to human rights, as well as the associated environmental and social risks to which our clients’ and our own assets are exposed. Our comprehensive ESR standards, which are in line with the principles expressed in the UBS in Society constitutional document, govern client and vendor relationships and are enforced firmwide.

We have set ESR standards for product development, investments, financing and supply chain management decisions. As part of our due diligence process, we engage with clients and vendors to better understand their processes and policies and to explore how any environmental and social risks may be mitigated. We apply a precautionary approach by avoiding transactions, products, services, activities or vendors if they are associated with material, environmental or social risks that cannot be properly assessed or mitigated.

Our ESR standards include a description of controversial activities and other areas of concern where we will not engage, or where we will only engage with stringent criteria in place, as outlined in the table “UBS ESR Standards.” These standards are reviewed on a regular basis.

Our standard risk, compliance and operations processes involve procedures and tools for identifying, assessing, reporting and monitoring environmental and social risks. These include client onboarding, ongoing Know Your Client reviews, transaction due diligence, product development, investment decisions, supply chain management and portfolio reviews.

These processes are geared toward identifying clients, transactions or vendors potentially in breach of our standards, or otherwise subject to significant environmental and human rights controversies. We use advanced data analytics to assess companies associated with such risks, integrated into our web-based compliance tool, before we enter into a client or vendor relationship or transaction. This significantly enhances our ability to identify potential risks. In 2020, our ESR unit assessed 2­,168 referrals, of which 81 were rejected or not pursued further, while 342 were approved with qualifications and 56 were pending at year-end 2020.

›   Refer to the “ESR policy framework“ in Appendix 6 of this report for more information

Combating financial crime

We are committed to combating money laundering, corruption and terrorist financing and have implemented policies, procedures and internal controls that are designed to comply with such laws and regulations. We have developed a financial crime prevention framework that is intended to prevent, detect and report money laundering, corruption, fraud and terrorist financing. We annually assess the money laundering, bribery and corruption, and sanctions risks associated with all of our business operations against our control framework, and take actions to further mitigate these risks.

We are a founding member of the Wolfsberg Group,  an association of global banks that aims to develop financial services industry standards for policies on preventing financial crime such as corruption, money laundering and terrorist financing, and on Know Your Client principles. The Wolfsberg Group brings together banks from around the world at its annual forum and regional reach-out meetings focused on financial crime topics. It also works on guidance papers in related key areas of anti-money laundering (AML).

Together with the other members of the Wolfsberg Group, we work closely with the Financial Action Task Force (FATF), an intergovernmental body that helps develop national and international policies on preventing money laundering and terrorist financing through consultation with the private sector. We have adopted the global FATF standards with respect to record keeping.

In November 2020, UBS joined the World Economic Forum’s Partnership Against Corruption Initiative (PACI), further strengthening our anti-corruption program. PACI serves as the principal CEO-led platform in the global anti-corruption arena, building on the pillars of public-private cooperation, responsible leadership and technological advances. It undertakes initiatives to address industry, regional, country or global issues tied to anti-corruption and compliance.

In 2019, we successfully achieved ISO certification in accordance with ISO standard Anti-Bribery Management System 37001:2016. The audit certified that UBS’s global anti-bribery and corruption framework meets global requirements to prevent and detect bribery as defined by ISO, and it evidences UBS’s commitment. The ISO certification is renewed annually and is the result of UBS proactively engaging an accredited ISO auditor. The ISO standard requires a series of measures that are aimed at preventing, detecting and addressing bribery. Such measures include, but are not limited to, policies and procedures, culture and tone from the top, appropriate resourcing, training, risk assessments, third-party due diligence, and implementing appropriate controls.

›   Refer to the ISO 37001 certificate in Appendix 7 of this report

Monitoring

We apply Know Your Client rules and use advanced technology to help identify suspicious transaction patterns and compliance risk issues. We continue to invest in our detection capabilities and core systems as part of our financial crime prevention program.

