UBS Group AG is urging its bankers to reconsider how they publicly discuss various sustainable products, following legal advice aimed at refining their communication strategies. This directive affects the terminology used when addressing a range of topics, from net-zero goals to specific client transactions, according to sources who requested anonymity to discuss internal matters. Notably, products like debt-for-nature swaps are under scrutiny as the bank seeks to mitigate legal risks.
A spokesperson for UBS declined to provide comments on the matter.
The bank’s decision to limit the use of certain environmental, social, and governance (ESG) labels aligns with broader trends within the financial industry, which is facing tightening regulations in Europe and an uptick in activist lawsuits. In the U.S., the proliferation of ESG labels has attracted the ire of Republican lawmakers, some of whom aim to outlaw the financial strategy altogether.
This new guidance at UBS is intended to prevent accusations of greenwashing and ensure compliance with emerging regulatory frameworks. The revised terminology being proposed by UBS’s legal advisors seeks to replace shorthand phrases commonly used in the industry. For instance, rather than referring to debt-for-nature swaps, bankers are now instructed to use the term “Country Debt Conversion With Associated Sustainable Development Goal Funding,” as outlined by one insider.
“You have to use longer sentences to fully convey your message,” noted Anna-Marie Slot, co-founder of advisory firm Transition Value Partners and a former partner for global sustainability at Ashurst law firm. “While it may not look as appealing in marketing materials, regulated financial firms must be able to explain and justify their actions.”
Prior to UBS’s takeover last year, Credit Suisse dominated the market for debt-for-nature swaps. However, the new language guidelines have not deterred UBS from pursuing such transactions, according to insiders. Lawyers advising the bank expressed concerns that the term “debt-for-nature swaps” is too vague and may expose UBS to legal liability, especially since the sustainability impacts of these instruments can be challenging to substantiate. Additionally, the label suggests that these products operate similarly to derivatives like interest-rate swaps.
In practice, banks in this emerging market have often described these deals as debt conversions in client-facing materials. Before its acquisition by UBS, Credit Suisse referred to a 2022 transaction with Barbados as a “debt-conversion-for-marine-conservation,” a title it also applied to a subsequent deal in 2023 for Ecuador. Credit Suisse had previously adapted its terminology, ceasing to describe bonds related to marine conservation efforts as “blue” to clarify that these instruments do not adhere to the same use-of-proceeds framework as green bonds.
In a related development, UBS is reassessing its use of the term “net zero,” largely due to the implementation of the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD). This regulation mandates that large firms develop transition plans aimed at limiting global warming to 1.5°C above pre-industrial levels, a target that many in the finance sector now deem overly ambitious.
UBS Chairman Colm Kelleher stated in April that the bank will prioritize its sustainability framework over that of Credit Suisse, highlighting its “broader application across sectors and generally stronger risk mitigants.” As part of the integration of Credit Suisse, UBS appointed Beatriz Martin to oversee sustainability efforts, combining this role with her responsibilities for non-core and legacy operations.
According to Slot, the evolution of how financial firms communicate about sustainability is shifting from catchy phrases suitable for social media to comprehensive explanations detailing intentions and dependencies.
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