Business Context and Reporting Period
This Form 6-K filing, dated March 28, 2024, contains the UBS Group AG Sustainability Report 2023. The reporting period covers January 1, 2023, to December 31, 2023. The report encompasses the consolidated operations of UBS Group AG, UBS AG, and Credit Suisse AG following UBS's acquisition of Credit Suisse Group AG on June 12, 2023. The filing details the integration of the two global systemically important financial institutions (G-SIFIs), the alignment of sustainability frameworks, and progress toward net-zero ambitions.
Key Financial and Sustainability Metrics
Note: This filing is a non-financial sustainability report. Traditional financial metrics such as revenue, net profit, and operating cash flow are not disclosed in this document. The following metrics relate to sustainability performance and risk exposure.
- Sustainable Investments (UBS AG): USD 292.3 billion in invested assets (10% increase from 2022), representing 6.5% of total invested assets.
- Green/Sustainability Bond Deals: 102 deals facilitated by the Investment Bank (USD 49.3 billion total deal value).
- Operational Emissions: Net GHG footprint for Scope 1 and 2 emissions reduced by 21% compared to 2022. Renewable electricity coverage reached 96%.
- Carbon-Related Assets: 7.2% of total customer lending exposure (UBS Group excluding Credit Suisse), down from 7.5% in 2022.
- Climate-Sensitive Exposure: 12.1% of lending exposure to transition risk sectors and 9.7% to physical risk sectors (UBS Group excluding Credit Suisse).
- Philanthropy: USD 328 million in donations raised by the UBS Optimus network of foundations in 2023.
Material Changes vs. Prior Period
The most significant change in 2023 was the acquisition and integration of Credit Suisse. This event necessitated a comprehensive review and revision of UBS's decarbonization targets to reflect the combined portfolio. Key changes include:
- Target Revisions: Decarbonization targets were updated for Swiss real estate, fossil fuels, power generation, cement, iron and steel, and shipping. Sectors such as automotive and aluminum were deprioritized due to lower materiality in the combined portfolio.
- Reporting Scope: Environmental footprint reporting now includes joint operations of UBS and Credit Suisse. Historical data (2021-2022) has been restated on a pro forma basis where applicable.
- Policy Alignment: UBS sustainable product standards are now the benchmark; Credit Suisse products are undergoing assessment for compliance. The Credit Suisse Sustainable Activities Framework was retired.
- Workforce Integration: A fully integrated performance management approach and fair pay practices were implemented for all employees, including former Credit Suisse staff.
Outlook, Risks, and Management Commentary
Guidance and Outlook: UBS aims to achieve net-zero greenhouse gas emissions across Scope 1, 2, and specified Scope 3 activities by 2050. The firm plans to complete the integration of Credit Suisse sustainability governance bodies in 2024. A revised 2030 target for Asset Management (aligning 20% of AuM with net zero) will be reassessed in 2024 to reflect the combined organization.
Risks and Contingencies:
- Integration Risk: Challenges remain in aligning data, methodologies, and processes between the two firms, particularly regarding climate risk metrics which will be fully published in Q3 2024.
- Regulatory Risk: Evolving disclosure requirements, such as the EU Corporate Sustainability Reporting Directive (CSRD) and ISSB standards, require ongoing adaptation.
- Climate Risk: Exposure to transition risks (12.1%) and physical risks (9.7%) in the lending portfolio is monitored via heatmaps. The firm notes that progress toward targets depends on external factors like government policy and client behavior.
Management Commentary: Management emphasizes that the acquisition strengthens UBS's position as a global leader in sustainability. The firm is prioritizing the "three keys to success" (Pillars, Principles, Behaviors) to build a unified culture. Despite market volatility, flows into sustainable funds remained positive.
Key Facts for Investor Verification
- Integration Timeline: Verify the progress of merging UBS and Credit Suisse legal entities and sustainability governance structures, with full integration targeted for 2024-2026.
- Target Revisions: Confirm the specific 2030 decarbonization targets for the combined lending portfolio (e.g., 70% reduction in absolute financed emissions for fossil fuels).
- Data Availability: Note that full quantitative climate risk metrics for the combined entity (including Credit Suisse) are scheduled for publication in Q3 2024.
- Scope 3 Emissions: Review the updated Scope 3 targets for key vendors and financed emissions, acknowledging dependencies on external data quality and client actions.
- Financial Performance Context: Cross-reference this sustainability report with the UBS Group Annual Report 2023 for actual financial results (revenue, profit, capital ratios) which are not contained in this filing.