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For the active equity and active fixed income assets we calculate a secondary metric demonstrating the % AuM in portfolios with a portfolio WACI lower than their respective benchmark. |
The metrics are derived from all portfolios identified by UBS Asset Management as relevant to the respective asset types where there is sufficient data coverage to enable calculation. Individual portfolios are excluded from the calculation where data coverage is below 50% (indicating insufficient data) or above 150% (indicating the heavy influence of derivative positions). |
The WACI of a single portfolio is derived from the carbon intensity of the underlying investments arising from the investment decisions within a portfolio. The carbon intensity of the investments in the portfolio are allocated based on portfolio weight, which is the current value of the investment relative to the current portfolio value. WACI at the portfolio level is calculated in metric tons CO2e per USD million of revenue by taking the Scope 1 and 2 carbon intensities of the issuers in the portfolio and determining the weighted average according to position size. UBS calculates the portfolio carbon intensity metrics using the 2021 TCFD Implementing Guidance. |
UBS calculates the asset level weighted average carbon intensity metric as follows: |
The % AuM WACI below benchmark metric is reported for active equity assets and active fixed income assets. To calculate this metric, we compare portfolio WACI to that of the relevant benchmark. Portfolio WACI is calculated as described under the WACI metric. Benchmark WACI is similarly the WACI of the individual benchmark constituents. Benchmarks used for the comparison are the performance benchmarks against which individual portfolios are being managed. The outcome of the comparison provides an indication of whether the portfolio WACI is above or below the relevant benchmark WACI. |
To ensure data quality, certain portfolios are excluded from the aggregation where data may be available but coverage across the portfolio is outside the required range. |
UBS calculates the % AuM WACI below benchmark at asset class level as follows: |
UBS reports aggregated figures for weighted average carbon intensity assets for a specified set of asset classes within the scope of Active Equities, Active Fixed Income, Indexed Equities and Indexed Fixed Income. |
Issuer scope 1 and 2 carbon intensity data is requested from external provider MSCI. |
Asset level carbon intensity metric = ∑(AuM with required data coverage × portfolio WACI) ∑AuM with required data coverage % AuM WACI below benchmark at asset class level ∑AuM WACI below benchmark ∑AuM with required data coverage = 169 |
Sustainability Report 2022 | Appendix 5 | Other 170. |
Weighted average carbon intensity (WACI) – Direct Real Estate. |
Theme Sustainable products. |
Metric(s) Weighted average carbon intensity – Direct Real Estate (in metric tons CO2e per square meter) |
Definition and method WACI measures the Asset Management Direct Real Estate portfolio’s carbon reduction and exposure to carbon risk by comparing carbon intensity to the Carbon Risk Real Estate Monitor (CRREM) Pathway. |
It is a measure of efficiency of emitting carbon in support of economic activities and allows comparisons between companies and products. |
The WACI of a portfolio is derived from the carbon intensity of the underlying investments arising from the investment decisions within a portfolio and aggregated to asset class level for Direct Real Estate. |
The metric is calculated in metric tons CO2e per square meter per gross interior building area by taking the scope 1, scope 2 and scope 3 carbon intensities of the properties in the portfolio and calculating the weighted average according to property size in square meters. |
“Weighted” is defined as “weighted by total property size”. Since UBS has operational control rights on each asset, the weight reflects entirety of the ownership or total property size. Refer to the Global Real Estate Sustainability Benchmark (GRESB) article for further information. This is equivalent to an equity approach, e.g., where a 0.01 weight is applied to a 1% holding of an equity fund and a 1.00 weight is applied to 100% of the same equity fund. UBS applies a 1.00 weight across all of these assets. |
UBS calculates the WACI – Direct Real Estate metric as follows: |
