UBS is poised to ramp up its lending efforts in the shipping sector while winding down loans to fossil fuel clients inherited from Credit Suisse, according to executives speaking with Reuters. This move represents a significant step in evaluating the sustainability commitments of banks in the wake of mega-mergers.

The merger of Switzerland’s two largest lenders initiated a complex integration process, necessitating the alignment of their respective environmental, social, and governance (ESG) initiatives. Chief Sustainability Officer Michael Baldinger described this process as a monumental effort, involving the harmonization of sustainability frameworks, methodologies, and programs.

One of the primary challenges facing UBS was determining the fate of legacy loans, particularly those tied to sectors deemed incompatible with the bank’s sustainability risk appetite, such as oil and gas. These loans will be housed in a “non-core” unit and allowed to run off over time, aligning with UBS’s commitment to reducing emissions and transitioning to a more sustainable lending portfolio.

Despite re-basing its emissions-reduction targets, UBS remains steadfast in its commitment to reducing fossil fuel sector emissions. The bank aims to achieve a 72% reduction by 2030, with a focus on sectors such as shipping, where innovation is driving cleaner technologies.

UBS also unveiled updated emissions reduction targets for real estate, power generation, cement, and iron and steel sectors, signaling its intent to prioritize sustainability across various industries. Christian Leitz, UBS’ head of corporate responsibility, emphasized the importance of evaluating all of Credit Suisse’s sustainable investing products to ensure alignment with the new framework.

In conclusion, UBS’s strategic approach to lending reflects its commitment to sustainability and responsible finance. By increasing support for the shipping sector and phasing out loans to fossil fuel clients, UBS is positioning itself as a leader in promoting environmental stewardship within the banking industry.