UBS Wealth Management Americas is pitching to US retail investors the index-linked green bond structured notes developed by BNP Paribas Securities and the World Bank in July last year. The 10-year structured green bond offers exposure to the performance of the Ethical Europe Equity Index developed by German index provider Solactive.
This is the first time that such green bonds have been launched by the World Bank for retail investors in the US, and UBS has moved to capitalise on the trend for sustainable investing in the domestic retail market, said John Amore (pictured), deputy head of wealth management transformation at UBS Wealth Management Americas. “There is an increasing client demand for sustainable investing products and solutions in the US,” said Amore. “Investors that are already committed to sustainable investing and aligning their investment portfolios with their personal values are demanding these kinds of solutions across-asset classes. We believe it is an interesting way to integrate sustainable investing into their portfolios via structured notes.”
“We can provide value to clients through sustainable investments,” he said. “We want to be among the main providers of sustainable investments in the US and globally.
Sustainable investing has been an area more in the domain of foundations, endowments, institutional investors and family offices, but demand is moving to other segments of the market, and providers need to find solutions that are suited for a broader audience, said Amore. “This equity-linked World Bank note is a way to democratise a sustainable investment solution,” he said. “When we have discussions with clients about this note, the sustainability element is key, but there are other elements, such as the credit rating of the issuer and the potential equity-like return of the European Ethical index, which allows investors to diversify their exposure.”
Demand for shorter tenors is also there, but in the current interest rates environment short-term structures are more difficult to price, said Amore. “As the segment matures, we see client demand getting more specific,” he said. “Initially, the underlying assets may be broad based, but we see this getting more theme-based, covering assets such as water, infrastructure, renewable energy and micro-finance.”
The introduction of the first index-linked green bond reflects a comeback of theme-based solutions because societal challenges have not gone away and investors are now “even more” interested in supporting firms and projects that address some of the problems the world is facing such as food scarcity, deforestation, access to healthcare, and income inequality, according to Amore.
The notes offer full capital protection on the initial investment and 100% participation in the rise of the index. The final index level is calculated as the average of 25 monthly readings taken during the last 24 months of investment.
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