UBS Ties Compensation of Top Execs to Sustainability Performance
Publishes Climate Roadmap to Net Zero, Including New Targets for High-Emissions Sectors
UBS revealed today that it has strengthened the link between ESG and compensation, tying pay for the company’s top executives to specific sustainability goals. The announcement was made along with the publication of UBS’ 2021 Sustainability Report and its Climate Report, which also include details of the company’s climate roadmap to achieve its net zero commitments.
In its Sustainability Report, UBS provides details on the enhanced compensation program. UBS said that it has revised the performance scorecards for all members of its Group Executive Board (GEB) and group CEOs, introducing explicit sustainability objectives linked to the firm’s priorities, and measured through robust quantitative metrics and qualitative criteria. Each member’s sustainability objectives are individually assessed, which directly impacts their performance assessments and compensation decisions.
ESG performance is also used in determining the performance award pool across the firm, measured against UBS’ key sustainability focus areas including climate, wealth inequality, health & education and diversity, among others.
UBS’ Climate Roadmap, set out in its Climate Report, focuses on the firm’s initiatives in two main areas, namely managing climate-related financial risks, and taking action on a net-zero future. These are further divided into four strategic pillars, including protecting clients’ assets, helping clients navigate the challenges of the transition to a low carbon economy; protecting the firm’s assets, using scenario-based stress-testing and other approaches to determine its risk appetite for carbon-related assets; reducing the company’s climate impact, including goals to achieve net zero in operations by 2025, aiming for net zero emissions from key vendors by 2035, and reaching net zero across all scopes by 2050, and; mobilizing capital both in its role as an investor and as a financier.
As part of this roadmap, UBS announced new interim 2030 targets for financed emissions for key high-emissions sectors, including fossil fuels, power generation and real estate. These sectors cumulatively account for approximately 43% of UBS’ credit portfolio and financed emissions. The new 2030 goals include reducing absolute financed emissions associated with loans to fossil fuel companies by 71%, emissions intensity associated with loans to power generation companies by 49%, emissions intensity of UBS’s commercial real estate lending portfolio by 44%, and its real estate lending portfolio by 42%.
The climate report also sets out a series of climate opportunities identified by UBS, which include advising clients on strategic climate opportunities, carbon offsets, expanding its range of climate investment products, investment advice supporting clients in directing capital to support climate goals, facilitating climate financing opportunities (such as green, sustainability-linked or transition bonds), and financing climate opportunities such as green projects and infrastructure.
UBS stated that it will put its Climate Roadmap to an advisory vote at the AGM on 6 April.
Commenting on the release of the new reports, UBS Group CEO Ralph Hamers said:
“We aspire to lead by example in our own transition journey. We know that to reach our long-term goal it’s crucial to identify and deliver on critical targets along the way. These are ambitious plans that will require us to act decisively.”
Suni Harford, UBS Group Executive Board lead for Sustainability and Impact added:
“We will turn our words into action by working in partnership with our clients by providing the advice, products and solutions they need to achieve their goals as the world moves toward a low-carbon future.”
Click here to access UBS’ Sustainability Report and Climate Report.