Our framework requires any suspicious activities to be promptly escalated to independent control units and external authorities, as required by law. Our monitoring framework covers risk-based transaction monitoring, real-time screening and retroactive searches. The UBS AML monitoring framework is established in accordance with the Monitoring Screening and Searching Wolfsberg Statement and is reviewed on an annual basis.

Risk-based approach to combatting financial crime

At UBS, we apply a risk-based approach and have a framework in place to identify and manage potential money laundering risks associated with customers and transactions. With our systematic assessment of money laundering risks, we strive to arrive at the appropriate level of initial and ongoing due diligence and monitoring of transactions throughout the course of a relationship. For certain higher-risk clients, face-to-face due diligence requirements are mandatory. Our AML policy sets out the processes and risk criteria pertaining to politically exposed persons (PEPs). Global PEP clients are reviewed and reapproved on an annual basis by the responsible member of each divisional Executive Committee.

Our Code focuses on preventing the misuse of the financial system, including in relation to bribery. The specific anti- corruption standards of conduct that apply to all employees are also set out in the Group Policy Against Corruption. The policy sets out our zero-tolerance stance toward corruption and prohibits all forms of bribery by the firm and our employees, including facilitation payments.

Anti-corruption policies and procedures that aim to prevent bribery from occurring throughout our operations apply to all business divisions. These policies are derived from the standards set out in the Group Policy Against Corruption and the Group Policy on Gifts and Business Entertainment.

All employees and external staff subject to mandatory learning requirements are required to complete financial crime training, which covers AML, sanctions, fraud and anti-corruption. The training is mandatory and must be completed at least on an annual basis. We regularly update web-based training modules to address compliance issues, including anti-corruption standards. Employees in specific areas also receive targeted training on client-related corruption, including the bank’s own corruption risks in regard to intermediaries, gifts and entertainment, or when major new developments require additional training.

Protecting data

Data has enormous value to our firm. When treated as a corporate asset, it enables our business to run smoothly. It can also help us to grow and prosper by giving us the information we need to capture new business, or react quickly to new trends. As we continue to invest in our digital solutions, we are similarly committed to

–   developing a robust command and control framework to manage and protect our offering and the petabytes of data that are inherently generated by it, and

–   being stewards of data on behalf of our clients and employees to benefit the firm and shareholders.

We regard it as our responsibility to protect all personal data disclosed to us in an increasingly complex and evolving environment. We have comprehensive measures (relevant controls, processes and policies) in place for the protection of personal data. We have also implemented organizational and technical security measures, underpinned by an operational risk and control framework, to safeguard personal data in accordance with applicable laws and regulations, including data protection laws.

Governance

Our Board of Directors (BoD) and Group Executive Board (GEB) recognize the importance of Cyber & Information Security (CIS) as essential in maintaining the continued success of UBS. BoD and GEB mandate Business Senior Management to foster an appropriate CIS risk management culture. The BoD Risk Committee and the GEB oversee the CIS program, review it regularly and receive reporting on all CIS activities. The BoD Risk Committee and the GEB are part of the escalation chain for major and critical cyber incidents.

The Group Data Management Office (DMO), part of Group Operations, partners across the firm to ensure robust governance over the collection, propagation, quality and usage of our firm’s data. Additionally, the Group Data Protection Office (DP Office), part of Group Compliance, Regulatory & Governance and led by Group Data Protection Officer (DPO), looks to ensure that our firm processes personal data and responds to data subject rights exercised by individuals (including clients and employees) in line with applicable data privacy laws and regulations. To this end, the Group DPO provides guidance to the business divisions and to Group functions.

Policies and procedures (including training)

As a firm, we want to operate at the highest possible standard. Our principles and policies guide how we use data and information as well as how we develop and deploy technological solutions.

We have implemented policies and procedures to ensure that everyone at our firm is aware of threats and the importance of cyber and information security. A cyber and information security policy is internally available to all employees.

