UBS Private Event Draws Clients to Fast-Growing ESG Idea

(Bloomberg) — UBS Group AG just held its first-ever conference dedicated to the ESG theme of biodiversity, signaling its ambitions to grow in a business area that Credit Suisse had targeted for expansion before its collapse.

Judson Berkey, group head of engagement and regulatory strategy at UBS, said the goal is to figure out “what would help unblock finance” for deals focused on protecting natural capital.

It’s not just about protecting assets from potential losses, but about identifying projects and deals that can make investors money, Berkey said in an interview before the London-based event. 

“There will be winners and losers,” he said.

UBS says 250 institutional investors, corporate clients, family offices and practitioners attended the private event on Tuesday, which had previously been hosted by Credit Suisse in New York before the bank was taken over by its larger Swiss rival last year. Berkey says UBS had to turn away some clients because demand to attend was greater than the bank could accommodate. It’s now considering expanding the scope of future conferences, he said.

Alistair Purdie, a biodiversity analyst at BloombergNEF who attended the event, said the guest list “highlights the speed at which biodiversity has climbed the finance agenda.”

The world’s biggest banks are increasingly trying to get a foothold in the small but fast-growing market for biodiversity. Standard Chartered Plc has built a dedicated nature innovation hub, which coordinates with bankers across trading, advisory, financing and risk management functions. And JPMorgan Chase & Co., Lloyds Banking Group Plc and NatWest Group Plc are among the banks that have created dedicated senior roles to focus on the business area. 

The investment banking arm of UBS is now working on its first debt-for-nature swaps, a product that — in its current form — was pioneered by Credit Suisse. Such swaps bring in institutional investors to help countries refinance existing debt, and then put any savings toward environmental conservation programs.

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UBS’s philanthropic arm is exploring the use of carbon and biodiversity credits to help build a business model for marine-protected areas. And last year, the bank’s asset management arm launched a so-called natural-capital engagement program. 

The London conference coincides with the release later this week of a new study by UBS and nonprofit Planet Tracker, examining the kinds of strategies investors can deploy for the energy transition in a way that avoids inadvertently harming nature.

“The transition journey has gotten very, very real, and it’s showing up with some real challenges and trade-offs,” said Lucy Thomas, head of sustainable investing at UBS Asset Management. Now is “the time to face into those and to get smarter on what the solutions could be to manage some of those complexities.”

There’s a growing political and regulatory apparatus in place that makes it increasingly hard to ignore biodiversity, and banks and investors are keen to monetize the development. That includes identifying conflicts between the energy transition and the need to protect biodiversity. Mining is a key example of this tension, as extracting the raw materials needed to power the green transition threatens fragile ecosystems.

Later this year, negotiators from almost 200 governments will gather in Cali, Colombia, to assess progress made against an international agreement signed in 2022 to halt and reverse nature loss by 2030 and source $700 billion per year to do so.   

Private finance for nature has grown eleven-fold over the past four years to $102 billion, according to new data from the United Nations Environment Programme’s Finance Initiative. Alternative investments, traded debt and private equity drove that growth, as did innovation in financial instruments such as debt-for-nature swaps, new “nature-supportive” exchange-traded funds as well as biodiversity credits, UNEP FI said.

“We are really encouraged by the fact that nature is coming online as a mainstream theme for the financial sector,” said Jessica Smith, UNEP FI’s nature finance lead. 

UBS’s Thomas says it’s increasingly clear that companies that have “made the investment to understand and put in place circularity, to understand their supply-chain transparency, and to understand those impacts are potentially better positioned from a market share perspective versus their peers.” 

For the finance industry, there’s now an “opportunity in identifying those who are doing this well, as well as those who aren’t thinking about that,” she said.

(Adds BNEF comment in sixth paragraph.)

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