Friday, May 21, 2021

Big Money: "Swiss private banks at odds with clients over ESG"

It's not just Bloomberg taking a fresh look at the Swiss banks.

The FT's Austria/Switzerland correspondent Sam Jones via SwissInfo, May 17:

Switzerland used to be a place where the rich came with their money to escape the world’s problems, not to confront them. 

These days, the private banks that dot the pristine streets of Zurich and Geneva are no exception when it comes to the wave of enthusiasm that has broken over the asset management world for better environmental, social and governance standards.

And, yet, for all the small forests that have been felled to produce the glossy brochures (containing, mostly, pictures of forests) littering the lobbies of Switzerland’s grand finance houses, many of the very wealthy remain stubbornly sceptical when it comes to changing the world with their money. 

“Private clients are behind the curve,” said a senior executive at one of Switzerland’s biggest private banks. While institutional investors were obsessed with environmental, social, and corporate governnace (ESG), he added, most wealthy individuals and family offices still tended to see it as philanthropy rather than investing. Putting 10 or 20 per cent of a portfolio into ESG strategies was one thing, he said, but all of it, quite another.

Another banker in Zurich was less circumspect: the entrepreneurs and oligarchs of the developing world that have been some of Swiss banking’s most coveted quarry in recent years have often made their money from a global carbon-emitting boom. The businesses they own and the markets they understand can often be the ones with the very worst environmental records. 

Climate Capital

He recalled the awkwardness of the Saudi Aramco IPO in 2019: at the same time as preaching from the gospel of sustainability, private bankers were falling over themselves to pitch an investment in one of the world’s biggest fossil fuel producers. 

Still, it is out of such politesse – others might call it moral plasticity – that Swiss banks were built.

Indeed, even if ESG investing is still a relatively small part of what the world’s rich do with their money in Switzerland, it is growing extremely fast. 

At UBS, the single biggest banker to the wealthy, sustainable investments made up 18.9 per cent of its advised assets at the end of last year. That is up from 13.5 per cent in 2019. 

ESG is in many ways a bank’s marketing dream, precisely because it is so loosely defined. Even done badly, it can be sold easily....