Sustainable and Impact Investing

Dr James Gifford, PhD Executive Director UBS AG

For Marketing Purposes

2

Investment portfolios have an impact on the world, for better or for worse.

3

A simple premise

The world has an impact on your investments, for better or for worse.

The world has an impact on your investments, for better or for worse.

The world has an impact on investment portfolios, for better or for worse.

4

5

Three approaches

Exclusion

Screen and exclude companies or sectors that do not meet certain environmental, social or governance criteria

Integration

Focus on securities with strong environmental, social and governance (ESG) characteristics in combination with attractive financial fundamentals.

Impact Investing

Investments made with the explicit intention to generate measurable environmental or social impact alongside financial return.

6

Size of the market – sustainable investing Current estimates (ex renewables)

Not scaled to size. Sources: Global Sustainable Investment Alliance, Market Watch,

USD 24 Trillion Global assets professionally managed with SI strategies USD 70 Trillion

Total value of largest global stock exchanges in 2017

USD 114 Billion Impact Investing

7

Size of the market – impact investing Growth of the Impact Investing market (ex renewables)

Sources: Global Impact Investing Network, Calvert Foundation

8

Interest is on the rise

28%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Today Future

Family offices who self report engaging in impact investing and who plan to increase their exposure to impact / environment, social and governance

investments

Current FO client base

Source: The UBS / Campden Wealth Global Family Office Report 2017 For illustrative purposes only. Please always read in conjunction with the risk information at the end of the document.

The face of wealth is changing

0

5

10

15

20

25

30

2015 2020

USD 24 trillion of global assets will be owned by millennials in 2020

USD Trn

11

Millennial express strong interest in impact investing

28% 24%

6% 5% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Millennials Gen X Baby Boomers Mature

Interested insocial impactinvesting

Have madesocial impactinvestments

28% 24%

85%

55%

85% Of millennials interested or very interested in

social impact investing

Source: US Trust, BOML (2016). US Trust Insights on Wealth and Worth Survey For illustrative purposes only. Please always read in conjunction with the risk information at the end of the document.

12

Sustainability

88% of women want to invest in entities that have a positive social impact

Women's economic power is on the rise

Source: Boston College Social Welfare Research Unit, McKinsey, Warner (2006) The Power of the Purse: How Smart Businesses are Adapting to the World's Most Important Consumer – Women, Ernst and Young LLP (2016) Harnessing the power of women investors in

wealth management ,UBS. For illustrative purposes only. Please always read in conjunction with the risk information at the end of the document.

6.7%

5.1%

4%

5%

6%

7%

Projected 2017 - 2021 wealth growth by gender, annual %, global market

research

Inheritance

Women to inherit 70% of the USD 41 trillion of legacies in the US (2003 – 2043)

Sources: The Millennium Project, 2014.

For illustrative purposes only. Please always read in conjunction with the glossary and the risk information at the end of the document.

Challenges and Opportunities

Global challenges as drivers of sustainable investing

The world's population is expected to reach over 8 billion by 2030, further increasing demand for food, water and

energy supplies.

US$13 trillion of sustainable investment opportunities

in key sectors by 2050.

• US$3.5 trillion Health and Education

• US$3.5 trillion Metals

• US$3.0 trillion Energy

• US$1.9 trillion Agriculture and Food

• US$0.6 trillion Water and Forestry

8.3 billion people require compared to 2015

+35% Food

+40% Water

+50% Energy

Huge opportunities in key sectors:

14

Returns across three dimensions Three reasons to engage in sustainable & impact investing

15

Sustainability challenges UN Sustainable Development Goals

Source: United Nations, November 29, 2017 Please see important disclaimer at the end of the document.

16

Reaching the SDGs is question of financing USD 2.5 trillion annual funding gap for key SDG sectors

Total annualinvestment needs

Current annualinvestment

Total investmentgap

3.9 1.4

2.5

Estimated investment gap in key SDG sectors in developing countries Trillions of USD, annual average 2015 - 2030

Source: UNCTAD World Investment Report, 2014

17

Private wealth needs to be part of the solution Annual funding gap for SDGs dwarfs in comparison to private wealth holdings

Source: Credit Suisse, Global Wealth Report 2013, Brookings Institute

Investment gap Top 1% private wealth

$2.5 trillion

$130 trillion

18

Aligning and passing down family values Building and preserving a legacy

Family unity and engagement

Millenials

Intergenerational engagement

Disengaged members

Members without interest in finance

Next generation skills development Widen the circle of competence

Life Satisfaction Passion, meaning, happiness, personal values fulfillment

19

“There have been more than two thousand academic studies on factors related to sustainable Investing over the last 40 years (Friede et al, 2015).

Systematic reviews of the literature conclude that integrating sustainable factors either improves financial returns , or causes no detriment to them , across all asset classes .”

Professor Timo Busch, 2017 School of Business, Economics and Social sciences University of Hamburg

How does it perform financially?

Source: Interview, 2017. For illustrative purposes only. Please always read in conjunction with the glossary and the risk information at the end of the document.

20

Similar performance over long term

Sustainable and conventional equity indices exhibit similar performance Comparison of S&P 500 Index and MSCI KLD 400 Social Index (i.e. sustainability equivalent of S&P 500) April 1990 – June 2016

Average Return

10.4%

Annual. Volatility

14.5%

Source: Bloomberg, as of June 2016. Please always read in conjunction with the risk information at the end of the document.