In recognition of the pace of digital change globally, our Code of Conduct and Ethics (Code) includes a section on the lawful and ethical use of data. The primary focus of this section is to prepare our employees for greater reliance on big data, data models and artificial intelligence.

We run a comprehensive, Group-wide education and awareness program, including on addressing risks related to cyber and information security. The program is composed of: computer-based training modules (reoccurring and requiring exam completion), newsletters, posters and flyers, purpose-created multimedia content and educational campaigns covering subjects such as: email phishing, malware infections, social engineering, tailgating, data classification and leakage.

Additionally, we provide training specifically tailored for sensitive staff. Employees are also required to review policies and affirm compliance in our web-based Affirmation Online portal on an annual basis. All UBS employees can easily access UBS’s Information Security portal to learn about information security threats. Selected management employees are sent regular updates regarding cybersecurity developments and trends.

Handling data

Personal data can only be collected for specified, explicit and legitimate purposes, and not further processed in a manner that is incompatible with those purposes. The processing of personal data must not be excessive in relation to its purposes.

When UBS obtains personal data from a data subject, the data subject must be informed, to the extent required by local law, about the purposes for which the personal data is intended to be processed and the recipients or categories of recipients to whom the personal data will be transferred, unless such information is apparent to the data subject. The content and form of the notice to the data subject regarding the purpose of the collection may be specified in the applicable laws of the jurisdiction relevant to the data subject.

If UBS collects personal data from a third party (e.g., from a recruitment consultant or list seller), the responsible UBS staff would seek contractual assurances from such third party that the data has been properly and lawfully obtained in compliance with applicable law and appropriate information has been provided to the relevant data subjects.

We communicate our client data use and storage policies to clients and seek consent for data use as required by local regulation. In these communications, we are clear what this consent means and which use cases do not require consent; for example, certain legal obligations. We provide reasonable and legally acceptable options for clients to be able to revoke this consent.

Dealing with incidents

Our Code sets out the principles and behaviors that define our ethical practices and the way we do business. Any violation, (whether it is our Code, UBS policies or external laws, rules and regulations) may result in disciplinary action, up to, and including, dismissal. This includes information security incidents. Also, employees as part of their year-end performance rating are evaluated on their integrity. This includes doing the right thing, self-declaring incidents and issues and adhering to policies, challenging the status quo and raising their hand when things are not right, including potential security threats, and collaborating across teams, departments, and divisions.

We aim to make the information security incident escalation process as simple as possible. For example, phishing emails can easily be reported by means of a dedicated button integrated within Outlook. We encourage employees to report issues and incidents to their line managers and follow up to ensure the matter is addressed. Any compliance incidents can also be escalated through the whistleblowing process.

How we gather and assess
stakeholder views

GRI-based materiality assessment

We put great emphasis on learning the views and values of our stakeholders with regard to the business activities of UBS and its role in society. Every year, we conduct a materiality assessment, as defined by the guidelines of the Global Reporting Initiative (GRI), to consider stakeholder views on key topics pertaining to our firm’s economic, social and environmental performance and impacts. Our materiality assessment draws on formal and informal monitoring, from our dialog with stakeholders and from relevant external studies and reports.

Supervised by the Corporate Culture and Responsibility Committee (CCRC), UBS’s GRI-based materiality assessment process is managed by a UBS-internal, cross-business division and cross-regional materiality assessment team. The team consists of a group of experts who – due to their function at our firm – deal with stakeholder expectations and concerns on a daily basis. The team is responsible for delivering the outcome of the materiality assessment to the CCRC on an annual basis.

We also regularly invite stakeholders to directly share their views. In 2019, we did so through our biannual online survey that was completed by nearly 3,300 stakeholders, with clients being, by far, the largest stakeholder group.