UBS reports aggregated figures for carbon intensity assets for a specified set of asset classes within the scope of Direct Real Estate (Discretionary direct real estate GRESB funds only). |
The metrics exclude property types where there is no respective CRREM benchmark. Data is collected from direct real estate assets for funds and mandates that participate in the GRESB. The numbers used represent either reported data grossed up to 100% (where coverage, ownership days or occupancy is less than 100%) or a benchmark as a proxy where coverage, ownership days or occupancy is less than 50%. Data as of December 31, 2021. This represents around 52% of Direct Real Estate's Assets under Management. The assets included are all of our discretionary funds' assets plus a number of separate mandates that have elected to participate in GRESB (but not all mandates). |
Issuer scope 1, 2 and 3 carbon intensity data is requested from external provider MSCI. |
WACI for Direct Real Estate = ∑ proxy GHG emissions over the UBS direct real estate assets ∑square meters over the UBS direct real estate assets = ∑(GHG emission/sqm for individual property × sqm of individual property) ∑square meters over the UBS direct real estate assets = Carbon intensity weighted by size of property 170 |
Sustainability Report 2022 | Appendix 5 | Other 171. |
Net-zero lending metrics. |
Theme Net zero. |
Metric(s) – Residential real estate (scopes 1 and 2 kg CO2e / m2) – Commercial real estate (scopes 1 and 2 kg CO2e / m2) – Fossil fuels (scopes 1, 2 and 3 t CO2e, baseline 2020 indexed as 100) – Power generation (scopes 1, 2 and 3 kg CO2e / MWh) – Cement (scopes 1 and 2 t CO2e /t of cementitious) – Financed emissions for non-financial corporates and real estate mortgages (mt CO2e) |
Sector specific metrics 1. |
Residential real estate (scopes 1 and 2 kg CO2e/m2) |
Definition. |
This metric measures the physical emission intensity related to the residential real estate mortgages financed by UBS. |
Scope – Financial indicator: gross lending exposure (loans and advances to customers, guarantees and irrevocable loan commitments) – Expected Credit Loss (ECL) segment scope: private clients with mortgages – Regional scope; emissions are estimated for properties in Switzerland, US and UK, representing 99% of the ECL segment exposure. Measuring indicator – Type of indicator: physical emission intensity – Metric unit: kg CO2e / m2 – Carbon emissions scopes: 1 and 2 Allocation rule. |
For residential real estate, we have decided to track our progress with a physical emission intensity metric. Physical emission intensity is a metric that normalizes real estate emissions by the floor space in square meters. Through this metric we can monitor whether our residential real estate portfolio is becoming increasingly energy efficient. The physical emissions intensity effectively demonstrates the progress made to transition climate-sensitive sectors in our lending portfolio. The physical emissions intensity is calculated by dividing the sum of financed emissions by the sum of financed surfaces. The attribution is based on the loan-to-value (LTV) of the property. |
2. |
Commercial real estate (scopes 1 and 2 kg CO2e/m2) |
Definition. |
This metric measures the physical emission intensity related to commercial real estate financed by UBS. |
Scope – Financial indicator: gross lending exposure (loans and advances to customers, guarantees and irrevocable loan commitments) – ECL segment scope: real estate financing – Regional scope: emissions are estimated for properties in Switzerland and US, representing 97.5% of the ECL segment exposure. Measuring indicator – Type of indicator: physical emission intensity – Metric unit: kg CO2e / m2 – Carbon emissions scopes: 1, 2 Allocation rule. |
For commercial real estate, we have decided to track our progress with a physical emission intensity metric. Physical emission intensity is a metric that normalizes real estate emissions by the floor space in square meters. Through this metric we can monitor whether our commercial real estate portfolio is becoming increasingly energy efficient. The physical emissions intensity demonstrates the progress made to transition climate-sensitive sectors in our lending portfolio. The physical emissions intensity is calculated by dividing the sum of financed emissions by the sum of financed surfaces. The attribution is based on the loan-tovalue (LTV) of the property. |
