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UBS Funds

Fund Complex: UBS Funds
Management Company: UBS Asset Management (Americas) Inc.
Funds Affected: (1) UBS US Sustainable Equity Fund, UBS International Sustainable Equity Fund, (2) UBS Engage for Impact Fund, (3) UBS Sustainable Development Bank Bond Fund
Sustainable Investing Strategy: (1)ESG Integration, Exclusions, (2) Exclusions, Impact, ESG Integration, Engagement, (3) Impact
Summary:
(1) The advisor will employ both a positive and negative screening process with regard to securities selection for the fund. The negative screening process will exclude securities with more than 5% of sales in alcohol, tobacco, defense, nuclear, GMO (Genetically Modified Organisms), gambling and pornography from the fund’s portfolio. The adviser believes that this negative screen reduces the global universe by about 7% by market capitalization and the advisor does not expect it to have a material impact on portfolio construction or strategy. The advisor may modify the above list of negative screens at any time, without prior shareholder approval or notice

The positive screening process will identify securities of companies that are attractive based on their fundamental and valuation profile in addition to evaluating specific sustainability factors.

These sustainability factors are material factors that help the advisor evaluate and compare the environmental, social and governance performance of the investable universe.

(2) The advisor seeks to invest in companies that are believed to be attractively valued, that integrate sustainability factors into the business model to build a competitive advantage, whose products and services can create meaningful, intentional, verifiable and measurable impact on society and the environment; and which have a clearly identified potential for additional positive impact that the advisor intends to drive through engagement with the companies. In selecting individual securities for investment, the following factors are considered:

  • Assessment of fundamental valuation (price/intrinsic value) to seek attractively valued companies with strong financial performance;li>
  • Quantitative and qualitative environmental, social and governance (ESG”) factors;
  • Quantitative and qualitative assessment of a company’s current and potential impact on society and the environment; and
  • The advisor’s ability to drive positive change in a company’s impact profile through engagement.
  • The advisor aims to identify the best investment ideas with additional impact potential across the market capitalization spectrum, sectors and geographies within the eligible investment universe (the impact universe).

    The impact universe is comprised of companies whose products and services can create measurable, verifiable impact within specific impact categories (such as climate change, air pollution, clean water and water scarcity, treatment of disease and food security and others) that are aligned with the United Nations Sustainable Development Goals. The advisor’s assessment of the ability of public companies to generate impact is based upon impact measurement methodologies the advisor has developed in partnership with academics from the fields of earth sciences and public health science. The impact of portfolio holdings is measured in changes in human well-being and changes in environmental quality (e.g. reduction in air pollution, hospitalizations and biodiversity loss).

    Engagement with portfolio companies is a key aspect of the Fund’s strategy. Companies have the potential to create additional impact through improving or optimizing the use of their products and services throughout society as well as indirectly through changes to their operations and supply chain. The advisor’s Global Sustainable Equities team and the Sustainable Research staff will seek to increase impact at each portfolio company through engagement on both fronts through communication with company management and continuous monitoring of the company’s ESG impact. The advisor will establish specific impact goals, and measure and evaluate progress regularly in order to assess the impact of its engagement efforts. The purpose of engagement with companies is to:

  • Improve the advisor’s ability to independently measure impact;
  • Engage the company to help it inform its strategy with regard to societal goals;
  • Engage the company to help increase its product and service impact by identifying target markets, customers and business partners that create additional impact over time; and
  • Engage the company to identify business model risks and opportunities linked to the ESG component of operations, supply chains and other aspects of the company that can help increase positive impact over time.
  • The advisor will employ both a positive and negative screening process with regard to securities selection for the fund. The negative screening process will exclude securities of companies with more than 5% of sales in alcohol, tobacco, defense, nuclear, gambling and pornography from the Fund’s portfolio. The advisor may modify this list of negative screens at any time, without shareholder approval or notice. The positive screening process seeks to identify securities of companies that provide solutions to significant global challenges through the impact of their products and services, that are attractive based on their fundamental and valuation profile in addition to evaluating specific sustainability (ESG) factors as well as the ability of the advisor to engage with the company’s management on impact-related issues.

    (3) The advisor seeks to invest in bonds issued by development banks. The advisor constructs the portfolio consisting of multilateral and regional development banks with a focus primarily on bonds issued by multilateral development banks which may include, but are not limited to, the World Bank, International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development. Development banks are formed by their member states with the objective to provide financial and technical assistance to improve overall living standards through sustainable economic development and growth. While each development bank has a distinct focus, development banks generally use their capital for projects that seek to improve the state of the developing world, promote sustainable growth and raise living standards.

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