Sustainability used to be a major topic in the financial industry as well. Just a few years ago, no financial institution could be «green» enough, and ESG (Environmental, Social, and Governance) became the new ABC for every modern financial institution. A large number of sustainable funds were launched on the market. Today, customers have access to five times more green funds than in 2018.

But the tide has turned. Banks today see ESG mainly as a regulatory obligation rather than a business opportunity. This shift is also due to increasing regulatory requirements. Since the beginning of the year, banks have been required to assess the sustainability preferences of their clients. If clients have sustainable investment preferences, banks must ensure that the offered investment products align with these preferences in the future. This is stipulated by the self-regulation of the Swiss Bankers Association. In the mortgage business, banks are also required to actively address renovation needs and energy efficiency. Furthermore, banks with more than 500 employees must now publicly report on climate-related issues.

Doing More Yields Little Benefit

This is only one aspect. A study by zeb, a consulting firm specializing in the financial services industry, reveals another reason: banks have lost interest in the topic because there is little to gain from it. As Wieland Weinrich, Senior Manager at zeb in Switzerland, puts it: «Those who do more hardly benefit. The demand from clients for ESG products and advice falls short of expectations.»

Practical experience shows that less than 10 percent of Swiss private clients choose strictly sustainable investment products. Loans for energy-efficient renovations account for significantly less than 5 percent of the financed properties.

For the international study, regional and major banks from Germany, Austria, Switzerland, and Liechtenstein were surveyed. The key findings:

For 97 percent of the surveyed institutions, a positive ecological public image is at least as important for their reputation as seriousness or solid financial figures. However, only 17 percent describe a green image as a defining factor in their public perception.

›For the majority of the surveyed institutions, regulatory requirements are more important than stakeholder expectations in their ESG efforts.
›The availability of ESG-relevant data is seen as the biggest obstacle to expanding ESG risk management and formulating reliable ESG goals.
›Only 25 percent of the surveyed institutions currently see ESG as a positive driver for their bottom line, with an equal number seeing clear negative effects.
›Only Corporate Client Consulting pays off

The final conclusion, from a sustainability perspective, may be sobering. However, according to Wieland Weinrich, it is ultimately not surprising: «Bankers are businesspeople. If ESG were profitable for them, they would have made greater efforts long ago,» he says. In this sense, it is appropriate that policymakers and industry associations are now setting minimum standards through regulation that apply to everyone.

To increase ESG maturity in the future and align with stakeholders, zeb identifies three key levers: banks must focus on improving their ESG data expertise, embed ESG into management processes and governance structures, and involve all stakeholders with the motto «don’t preach, but inform.»

The greatest potential for banks, according to zeb, currently lies in ESG-specific consulting for corporate clients. Due to the growing financing needs, this could generate an additional annual revenue of around 700 million francs.