Real estate physical emissions intensity = ∑(Real estate emissions × LTV) ∑(Real estate surface × LTV) |
Real estate physical emissions intensity = ∑(Real estate emissions × LTV) ∑(Real estate surface × LTV) 171 |
Sustainability Report 2022 | Appendix 5 | Other 172 3. |
Fossil fuels (scopes 1, 2 and 3 t CO2e, baseline 2020 indexed as 100) |
Definition. |
This metric measures the absolute emissions related to the loans financed by UBS to fossil fuel companies. |
Scope – Financial indicator: gross lending exposure (loans and advances to customers, guarantees and irrevocable loan commitments) – ECL segment scope: large corporate clients, SME clients and other smaller segments – Value chain segment scope: coal mining, oil and gas exploration and production are included in line with Paris Agreement Capital Transition Assessment (PACTA) guidelines. In addition, we also consider refinery activities, as well as integrated companies operating across the value chain. Transportation, trading, and wholesale are excluded in line with PACTA guidance. – Regional scope: global – NACE code scope: B.05, B.06, C.19 Measuring indicator – Type of indicator: indexed absolute emissions – Metric unit: t CO2e, baseline 2020 indexed as 100 – Carbon emissions scopes: 1, 2, 3 Allocation rule. |
For fossil fuels, we have decided to track our progress with an absolute emission metric. It represents the carbon emissions of our clients attributed to UBS. The attribution factor is the fraction of UBS’s gross exposure to the client’s enterprise value including cash (EVIC) or the sum of equity and debt for private companies. The metric is calculated at a portfolio level as the sum of companies’ emissions attributed to UBS. |
As absolute emission metrics are more sensitive to data quality improvements over time, we have decided to index our baseline and target to 100 in order to avoid frequent subsequent restatements. |
4. |
Power generation (scopes 1, 2 and 3; kg CO2e/MWh) |
Definition. |
This metric measures the physical emission intensity related to the loans financed by UBS to power generation companies. |
Scope – Financial indicator: gross lending exposure (loans and advances to customers, guarantees and irrevocable loan commitments) – ECL segment scope: large corporate clients, SME clients and other smaller segments – Value chain segment scope: electricity producers are included in line with PACTA guidelines Most electricity distributors in our lending book also produce electricity and are included in our net zero ambitions. Pure play transmission and distribution companies are excluded in line with PACTA guidance – Regional scope: global – NACE code scope: D.35.11, D.35.13 Measuring indicator – Type of indicator: physical emission intensity – Metric unit: kg CO2e / MWh – Carbon emissions scopes: 1, 2, 3 Allocation rule. |
For power generation, we have decided to track our progress with a physical emission intensity metric. Physical emission intensity is a metric that normalizes a company’s emissions by its output (e.g., the megawatt hours produced). Through this metric we can monitor whether our clients are becoming increasingly efficient. The physical emissions intensity demonstrates the progress made to transition climate-sensitive sectors in our lending portfolio. To allocate multiple companies’ intensities at a portfolio level, a portfolio weight approach is applied, which is an average of the companies’ intensities weighted by their gross exposure. |
Corporate fi nanced emissions = ∑ (Corporate emissions × ) |
Financing to corporate. |
EVIC or Equity + Debt. |
Indexed corporated fi nanced emissionst = Corporate fi nanced emissionst Corporate fi nanced emissionsBaseline × 100. |
Corporate physical emis. intensity =∑ ( × ) |
Financing to corporate. |
Total sector fi nancing. |
Corporate emissions. |
Corp. output (e.g., MWh, tons produced) 172 |
Sustainability Report 2022 | Appendix 5 | Other 173 5. |
Cement (scopes 1 and 2 t CO2e/t of cementitious) |
Definition. |
This metric measures the physical emission intensity related to the loans financed by UBS to cement companies. |
Scope – Financial indicator: gross lending exposure (loans and advances to customers, guarantees and irrevocable loan commitments) – ECL segment scope: large corporate clients, SME clients and other smaller segments – Value chain segment scope: cement manufacturers are included in line with PACTA guidelines – Regional scope: global – NACE code scope: C.23.51 Measuring indicator – Type of indicator: physical emission intensity – Metric unit: t CO2e / t cementitious – Carbon emissions scopes: 1, 2 Allocation rule. |
