Following are excerpts from a CNBC interview with Jürg Zeltner, President, Wealth Management at UBS, from the World Economic Forum 2017 with Steve Sedgwick and Geoff Cutmore.
GC: 'The private sector is being ignored in green project fund raising' that according to a new report from UBS. The Swiss bank has warned of hurdles preventing critical private funds from flowing into sustainability projects. Well we're very pleased to have with us Jürg Zeltner the President of Wealth Management at UBS. Good to see you, thanks for joining us. Just on the white paper for a moment, just give us a line on this and why this is such an important issue.
JZ: Look I think global growth is a number one topic. It's pretty obvious that even companies need to commit to sustainable targets, we've done so. We're at the forefront given that we have the privilege to service the most privileged in the world. We've committed to actually invest over the years, took on five billion of the clients' money into sustainable investments. What does that mean? It's actually investments that are beyond financial return and I think the private sector has it all to play. We acknowledge that and we want to contribute.
SS: So what's the barrier? Why is all this huge amount of money which is desperate for return, it's really struggling to get a return anyway, it can't get it in fixed income, it's worried about stock market levels. You guys are the transmission mechanism aren't you, between that wealth and it finding an STG home. Why is it not finding it?
JZ: Obviously you're dependent on the macro environment, right wand we've seen obviously over the last couple of quarter quite a risk of environment. Uncertainty is never good for climate behaviour and that is when people are very reluctant to invest money. On the other end, that's when they actually think very hard on what they want to do with the money. And if you think about it, the price to now suddenly invest in a sustainable way came down. If you had a high return environment people are reluctant – this is now the right moment to bring these ideas to clients…
SS: It's very lazy to accuse governments of not leading the way and giving regulation and giving tax breaks but I guess that's part of it as well saying, look, if the governments want to unlock this huge pool of money, not only for climate issues and sustainable issues but just for infrastructure generally, then the governments have got to say 'ok we're going to give you a few percentage points of tax benefits to do this.'
JZ: Oh absolutely, and I think it needs both right. It needs the government sector and it needs the private sector to partner up which is why the United Nations has agreed to the targets. We are one of the companies that has actually agreed to these targets and we want to contribute by channelling the flows. But ultimately, it's the client's money, the clients will actually direct where they want to direct, where they have their own priories. But the wealthy people are the most privileged ones. And there is a role to play for them as well.
GC: We've seen a clear shift in the way markets have behaved since Donald Trump's election. Can I ask you, do you think that this shift now is permanent? That we can expect to see people moving to reduce their positions in fixed income and increasing their holdings in risk assets like equities. Or will it be like 2016 that we get a trend reversal year that makes it very difficult to make money?
JZ: Early to say. There seems to be Trump effect. But that's only one of the effects, right, the real driver is actually light and sight in terms of the yield curve. We have a committed growth pattern in terms of raising rates which is very important for the US because that means they are on a sustainable growth plan. It sort of puts a flaw into Europe, right, because you don't want to get too much of a divergent amongst the two. We got used to the growth in China which is, call it six-ish, and I think that feels to me very different. If you look at the markets here today markets would actually justify that people want to go back into liquid markets into equities. And that's the big questions. Are we ahead of the largest asset trade that we've seen over the last, call it, decade after the financial crisis.
GC: Well we're going to find out this year.
JZ: Oh yeah, we have to!