UBS materiality matrix 2020

The overall results of the materiality assessment are expressed in the following UBS 2020 materiality matrix. The matrix ranks topics by their relevance to UBS stakeholders and their impact on UBS’s sustainable performance. Sustainable performance, one of UBS’s three principles, signifies our focus on the long term and our efforts to provide consistent returns to our stakeholders.

For the 2018 materiality matrix, we substantially reduced the number of topics, including by subsuming several topics previously listed separately in the matrix (Combating financial crime; Financial stability and resilience; Cybersecurity; Conduct; Client protection) within the topic of Regulatory compliance and by merging topics. We continued with this list of topics in 2019, but in 2020, we removed Community investment as a single topic and made it a subtopic of Working culture and environment.

For the 2020 materiality matrix, we undertook a limited assessment (following our major stakeholder survey in 2019). From the assessment, we concluded that the topics of Climate action, Diversity and inclusion, Environmental and social risk management, Working culture and environment had become more relevant for our stakeholders and also increased in terms of their impact on our performance. We broadened Digital innovation with topics such as digital transformation, integration of services, consideration of cyber risks and new business opportunities – and we renamed it Digitalization.

Furthermore, we renamed Sustainable investment to Sustainable finance, which – in turn – has become more relevant to our firm’s performance. Five topics remained unchanged (Regulatory compliance, Corporate governance, Operational efficiency and effectiveness, Client experience, Talent management). Among the 12 topics, Regulatory compliance continues to be the most material, followed by, as in 2019, Client experience.

Our materiality assessment included a consultation of internal experts on our firm’s significant economic, environmental and social impacts. We concluded that these impacts are directly reflected in the topics deemed most material in the GRI-based materiality assessment and that they are overwhelmingly concerned with economic impacts. These topics fall within two significant impact areas of our firm:

–   ensuring the provision of high-quality services to clients and

–   actively managing potential major risks to clients as well as other stakeholders.

Jointly, these two significant impact areas of our firm are reflected in the highly ranked topics of Regulatory compliance and Client experience.

›    Refer to Appendix 9 of this report for a detailed overview of the impact of material GRI topics

As shown in the 2020 materiality matrix, stakeholders currently regard the impact of environmental and social topics as partly influencing their assessments and decisions. The relevance of these topics has again increased compared with 2018 and 2019 and, with it, the probability that the relevance of some of these topics to UBS, notably Climate action and Sustainable finance, will further increase in coming years.

As in previous years, the overall result of the assessment was reviewed by the CCRC. It also becomes part of the decision-making processes of this committee, with a particular focus on those topics that were assessed as very relevant or have considerably increased their relevance since the preceding year.

Appendix 1 – SDGs in our focus

We highlight the importance of the Sustainable Development Goals (SDGs) for our firm and our clients in the “Why” section of this report.

Appendix 2 – Sustainable finance products

Key sustainable finance products and services in 2020

Appendix 3 – Workforce by the numbers¹

This appendix provides supplementary information to “What we do for our employees” in the “What” section of this report.

As of 31 December 2020, we had 71,551 employees as full-time equivalents (FTEs), 2,950 FTEs more than in 2019. In addition, a total of 15,804 external staff members for core business services were active at the end of 2020, primarily in technology and operations roles. This included 2,226 FTEs employed through third parties on short-term contracts to fill positions on an interim basis. Additionally, a total of 10,903 external staff members for non-core business services were active at the end of 2020, primarily in premises-related roles.

To give the most accurate view of our global workforce, human resources reporting considers a person (working full time or part time) as one head count. This accounts for the total UBS employee number of 72,887 as of 31 December 2020 (versus 69,966 as of 31 December 2019). These numbers exclude staff from UBS Card Center, Hotel Seepark Thun and Wolfsberg. The following tables are all reported on this basis, unless otherwise specified. The percentages in the tables may not total 100 due to rounding.

1 Our reporting covers key statistics relevant to full- and part-time employees, as well as relevant data about external staff.   

All data was calculated on / as of 31 December 2020, unless otherwise noted.