UBS and Climate Change –

Warming up to Global Action?

Presented by
Group 1

Ashish Bokaria 404

Anil Jain 413
Abhishek Khurana 423
Surel Shah 442
Arpit Agarwal 456
Sheetal Rastogi 457
 About The Company
•UBS AG, headquartered in Zurich and Basel, Switzerland
•One of the world’s leading financial services companies
•Has offices in more than 50 countries, and employed 70,000 people worldwide
•UBS is the top bank in Switzerland, serving 2.6 million individuals and approximately
137,000 corporations

•Offers
Investment Retail and
Wealth and
banking corporate
asset
services banking in
management
internationally Switzerland
 Business Units
•Serves high-net worth individuals, corporations, and institutional clients via three
business units:
Global wealth • Serves private institutors and corporations
management & • BY 2006, UBS was the largest wealth manager
in the world, with 3.5% share of the CHF 50
business trillion GWMBB market
• Further divided into 3 units
banking(GWMBB)

• Headquartered in London and New York and

Investment bank employs 18,000 people in 34 countries

Global Asset • Offers clients traditional investment vehicle,

alternative and quantitative investments and real
Management estate investment options
The business Wealth management Wealth management
banking US- international &
Switzerland- Switzerland
• advises high net worth
• provides traditional individuals in the US
division –
banking services in • serves wealthy swiss
Switzerland and international clients
excluding those from the
united states
Further divided into 3 units
GWMBB market
CSR POCILY
 Corporate Responsibility at UBS
Takes CR seriously
Was among the first to sign the bank Declaration of the UNs environment program,
committing to conduct its business in an environmentally responsible manner
Responsible behavior is an important part of the company’s culture, identity, and
business practice
Organization
Has created a special corporate responsibility committee
The task of the committee is to judge how could best meet the ever evolving
expectations of its stakeholders
Comprises many of the company’s most senior managers
Suter and two members of board of directors and four members of the group
executive board
• Carefully tracks the impact of its business operations on the natural
environment Environmen
• Environmental reviews are also a standard part of the bank’s risk t
management system
• Included in THE Dow Jones Sustainability Group Index( DJSGI) and the
FTSE4good index
Communitie
• To support communities, the company made Annual cash donation of CHS 50 s
million for educational & environmental projects.
Client
• In 2004 conducted research to monitor ranking of social responsible relationships
investments and accordingly distinguishes products into three classes
Principle Activities
Corporate Responsibility Mission

Think beyond Profit-Oriented and Legal

Requirement for Broader Public Good
 Client
Relationship
s

Focu
Internal
Work s Communitie
Environmen
t Area s

s
Natural
Environmen
t
• SRIs included three classes of products
• Companies with superior track record (1.7% )
• Exclude problematic industries like weapons(15.7%)
• Company engaged in changing corporate behavior( 82.1%)
• Established Equity Research Desk to monitor the rankings of
SRIs
• By 2005 UBS managed SRIs worth CHF 46.89(2% invested
assets)
Client Relationships
 Community

Annual cash donations of around CHF 50million for

Education and Environmental projects
 Environment

 Tracked impact of business on Environment

through Reports and Reviews

 Reports tabulated per person impact on various

environmental indicators per year like Direct energy ,
total waste, total CO2 emissions etc
 Organization & CR
A special Corporate Responsibility Committee to
assess the impact of the CR activities

Committee took inputs from the Business Groups and

the Functional Groups

Analyzed the gap between the stake holders

expectation and current activities and gave
recommendations
Climate Change
A Global Concern?
 CLIMATE CHANGE
CONCERNS
Due to industrial activity CO2 level in the atmosphere has risen from
280 ppm to 380 ppm

Few most important sources of CO2 and other greenhouse gases are
• Electricity Generation – 24.5%
• Deforestation – 18.2%
• Agriculture – 13.5%
• Transport – 13.5%

Consequently earth’s average surface temperature has risen by 1.1 F

With this continuing trend CO2 concentrations would reach 800 ppm
by this century end
EARTH’S COMPLEX CLIMATE
SYSTEM

a r m er
W
ocean res
m p e r a tu e
te s e s th
e a
incr ber of
num anes
c
hurri

Warmer
oceans
absorbs less Melting Ice
CO2 decreases the
planets Albedo,
leading to
Quicker
warming
The Dilemma
 Based in Switzerland, UBS is a financial services company
with no obligation to comply with the Kyoto Accord or
European Trade Union restrictions on carbon emissions.
 Is it a matter of leadership in the industry?

