Sustainable investing capabilities of private banks

An assessment of 20 private banks

Sustainable investing is coming of age. The portion of assets managed using sustainable approaches has risen markedly to levels that have made sustainable investing a high-priority topic for private banks, regulators and investors alike. This means that in addition to changing market sentiment, banks are increasingly having to contend with regulatory pressure to integrate environmental, social and governance (ESG) factors into their investment strategies and processes. This study, conducted by the Center for Sustainable Finance and Private Wealth (CSP) at the University of Zurich with the support of PwC Switzerland, examines the sustainable investing practices of 20 private banks to provide guidance to private banks and private investors in the rapidly evolving field of sustainable finance.

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Methodology

The study is based on an assessment of questionnaires completed by 20 banks that serve the (ultra-)high-net-worth client segment and have a sustainable investment offering. The analysis of the questionnaires was cross-checked with publicly available material to give a fuller picture. To illustrate good practices and provide guidance on emerging standards, we included both large global players and smaller, innovative private banks.

20 banks with sustainable investment offerings

Large global players and smaller, innovative banks

Cross-checked with publicly available material

«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.»

Dr. Antonios KoumbarakisSustainability & Strategic Regulatory Leader, PwC Switzerland

Key learnings

Sustainable investing vision

Private banks perform well in terms of establishing sustainability-related objectives but are still developing concrete strategic implementation plans and processes. Current strategy review and progress tracking mechanisms are often lacking or insufficient.

Sustainable offering

On the offering side, the range of sustainable products is constantly evolving, with a significant increase in the ESG funds and sustainable investing mandates being offered with different investment strategies, focuses and approaches. However, compared with conventional asset classes, the offering of sustainable investment products within the alternative investment space for private investors is lacking, as these investments often require different sourcing and due diligence capabilities.

Client interactions

Private banks are becoming increasingly active when it comes to asking their clients for sustainability preferences. This is due in part to the upcoming MiFID II requirements in the EU. More thorough client profiling and sustainability preference capturing is emerging at some banks, but this is something that should continue to be strengthened to enable clients to be matched to appropriate sustainable investments.

Sustainability risk

Private banks have started integrating sustainability risk and ESG factors in their wealth management’s internal risk management and control framework. While methods for identifying and managing ESG risks are still evolving rapidly, banks have yet to broadly apply the most sophisticated methods, such as climate scenario analysis, in wealth management.