This report assesses the sustainable investing capabilities of 20 private banks. It analyses the sustainable offering, governance, and management of the banks, as well as their SI policies, training, and client interactions. While the research found that the banks were making progress in several areas, it called for better training and education for client advisers. Based on the findings, we recommend that private banks should continue improving their ESG reporting and monitoring, invest in training for client advisers, and consider designing financial incentives for clients to promote sustainable investing.

Sustainable investing vision

Most large banks have set up a sustainable investing vision, aiming to align their investments with the Paris Agreement and the UN Sustainable Development Goals. However, their visions vary in scope and specificity, and client preferences can often drive sustainable investments more than the banks’ policies. To build client trust and increase understanding, banks should provide transparency around their ESG strategy, simplify their ESG reporting, and educate their clients about the benefits of sustainable investing.

Sustainability offering

Private banks have developed a range of sustainability products and solutions, such as thematic, impact, and ESG mandates. However, there is room for improvement in their ESG integration processes, with many banks relying on generalist data providers and the lack of a common ESG framework. To increase impact, banks should establish well-defined processes and systems for monitoring sustainability objectives, investing in bespoke ESG data platforms and analysis, and offering comprehensive training programmes for staff.

Governance and management of sustainability objectives

To effectively govern sustainability objectives, banks should involve top management and establish clear roles and responsibility. Banks should track the sustainability objectives regularly and report progress via a centralised governance body regularly. They should implement well-defined processes and systems to continually track progress and ensure regular reviews. While we found success in some banks with establishing a weekly or monthly review mechanism, including tools and metrics such as TEAM sustainability excellence scorecard.

Client interactions

Most private banks aim to help their clients towards sustainable investing. However, private banks struggle to educate their clients and engage with the ESG topic. Banks must improve client engagement and focus on how they can involve clients more in the process. They can design bespoke sustainability and impact reporting based on the client’s requirement and preferences, in line with reporting capabilities for public markets, and focus on improving private market ESG and impact reporting.

Sustainability risk

The report found that while private banks’ consideration of sustainability risks differed vastly throughout a respective institution, ESG risk management was a highly evolving topic and on the banks’ agenda for years to come. Banks should fully integrate sustainability risk management across all investment processes and establish ESG risk governance capabilities. Written guidelines on sustainability risk management integrated in the organisation’s overall sustainability policy is an important step towards a more sustainable future. Banks should follow TCFD guidelines to perform climate risk scenario analyses for the bank’s entire asset base, including wealth management.

Regulatory developments in the area of sustainable finance

Regulators around the world are heavily involved in shaping the sustainability agenda, introducing mandatory disclosure obligations on environmental, social, and governance factors into investment strategies and processes. The private banks can start by having full transparency of potential ESG risks and its impact on their clients’ wealth, and also want to continue regular communication with clients about ESG issues, such as climate risk, and compliance. Additionally, participating in sustainability market initiatives and working groups and implementing relevant regulations such as SFDR and the Net Zero Asset Manager Initiative should also be adopted by banks.

Bank profiles

The report assesses the sustainability offerings, governance, and management of 20 private banks. Using quantitative and qualitative evidence throughout the report, the research analyses sustainability risk management, ESG product offering, sustainability commitment, transparency in reporting, and client interactions against best practice metrics. The research finds that some banks demonstrate best practices, while others struggle in specific areas.