  UBS discovers that its stance on global warming lags

behind industry competitors.
 Marco Suter, Executive Vice-chairman, UBS Board of
Directors, was faced with the task of adopting a more
progressive policy on climate change.
 Environmental specialists and senior executives at UBS
had compiled a report which considered four options.
 Alternatives
Stabilize its emissions at the company's 2005 levels
with internal energy-saving strategies and the purchase
of carbon emissions offsets.

A 10 percent reduction would fall in line with industry

practice and cost $3.7 to $5.9 million

40 percent would provide an innovative, positive story

for the public and cost $6.4 to $8.6 million

a 100 percent reduction would cost $9.1 to $11.3 million

and match industry leader HSBC.
COMPETITORS’ ACTIONS
 Corporate Citizenship

2002
• Compiled data on energy use in its 13,000 buildings

2004
• Started disclosing carbon emissions from power plants that it
financed
2006
• Target to lower greenhouse emissions by 2011 to 10% below
2005 level
2007
• 10% of its electric power as green power in US
 Sustainability Committee

2005 2006 2006-08

• Emitted 450,000 • Greenhouse gas • Ordered 243,000
tons of greenhouse neutral buildings tons of carbon
gases credits

• Business Travel • Expected to spend

and use of $ 2.1 million on
electricity certificates
 Carbon Management task Force

Neutralize 100% carbon emissions by purchasing green

electricity and other certificates

Invested in projects like Wind farm in NewZealand, organic

waste composter in Australia, etc

Top Bank in Sustainable Banking Awards by The Financial

Times
• 5% - 10% reduction from 2004 levels by 2012
Barclays
Chase
• 5% - 7% reduction from 2004 levels by 2012 JP Morgan
Sachs
• 7% reduction from 2005 levels by 2011 Goldman
America
• 9% reduction from 2004 levels by 2012 Bank of
• 2004, began trading carbon credits
Stanley
• Acquire deals valued at over $ 3 billion by 2009 Morgan
Other competitors
Carbon Markets
Carbon Trade
A carbon market is created when an emissions cap is
set — either through a political or regulatory process
— and an emissions allowance is then passed down to
regulated entities.
Carbon trade: Transfer of carbon credits.
Allows companies to choose least-cost methods of
compliance
Results in a net societal financial gain when overall
emissions are reduced to the desired level
Carbon Market
Internal Reductions

Energy
Business travel
consumption
Renovation of
cooling, heating,
lighting system
Videoconferencin
g
Climate change
levy-free
electricity
 Carbon Market Components
Market Transaction Type Credit type Regime
Regulatory Allowance-based AAU International Emissions
(Assigned Amount Units) Trading

EUA EU-Emissions
(EU Allowance) Trading Scheme
Project-based ERU Joint Implementation
(Emission Reduction
Unit)
CER Clean Development
(Certified Emission Mechanism
Reduction)

Voluntary Mainly project-based VER Voluntary projects

(Verified Emission
Reduction)
Offsets
Investments in third party projects that reduced GHG
emissions
Certified Emission Reduction Units(CERs)
Emission Reduction Units (ERUs)
Verified Emission Reductions (VERs)
 CER Transaction Process

