Partnerships with the private sector

Paul Clements-Hunt

Paul Clements-Hunt

Paul Clements-Hunt is Head of Unit at the UNEP Finance Initiative.


UNEP talks sustainability with bankers

The potential of wealthy individuals' investments for promoting sustainability is largely unexplored.

The Swiss private banking industry is being challenged like never before. UNEP Finance Initiative, a Geneva-based public private partnership between the environmental arm of the United Nations and some 170 financial institutions worldwide, is urging bankers to the rich and super rich to buy into the «People, Planet, Profit» ethos. Why? Because aligning Return on Investment with Responsibility of Investment - the two ROIs - is great business for private bankers as more and more rich clients are demanding both.

The integration of environmental, social and governance (ESG) issues into mainstream investing has captured the imagination of the global financial community in the past two years. And the hard numbers are there to prove it: institutional investors (currently representing more than US $8 trillion in assets) have now committed to integrate ESG issues into their investment decision-making and ownership practices. The institutions behind those assets - representing more than 12% of global capital market value - are the world's largest pension funds, special government reserves and foundations which now back the United Nations Principles for Responsible Investment (UNPRI) launched by former Secretary General Kofi Annan in April 2006. The PRI process was coordinated by UNEP FI and the UN Global Compact.

The simple question UNEP FI has posed to the Swiss private banking community is: «Why don't you embrace ESG for your clients as the world's institutional investors have done?» To open a dialogue, UNEP FI invited more than 40 senior representatives of some of the world's most prestigious private banking institutions to the Palais des Nations, the United Nations office in Geneva, in November 2006. The purpose was to discuss the possibility and ways of incorporating ESG factors into the management of the assets of high net worth individuals (HNWIs). The robust discussion at Geneva's historic Palais revealed new opportunities for the private banking community whose core clients appear to have a growing appetite for ESG-themed investment and asset management products. Research published in 2006 showed that in Switzerland the total assets managed using ESG-inclusive investment styles exceeded CHF10 billion (over US $8 billion) at the end of 2005.

The expectation is that global assets of HNWIs will reach more than US $44 trillion by 2010. HNWIs typically hold 4-5% of their assets in investments that integrate ESG considerations. At the same time, market analysis indicates that 32% of this community find ESG investment concepts attractive. Private bankers willing to take a leadership role in ensuring the development of products and services that respect the two ROIs - Return on Investment and Responsibility of Investment - will be serving a market where client demand is set to outstrip supply.

Among the remarks by participants on ESG-inclusive products:

Following the success of the Geneva meeting, UNEP FI's «Private Banking Roadshow» rolled on to Sao Paolo, Brazil, in March 2007.

The Geneva and Sao Paolo events have confirmed that private wealth can operate with unencumbered flexibility and speed. Its potential for promoting sustainability, however, is largely unexplored. UNEP FI sees its discussions with Switzerland's private bankers - as well as those in other parts of the world - as a journey of understanding, and we look forward to continuing the exploration.