Sustainable Investments by Private Banks Are Becoming Almost Standard Practice

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Private banks across Europe are meeting more client demands, new regulations and pressure from stakeholders with better qualified advisors. A new study carried out at the University of Zurich shows that banks are rising to the challenge of investing sustainably with varying degrees of success.

What is the current state of the sustainable investing capabilities of private banks? The Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich together with the audit and advisory company PwC Switzerland released its new report covering the fourth round of research answering this question. Twenty financial institutions were assessed in the report, including UBS, Credit Suisse, Deutsche Bank, Danske Bank, Triodos Bank and Globalance Bank from Switzerland. The study focused on aspects such as sustainability strategy and governance, sustainability risk, range and depth of sustainable investing products, and client interactions and reporting.

Managed sustainable investing assets almost doubled

According to the 2022 Sustainable Investing Capabilities of Private Banks report, the sustainable investment growth rate of assets under management has almost doubled since the previous study in 2019, rising from approx. 16% to 28%. Several banks, including UBS in 2021, have introduced sustainable investments as the preferred solution for their private clients citing comparable or better performance and global diversification as the reason for doing so. "The portion of assets managed using sustainable approaches has markedly risen to levels that have made sustainable investing a topic that cannot be ignored - neither by any bank, nor by regulators and investors," says Andrew Douglas, institutional programs manager at the CSP.

Better trained advisors, but depth still lacking

Improvements have also been made in terms of advisors’ training. Half of the banks surveyed stated that 80% to 100% of their advisors are qualified to advise clients on sustainable investing - a big jump compared to 2019 and evidence of genuine efforts to upskill advisors in this area. "Nevertheless, we continue to see client advisors struggling with sustainable finance and needing continuing, in-depth training to become confident sparring partners for their more demanding clients looking to invest sustainably," states Douglas, co-author of the report.

Regulators have been watching sustainable investment trends observing many of the claims made about sustainable investment products particularly in terms of their impact and sustainability merits have been misleading. With more sustainable investment products there has been more cases of green-washing and impact washing. Recently there have even been high profile cases such as a German investment company where the police was involved in investigating such claims. ’While regulation such as the EU taxonomy hopes to clamp down on false claims, clients need to be more critical than ever and potentially seek external advice to navigate the sustainable investing ecosystem. Impact investing in private markets and active ownership approaches hold great hope for private investors’ impact potential, but are still relatively underrepresented," Douglas says.

Regulation poses a challenge for private banks

Regulation such as the EU taxonomy is a positive development. This classification system establishes a list of environmentally sustainable economic activities and came into force in 2020. At the same time, however, it presents a major challenge. The ability of financial institutions to implement the new regulations and emerging guidelines effectively is heavily reliant on the accessibility of high-quality data which at times is still not available.

Guidance for private investors in a rapidly evolving field

CSP’s private banking report series was launched in 2017 and the publications have influenced the sector ever since. For its fourth edition, CSP collaborated with PwC Switzerland. The twenty banks assessed in the report provide an opportunity for financial institutions to compare themselves against industry benchmarks and see where they might improve in the future. At the same time, the report allows prospects and clients to assess the bank’s current sustainable investing capabilities.

"Regulation has been a driving force in banks’ preparedness to offer and improve sustainable investing solutions. This report provides guidance to private investors and private banks in the rapidly evolving field of sustainable finance," concludes Antonios Koumbarakis, co-author and Head Sustainability and Strategic Regulatory at PwC Switzerland.

Journalists are cordially invited to attend the launch apero and online launch sessions (in English):
Apero: Thursday, June 16, 2022 - 18:00-20:00, Restaurant UniTurm, Rämistrasse 71, 8006 Zürich - Register
Zoom: Thursday, June 16, 2022 - 13:00-13:30 CET- Register or 16:00-16:30 CET - Register


Literature:

Andrew Douglas, Antonios Koumbarakis. Sustainable Investing Capabilities of Private Banks. June 16, 2022.

Center for Sustainable Finance and Private Wealth (CSP) Zurich

The Center for Sustainable Finance and Private Wealth (CSP) is a research and teaching unit at the Department of Banking and Finance of the University of Zurich in Switzerland. The CSP engages in multidisciplinary research to explore fundamental issues and current dynamics in sustainable finance. It uses the insights from its research to advance the understanding of sustainable finance within the private wealth ecosystem. The goal of the CSP is to activate sustainable development. www.csp.uzh.ch

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