UBS has launched financial benchmark indices for debt issued by the World Bank and other development banks.
Solactive, a German financial indices provider, is helping facilitate the Solactive UBS Development Bank Bond, which comprises 36 total return indices that match the performance of US dollar-denominated bonds issued by development banks.
The new indices will cover World Bank bonds, multilateral development lender bonds, and development bank bonds. Their aim is to give investors the ability to allocate more private capital to sustainable fixed-income instruments and depend less on traditional indices which typically offer only 2 percent exposure to development lenders. According to UBS, the indices will cover a range of instruments that actively finance development banks’ balance sheets.
Jim Yong Kim, president of the World Bank Group, made the announcement with UBS’s chairman of the board of directors Axel Weber at the bank’s 2018 Spring Meetings in Washington DC. UBS and The World Bank have recently partnered with the aim of making sustainable investment opportunities more available to clients.
“Investors have historically struggled to find high-grade debt instruments with a sustainability focus, especially within traditional financial benchmarks,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “These new indices open up new avenues for sustainable investors and fruitful partnerships with development banks seeking fresh funds.”
Institutional investors and corporate treasuries are expected to benefit as they often look at indices according to strict fiduciary rules, which together with low exposure to impact investment often minimise sustainable investments overall. The indices could also deepen the volume of capital with which the World Bank and other development banks fund and invest in projects around the world.
UBS has invested in about two billion Swiss Franc of World Bank debt, which forms a portion of a fully sustainable cross-asset set of portfolios for private clients. The company’s CEO, Steffen Scheuble said indices give investors “standardised access to relevant instruments that can help deepen liquidity and issuance”.
Jim Yong Kim, speaking at the meetings in DC, said greater access to quality information on investments with impact would empower investors to “move investment dollars off the sidelines and put that capital to work to address the immense environmental and social challenges in developing countries”.
UBS were contacted to name other development lenders the indices would include, but said it was unable to comment on other specific issuers apart from the World Bank.