Case Study: UBS Philanthropic Investment Strategies

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UBS for example offers three sets of investment strategies under the banner of Sustainable Investing to support its clients’ needs in this area:

Exclusion:

This traditional and still most commonly used approach involves excluding individual companies or entire industries from portfolios if their areas of activity conflict with an investor’s personal values. This process, called exclusionary or negative screening, can rely either on standard sets of exclusion criteria or be tailored to investor preferences. For instance, investors may wish to exclude companies with 5% of sales or more generated from alcohol, weapons, tobacco, adult entertainment or gambling – so-called “sin stocks.” Exclusion is generally applied through publicly listed stocks and bonds.

Integration:

This approach centers on systematically combining environmental, social and governance (ESG) information with traditional financial considerations to guide investment decisions. Compared to exclusion, integration is more holistic, proactive and involves a higher level of expertise and data availability. This category includes two specific approaches that are often blended in practice:

  • Positive screening (also known as best-in class screening) uses ESG performance criteria and financial characteristics to select the best companies within an industry or sector.
  • ESG integration, unlike positive screening, seeks to incorporate material ESG risks and growth opportunities directly into traditional security valuation (e.g. through inputs such as earnings, growth or discount rates) and portfolio construction.

Impact Investing:

This strategy differs from the previous two in its explicit intention. While exclusion removes companies which do not comply with investors’ values, and integration applies ESG considerations to security selection, impact investing explicitly aims to make a measurable positive environmental or social impact through the capital invested. Impact investing engages directly with companies and/or funds, generally through private market solutions, that intend to create measurable positive social or environmental outcomes alongside financial returns.

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