Customisation in the integration of sustainability into private banking

One of the challenges facing private banks today is the need for customisation when integrating sustainability into their businesses. This requires the implementation of environmental rating methodologies, as well as the ability to offer tailor-made sustainable investment solutions.

Today, clients have become increasingly demanding in the complex world of private banking. With the proliferation of investment products, digitalisation, the heterogeneous nature of client bases and the need to integrate strong sustainability criteria into their business, the private banker’s role has become even more complex. Faced with all these challenges and an endless flow of information, the private banker must remain focused to be able to define clients’ needs and the tailored solutions to meet them.

Defining environmental rating methodologies

Integrating sustainability into the services they offer is now the order of the day for private banks. It allows them to finance the economy ethically, to develop and engage with their employees in a responsible manner, and to be agents for positive change by stepping up the transition to a greener, more sustainable future. The number of sustainable investment opportunities available to clients is growing as a result, as is the number of environmentally conscious investors. At the same time, green washing – where financial products are passed off as responsible when they aren’t – is also an established fact in the banking world.

On this subject, Jérôme Eschbach, Head of Impact Solutions at BNP Paribas, Switzerland, explains: “To avoid green washing in today’s environment, the services of a reliable private bank must be based on an internal environmental, social and governance rating methodology that covers most asset classes.” Private banks cannot take at face value all investment products that claim to be sustainable. It is essential that they assess these products themselves before offering them to clients. This is exactly what BNP Paribas has done.

It started by rating its funds, including exchange traded funds (ETFs), then equities and bonds, and has now launched its own methodology for rating green, sovereign and supranational bonds. In addition, the bank is now preparing to launch a similar methodology for structured products.

Offering such an approach requires more than the non-financial rating methodologies available on the market and limited to funds, stocks and bonds with heterogeneous systems. In fact, customising environmental rating methodologies allows us to provide clients with a global assessment of the environmental, social and governance (ESG) quality of their investment portfolios, across all asset classes.

Customising sustainable investment solutions

Private bankers have long appreciated the heterogeneity and segmentation of their client bases. They are also aware of the continual changes in their clients’ behaviour and needs. Such factors make it crucial to identify the different needs of clients across all generations and to take into account their individual values, interests and motivations, as well as their financial goals.

For private banks today, true engagement not only means offering varied and innovative services that incorporate sustainability issues and position banks as pioneers in positive impact solutions. Engagement also means offering clients an original and tailored service. A major challenge facing private banks today is being able to offer a wide range of truly personalised sustainable investment solutions and build portfolios that best reflect the investor’s profile. This is also essential when it comes to retaining existing clients and engaging new ones.

When advising on sustainable investment products, it is first and foremost important to raise clients’ awareness on sustainability issues and the UN’s Sustainable Development Goals, all while establishing their profile as responsible investors. Banks must be able to provide private clients with appropriate and personalised advice on sustainable investment issues. Those providing advice should be true experts in positive impact solutions who are able to share key insights on sustainable investment and impact investing. Lastly, it is essential to offer follow-up services to clients, for example, by providing sustainability reports that analyse the ESG quality of investments made.