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Five private banks scaling up impact investments

Citywire Asia looks at the impact investing actions outlined in the 2017 sustainability reports of five banks

Credit Suisse

Credit Suisse established an Impact Advisory and Finance Department in 2017 to explore projects and initiatives that have a positive social and economic impact.

One of the impact investing themes is financial inclusion and currently $413 million of Credit Suisse’s client holdings globally are used to finance microfinance institutions. It also offers global microfinance funds, structured products and a private equity fund-of-funds directed towards impact investing.

In addition, the Swiss bank is making impact investments in the space of higher education for underprivileged students, conservation finance, fair agriculture and social enterprises.

It has excluded certain businesses from client portfolios, such as gambling. Meanwhile, the bank has launched products focused on sustainable investing, such as the Credit Suisse (Lux) European Climate Value Property Fund, the CSIF (Lux) Equities Emerging Markets Sustainability Blue, and the CSIF III World ex CH Sustainability Index Blue – Pension fund.

The bank also acts as impact advisor to the Asia Impact Investment Fund I L.P, which invests in fast-growing businesses that address social challenges across Asia. Credit Suisse is the co-founder of the Sustainable Finance Collective Asia initiative, which aims to accelerate the funding of circular economy, sustainable energy and positive social impact projects.

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Credit Suisse

Credit Suisse established an Impact Advisory and Finance Department in 2017 to explore projects and initiatives that have a positive social and economic impact.

One of the impact investing themes is financial inclusion and currently $413 million of Credit Suisse’s client holdings globally are used to finance microfinance institutions. It also offers global microfinance funds, structured products and a private equity fund-of-funds directed towards impact investing.

In addition, the Swiss bank is making impact investments in the space of higher education for underprivileged students, conservation finance, fair agriculture and social enterprises.

It has excluded certain businesses from client portfolios, such as gambling. Meanwhile, the bank has launched products focused on sustainable investing, such as the Credit Suisse (Lux) European Climate Value Property Fund, the CSIF (Lux) Equities Emerging Markets Sustainability Blue, and the CSIF III World ex CH Sustainability Index Blue – Pension fund.

The bank also acts as impact advisor to the Asia Impact Investment Fund I L.P, which invests in fast-growing businesses that address social challenges across Asia. Credit Suisse is the co-founder of the Sustainable Finance Collective Asia initiative, which aims to accelerate the funding of circular economy, sustainable energy and positive social impact projects.

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UBS

At the end of 2017, sustainable investments accounted for CHF 1.1 trillion ($1.1 trillion) of UBS Group’s assets under management, representing close to 35% of total invested assets.

Impact investing accounted for CHF 3.2 billion ($3.3 billion) and CHF 927.5 billion ($1957 billion) in assets fell under norms-based screening. The bank has set a target to have $5 billion of client assets invested in new impact investments by the end of 2021.

As a result, the wealth management division is developing a range of new thematic and pooled impact investment products. It is a launching a new sustainable investing strategic asset allocation and is re-training client advisors.

UBS also entered into exclusive product collaborations with the World Bank and Hermes. In January 2018, it launched the enhanced UBS Manage Sustainable Investing offering with 100% sustainable and impact investments, excluding liquidity. They are based on the global chief investment office’s house view.

UBS Wealth Management’s products related to sustainable investing include the OrbiMed Asia Partners III fund, which raised $85 million. The fund looks at growth investments in health care companies in China and India, focusing on biopharmaceuticals, medical technology and health care services. The division has also raised $325 million globally for the Rise Fund, which invests in seven sectors.

Additionally, 5% of the management fee of the UBS Unique ETF is donated to UN Sustainable Development Goals-related projects managed by the UBS Optimus Foundation.

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Julius Baer

As of 2017, globally, Julius Baer had CHF 45.8 billion ($47.3 billion) in assets under management with ESG integration, CHF 736 million ($760 million) in discretionary suitability mandates and CHF 215 million ($222.2 million) in recommended sustainable investment and impact investment funds.

The funds team assigns the Julius Baer Responsible Investment Fund Rating (JB RIFR) to all recommended funds. It also includes MSCI ESG Ratings and MSCI ESG Controversies for equities and fixed income in research reports and marketing materials.

In 2017, Julius Baer focused on two areas of impact investing through funds and fixed income in its offering: microfinance solutions and green bonds.

The recommended funds mostly engage worldwide in less liquid short-to-medium-term income-bearing debt contracts of microfinance institutions domiciled in emerging and developing countries, including Central and South America, Asia, sub-Saharan Africa, the Middle East and Eastern Europe.

The funds are actively managed and diversified global portfolios. The green bonds were for projects related to renewable energy, pollution prevention, sustainable water and waste management, green buildings, climate change adoption and clean transport.

The Swiss group established a Responsible Investment campaign in 2017 to train client advisors. The bank has also identified five ‘next generation’ themes, such as rising Asia, digital disruption and energy transition, and has integrated ESG risk monitoring in its broader investment process for funds and equities related to these themes.

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Deutsche Bank

Deutsche Bank had EUR 9.6 billion ($11.9 billion) in sustainable assets under management in actively managed retail and institutional funds in 2017. For passive investments related to ESG, it had EUR 559 million ($692.9 million).

Last year, the Sustainable Investments unit that sits under the Alternatives division managed seven sustainable and impact funds with a combined volume of EUR 355 million ($440 million).

The funds are based on the UN Sustainable Development Goals and cover energy (clean energy, energy storage, energy usage), environment (food/agriculture, waste, water), microfinance, employment/education, and housing.

Within discretionary portfolios, the bank excludes certain investment areas, such as cluster bomb munitions.

The German lender also created a Sustainability Council last year, comprising senior managers from every business division at the bank, tasked with advising the management board on ESG issues.

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DBS Bank

Singapore-headquartered DBS Bank closed a listed social sustainability bond, called the Women’s Livelihood Bond, with Impact Investment Exchange in July last year, which saw significant uptake from private banking clients.

The $8 million bond provides loans to social enterprises and microfinance institutions, targeted at improving the livelihoods of more than 385,000 women in Cambodia, the Philippines and Vietnam. The four-year bond offers a coupon rate of 5.65% per annum and is listed on the Singapore Exchange. 

The group also issued its first green bond - for a series of $500 million floating rate green bonds due 2022 - in 2017. The bonds bear a quarterly coupon of three-month USD Libor +0.62%.

The net proceeds are allocated to financing green projects or assets described under the DBS Green Bond Framework, with the first green assets expected to include the DBS Group’s financing of Marina Bay Financial Centre Tower 3, a commercial property in Singapore certified Green Mark Platinum by the Building and Construction Authority.

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