For cement, we have decided to track our progress with a physical emission intensity metric. Physical emission intensity is a metric that normalizes a company’s emissions by its output (e.g., the quantity of cement produced). Through this metric we can monitor whether our clients are becoming increasingly efficient. The physical emissions intensity demonstrates the progress made to transition climate-sensitive sectors in our lending portfolio. To allocate multiple companies’ intensities at portfolio level, a portfolio weight approach is applied, which is simply an average of the companies’ intensities weighted by their gross exposure. |
Corporate physical emis. intensity =∑ ( × ) |
Financing to corporate. |
Total sector fi nancing. |
Corporate emissions. |
Corp. output (e.g., MWh, tons produced) 173 |
Sustainability Report 2022 | Appendix 5 | Other 174. |
Financed emissions across sectors 6. |
Financed emissions for non-financial corporates and real estate mortgages (mt CO2e) |
Definition. |
This metric measures the financed emissions related to loans to non-financial corporates and real estate mortgages. Financed emissions are calculated based on UBS’s outstanding lending exposure in line with PCAF guidance. Our disclosure includes total financed emissions for corporate loans and real estate mortgages, as well as a break-down per sector where we have set targets. |
Scope – Financial indicator: outstanding lending exposure (loans and advances to customers) – ECL segment and sector scope: all segments excluding Lombard, financial services, commodity trade finance, private individuals and credit cards – Regional scope: global Measuring indicator – Type of indicator: absolute emissions – Metric unit: Mt CO2e – Carbon emissions scopes: 1, 2 (all sectors), 3 (Fossil Fuels, Power Generation, Automotive) Allocation rule. |
Financed emissions represent the carbon emissions of our clients attributed to UBS. Following PCAF guidance, the attribution factor is the fraction of UBS’s outstanding loan exposure to the client’s enterprise value including cash (EVIC) or the sum of equity and debt for private companies. The corporate or real estate emissions are estimated following the options to estimate the financed emissions per asset class as indicated in the PCAF guidance. |
In the case of real estate, the attribution factor is the loan-to-value (LTV) of the property as indicated by PCAF. |
Data sources and reporting. |
Note on data source and reporting To estimate the emissions from our clients we rely on data available in their own disclosures, data from specialized third-party providers and internal data. Current limitations on the availability of emissions data at company or asset level required us to include approximations in the calculations; for example, by applying a sector-level proxy where company- or asset-level data is not available. |
In the preliminary assessment of our total financed emissions, we have included PCAF quality scores facilitating data transparency and encouraging improvements to data quality in the medium and long term. |
There is an inherent one-year time lag between the as-of-date of our lending exposure and the as-of-date of emissions. The reasons for this inherent time lag are twofold: 1) corporates disclose their emissions in annual reporting only a few months after the end of a financial year; 2) specialized third-party data providers take up to nine months to collect disclosed data and make it available to consumers. Consequently, our net-zero ambitions baselines are based on year-end 2020 lending exposure and 2019 emissions data. Our 2021 emissions actuals are based on year-end 2021 lending exposure and 2020 emissions data. |
› For more information, please refer to the “Appendix 3 – Environment” section of this report for “Climate-related methodologies – net-zero approach for our financing activities” › For our definition on “Carbon emissions scopes” refer to the Greenhouse Gas Protocol to which we align, available on ghgprotocol.org › For PACTA guidelines referenced, see PACTA for Banks Methodology Document, available on transitionmonitor.com › For PCAF guidance referenced, see PCAF guidance available on carbonaccountingfinancials.com. |
Corporate fi nanced emissions = ∑ (Corporate emissions × ) |
Financing to corporate. |