Initial
Initial Proposal
Proposal Term
Term Sheet
Sheet and
and Signing
Signing of
of ERPA
ERPA Ongoing
Ongoing
Negotiation
Negotiation Monitoring
Monitoring
• Trader discusses • Legal checks terms • Wording agreed • Trader keeps ongoing
principal terms of against internal between Buyer and relationship with
deal with seller procedures Seller Seller
• Risk Management & • Final draft subject to • Risk Management and
Credit analyse Seller review by Board Credit monitor any
and CDM project and • Board approves entry events that might
give specific affect deal
into ERPA
requirementzs to legal • If such events occur,
• Legal co-ordinates all discuss how to
due diligence on CDM respond (termination,
project and host amendment,
country assignment, etc.)
Sale of Carbon Credits
Spot market transactions occur when actual,
existing, verified or certified credits are transferred.
Forward sales are the most common transaction form
– they are the promise to purchase credits once they
are generated, at a specified price.
 Multi European Chicago
Commodity Climate Climate
Exchange Exchange Exchange
(MCX) (ECX) (CCX)
Trading Exchanges
Verified Emission Reductions (VERs)
 a generic term for ‘voluntary’ carbon credits, not certified by any
external body, but verified on a case-by-case basis
 Offset projects set up by a wide variety of project developers – often
small-scale projects in developing countries
 Technologies used vary widely – mainly renewable energy, energy-
efficiency and forestry projects
 Emissions reductions verified by a 3rd party (normally independent),
but standards can vary widely
 Analysis &
Recommendations
 Is there a business case for reducing
Carbon Footprint?
• Are
Is UBS
UBSstock held by
managers funds that
primarily expect socially
motivated responsible
by the business value
of the bank’s action?
behavior?
 Is it because my competitors do, so I do?
 UBS has little information abut the influence of corporate-responsibility
initiatives on its brand and its business
 How does the cost of environmental action compare to firm
annual profitability?
 The cost of carbon neutrality for UBS is 10 million CHF, compared to
14.6 billion in profit in 2005 (approximately one tenth of one percent)
 Is UBS stock held by funds that expect socially responsible
behavior?
 Mix for UBS to reduce carbon emissions
1. Integrate Environmental responsibility into its business
strategy
 Cut UBS’s own emissions through facility efficiency, reduction
in business travel, etc.
2. Purchase emission reduction units (EURs)
 Carbon reduction projects in developing countries
3. Purchase certified emission reduction units (CERs)
 Carbon reduction projects in industrialized nations that have
signed the Kyoto protocol.
4. Purchase verified emission reduction units (VERs)
 Certificates that represented carbon reduction projects traded in
over the counter markets.
 The projects have not gone through the process of certification
of EURs and CERs.
 Integrating Environment responsibility
into its business strategy
 Energy consumption
 Tighter building controls
 New Jersey building, where building management system was re-
programmed led to increased efficiency of 5%
 Data center and work station efficiencies
 Major IT server consolidation project which has reduced the no of
data servers by 2200, the resulting saving is equivalent to the 3% of
the global energy consumption
 Supply Chain Management
 Responsible procurement- set Environmental standards which every
supplier is required to adhere to
 Business Travel
 Encouraging use of other modes of transport than Air and Road travel;
e.g. Travel by high speed rail within Europe.
 Investment in video conferencing
 Integrating Environment responsibility
into its business strategy (2)
Paper and Waste
 Significantly lower publication volumes
 Success of e-documents
 Double sided printing
 Use of Forest Stewardship Council certified paper
 Responsible Banking
 Carbon Trading- help clients to manage emissions exposure
 Clean Tech finance and Advisory – advising clients for companies
in solar, wind, wave and other renewable energy projects
 Core Committee for overlooking the Environmental and human
rights governance
Actual CO2 strategy and emission
reduction
In Feb 2006, the Group Executive Board decided to set
CO2 reduction target to 40% of 2004 levels to be achieved
by 2012
Strategy
 Adopting in-house energy efficient measures
 Increasing the proportion of renewable energy
 Offsetting and neutralizing emissions
 Investments in Clean Development Mechanism and Joint
Implementation projects
 Carbon offsetting by projects in Brazil, India, China, Turkey
 Commitments

One of the first signatories to UN Global Compact

One of the first signatories to UN Environment program’s
Bank declaration
Signatories to UN Principles for Responsible investment
Member of many Environmental communities such as
 Institute of Ethics
 Business in the community
 CSR Asia
 Zurich Energy model
 Key Financial Figures and Ratios
Figure 31/12/2007 31/12/2006 31/12/2005
Total Operating Income 31721 47484 40470
(CHF Million)
US$87,601m

Net Profit (CHF Million) (4,708) 12,020 14,193

US$20,455m
Balance Sheet size 2,274,891 2,348,733 2,001,099
(CHF Million)

No. of employees - - -
Basic EPS (CHF) (2.4) 5.15 5.93
ROE to UBS Shareholders (10.5) 23.8 34.0
Return on average assets (0.2) 0.5 0.7

The bank has made losses in the following years but has again became profitable
starting Q4 2009, the Bank’s profit in Q2 2010 are 2.6 Bn CHF
1CHF = 0.94 US$
Numbers highlighted in red color indicate the corresponding figure for HSBC
Greenhouse Gas Footprint
 Impacts
Changes in Energy Consumption behaviour
• Changes in Travel behaviour

• Changes in Paper Usage

Thanks for your Patience!