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The importance of corporate social responsibility: increasing the value of assets through commitment

  • Corporate commitment and proxy voting activities play a fundamental role in the integration of sustainability
  • UBS AM considers that responsible management is an important mechanism to add value to customers, by achieving better returns on long-term investments
  • The voting system is seen by the manager as a fundamental aspect to achieve responsible and effective management with impact
  • The interactions of its financial analysts and fund managers generate effects throughout all active management strategies
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At the global level, there is a growing need to better understand sustainability and long-term investment, which has made corporate social responsibility more important in companies. UBS Asset Management considers that in equity investments, both active and passive, and in investments with sustainability objectives, this type of action has been shown to have a favorable impact on business results .

As reported by the manager in its investment perspectives report for 2019, the reason is obvious: in essence, responsible management equates to responsible ownership and corporate commitment and voting activities by delegation play a fundamental role in the integration of sustainability . This is a trend that will be gaining ground this year and beyond.

The many positive characteristics of corporate responsibility have strong academic support , as several studies have shown the financial benefits that come from responsible management. One of them revealed that those companies in which investors had collaborated in a satisfactory manner obtained better returns measured as Return on Assets (ROA). Another study cited in the report by UBS AM highlighted the communicative, educational and political benefits linked to the commitment of shareholders.

"If we rely on this evidence, we believe that responsible management activities are an important mechanism to add value to customers, by achieving better returns on long-term investments ," says the manager.

A unique approach

In addition to the academic research that clearly supports the benefit of responsible management, UBS AM believes that the work it does in passive and active strategies, as well as its recognized leadership in sustainability, provide a solid base for clients to benefit from a strategy of well-developed corporate social responsibility.

"We do not work isolated. We have signed codes of good practice, such as the International Corporate Governance Network (ICGN) Global Stewardship Principles or the framework established in the Investor Stewardship Group (ISG) of the United States, "says the manager before pointing out that she is also a member of UNPRI (United Nations Principles for Responsible Investment) , an initiative supported by the UN that encourages investors to be "active owners", engaging with companies and voting at annual general meetings.

Currently, the corporate social responsibility initiatives of UBS AM are organized on the basis of four types of commitment: thematic, reactive, related to the delegated and proactive vote (that is, guided by the analysts). In addition, the manager is always open to collaboration in situations where it considers that the effectiveness of the commitment can be increased: "We believe that, with a unified voice, investors can communicate their visions in an efficient and focused way," he says. In addition, it sees the voting system as a fundamental aspect to achieve effective and impactful responsible management. On average, in a period of 12 months, 10,000 meetings are voted, since UBS AM sees this essential process to complement and second commitment activities with companies. In addition, in the case of passive strategies, it is often their only tool to give voice to different opinions and encourage management boards to address their concerns .

Proactive management

By allocating greater resources to commitment and voting initiatives, active managers can collaborate directly with companies and not base their investment decisions solely on the analysis of results. If long-term relationships are established with investees, active fund managers can work with them to improve long-term growth engines.

This intensive dialogue, guided by analysts, has a direct impact on the companies' business strategies, since it is directly linked to investments . "The interactions carried out by our financial analysts and fund managers, who work in close collaboration with corporate social responsibility management teams, generate consequences that extend throughout all active management strategies, " says UBS AM.

Looking ahead to 2019, the manager plans to continue developing its strategic commitment program, which focuses on the most material sustainability risks and opportunities. One issue that he hopes will be the focus of attention is climate, as well as gender equality and the impact linked to the Sustainable Development Goals . According to UBS AM, the publication of the latest report of the Intergovernmental Panel on Climate Change (IPCC) and the growing number of directives of bodies such as the European Union support the need for large-scale investors to promote the dialogue to achieve change.

SUBMITTED BY Funds Society