0%

2%

4%

6%

8%

10%

12%

14%

16%

S&P 500 Index MSCI KLD 400 Social Index

Average return (annualized)

Volatility (annualized)

Average Return

10.4%

Average Return

10.9%

Annual. Volatility

15.1%

Past performance is not a reliable indication of future results

Annual. Volatility

14.5%

21

Sustainability themes leverage megatrends

22

100% Sustainable and Impact portfolio - liquid

Cash 5%

World Bank bonds 13%

Green bonds 10%

ESG leaders bonds 18%

ESG leaders equities

10%

Improving ESG equities

15%

ESG thematic equities

15%

ESG engagement

equities 14%

Sustainable Investing

Impact Investing

Other

Liquidity

Bonds

Equities

23

• A leading computer manufacturing company faced heavy criticism for the unethical treatment of its Asia-based employees

• The fund manager used its influence as a shareholder to push the company to address the issue.

• The company has made solid progress, as verified by an independent assessment .

• In 2017, the company was officially taken off a third-party Controversial Companies List.

Shareholder engagement

Global computer manufacturing company:

Social sustainability

24

Shareholder engagement ESG engagement can improve financial performance

Engagement (both successful andunsuccessful)

Successful engagement

1.8%

4.4%

Abnormal positive returns following ESG engagement 1,800 engagements observed, 1999 - 2009

Source: Dimson, E., Karakas, O. and Li, X. (2015). Active Ownership. The Review of Financial Studies. For illustrative purposes only. The above asset classes and allocations are indicative only and can be changed by UBS without notice. Please always read in conjunction with the glossary and the risk information at the end of the document.

25

Green bonds

• Green bond issued by utility company has driven the company's transition into renewable energy.

• This includes the launch of 13 renewable energy projects, including wind turbines, solar panels and biogas.

Clean energy through Green Bonds:

Environmental Sustainability

26

Green bonds

Comparison of Bloomberg Barclays MSCI Green Bond index and Barclays Global Aggregate Dec 2013 – Oct 2017

Source: Bloomberg Please always read in conjunction with the risk information at the end of the document.

Similar historical return / risk

95

100

105

110

115

120

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17

Bloomberg Barclays MSCI Global Green Bond Index (USD…Bloomberg Barclays Global Aggregate Bond Index (USD…

27

Key takeaways

Portfolios have an impact on the

world

You can have both financial returns and

impact

The world has an impact on portfolios

Sustainable and Impact Investing

Panel:

Shuyin Tang, Partner, Patamar Capital

Robert Kraybill, Managing Director, Portfolio Management, IIX

29

Disclaimer

This material is intended for information and marketing purposes only. It is not to be regarded as investment research, a sales prospectus, an offer or solicitation of an offer to enter into any investment, to conclude an agreement or to conduct other activity. The general explanations included in this presentation cannot address your personal investment objectives, your financial situation as well as your financial needs.

Availability of described services and products: Please note that UBS retains the right to change the range of services and the products at any time without prior notice and that all information and opinions indicated are subject to change. Certain services and products are subject to legal restrictions in some countries and cannot therefore be offered worldwide on an unrestricted basis.

Accuracy and completeness of information: Although all information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions indicated are subject to change without notice and the asset classes, the asset allocation and the investment instruments are only indicative. Information displayed in this document may be referring to your personal situation as known to your UBS client advisor at the present time. Please note that UBS is under no obligation to revise this document or inform you otherwise should your personal situation change or should other employees of UBS be or come to be in possession of other or additional information.

Separate agreements and further documentation: Some products and services mentioned in this document may require agreements to be signed. Please note that only the terms and conditions of such specific agreements apply to these products and services. We kindly ask you to carefully read such agreements and revert to your UBS client advisor in case of unclarities. Please also consult further documentation on specific products and services mentioned in this document.

Legal and tax advice: We recommend that you obtain appropriate independent financial, tax or legal advice on the implications of investing in or making use of any of the products and making use of the services mentioned herein, including tax matters. Tax treatment depends on the individual circumstances and may be subject to change in the future. UBS does not provide legal or tax advice and this document does not constitute such advice. UBS further makes no representations as to the tax treatment of assets or the investment returns thereon both in general or with reference to your specific circumstances and needs. You should obtain independent tax advice on the suitability of products, assets or instruments before investing and as you may consider appropriate.

UBS’s role: At any time UBS and other companies in the UBS Group (or employees thereof) may have a long or short position, or deal as principal or agent, in relevant securities or provide advisory or other services to the issuer of relevant securities or to a company connected with an issuer.

Use of this information material: This material is not intended for distribution into the US and/or to US persons or in jurisdictions where its distribution by us would be restricted. Source of all information is UBS unless otherwise stated. UBS specifically prohibits the redistribution of this material in whole or in part without the written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect.

Investment risks: Please be reminded that all investments carry, depending on their nature, a degree of risk. Some investments may be subject to sudden and large falls in value and on realization you may receive back less than you invested. Some investments may not be readily disposable since the market in such securities is illiquid or because of minimum holding periods and therefore identifying and quantifying the risk to which you are exposed may be difficult. You should consult your UBS client advisor on the nature of any specific investment you are interested in and carefully consider whether such investment is appropriate for you before making any decision on an investment or transaction. For further information on the risks of specific types of investments and transactions we refer to the brochure ”Special Risks in Securities Trading” and the document ”Additional Risk Information” previously sent to you. Please ask your UBS client advisor for further copies of these documents if you deem necessary. The information contained in this presentation on investment strategies and asset classes in general is in abbreviated form. It is not intended to provide the sole basis of an evaluation of an investment and should not be considered a recommendation by UBS that an investment is suitable for you. UBS shall have no responsibility for the performance of investment instruments or an asset class selected by you and shall assume no liability for the selection and decision you may take.

© UBS 2017. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.