The asset management arm of UBS Group AG has slipped in an ESG ranking published by Morningstar Inc., which pointed to its acquisition of Credit Suisse as the main reason for the decline.
The ranking, which looks at 108 global asset managers, listed UBS as the only firm to fall to “Basic” from “Advanced” in its so-called commitment level to environmental, social and governance issues, according to a report published Wednesday. The four-notch scale ranges from “Low” to “Leader.”
Challenges related to its “ESG integration efforts and the acquisition of Credit Suisse’s asset-management franchise introduced some uncertainty,” according to a team of analysts including Alyssa Stankiewicz, Morningstar’s associate director of sustainability research. “This doesn’t mean that UBS isn’t making progress in these areas, just that it has slipped relative to other firms with Advanced ESG Commitment Levels.”
An UBS spokesperson said “that following the acquisition of Credit Suisse, our ambition is unchanged: to be a global leader in sustainable finance.” The spokesperson said UBS and Credit Suisse have “complementary sustainable finance offerings and our goal is to, over time, integrate Credit Suisse’s sustainability capabilities into our existing governance, structure and standards.”
Since taking over Credit Suisse, UBS has had to absorb a bigger portfolio of loans to fossil fuel companies and a less ambitious set of sustainable finance goals. Before the acquisition, UBS also enjoyed a higher MSCI ESG rating than Credit Suisse, as well as a significantly better CDP grade on its climate disclosures.
At the same time, a number of ESG bankers left Credit Suisse in the run-up to the UBS takeover, turning instead to firms that were building out their sustainable finance units.
Natalia Wolfstetter, a research director at Morningstar, said UBS “continues to expand and refine its sustainability-focused resources and practices,” but the company “faces significant challenges in integrating environmental, social, and governance factors across its fund range.”
Such challenges “are exacerbated by integration issues of another kind, as UBS AM absorbs Credit Suisse’s asset-management franchise,” Wolfstetter said. That’s “a project that will consume much organizational resource and management attention, and which could slow further ESG progress.”
Morningstar said its ranking serves as “a qualitative assessment that aims to help investors identify the asset managers dedicated to delivering sustainability outcomes.”
In the same report, the market researcher upgraded Wellington Management and Brown Advisory to “Advanced” from “Basic,” while Franklin Templeton and BetaShares rose to “Basic” from “Low.”
Other investment firms in Morningstar’s “Basic” category include Goldman Sachs Asset Management, JPMorgan Asset Management and BlackRock Inc.
“Firms with an ESG Commitment Level of Basic have made a meaningful effort to integrate sustainability themes into their investment process, but they still blend in with the crowd,” Stankiewicz’s team said.
The report only lists eight so-called ESG-commitment “Leaders,” including Robeco Institutional Asset Management BV, Impax Asset Management Group and Parnassus Investments.
Firms assigned a “Low” grade include Vanguard Group Inc., the asset management arm of Bank of New York Mellon Corp. and Janus Henderson Group Plc.
This article was provided by Bloomberg News.