Private Banking Profits and ESG Partnerships

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Norbert Paddags co-wrote this article that explains why private banking can grow and become more profitable, in a good way.

Sustainable investments continue to gain in importance, driven by investor expectations and regulation. This creates challenges for portfolio management and the pricing of cost-intensive ESG services. If these are mastered, one can do good and earn money in the process.

On March 10, 2021, the “Regulation on Sustainability-Related Disclosure Obligations in the Financial Services Sector”, or Disclosure Regulation for short, will come into force and thus one of the central components of the EU’s ESG regulations. The ordinance, which, among other things, is intended to increase transparency about which financial products are more or less “green”, has been widely discussed in the specialist press, from the setting of objectives to implementation. Even if the goal of reducing “greenwashing” is a very sensible one, some private bankers will be reminded of the introduction of MiFID II and be slightly or more annoyed: additional regulatory effort in the case of requirements that are still unclear and have to be implemented at short notice.

Beyond the fulfillment of the minimum regulatory requirements, which one simply cannot avoid, the question arises for every company how it would like to deal with the topic of ESG now and in the future. A minimalist approach would be to include individual sustainable investment solutions in the range so that the customer can say “We also have something in green” when asked. Even if this approach may seem resource-saving and therefore sensible in the short term, it negates two important points:

ESG is one of the dominant social issues, and therefore also a financial market issue, and will develop into the market standard, which can be demonstrated, among other things, by the growth of AuM

Regardless of how practicable it is to implement them, ESG-related regulations will become increasingly important over the next few years, from investment advice to the identification of EU-specific ESG criteria.

If you follow these two theses, a comprehensive alignment and implementation of ESG topics is necessary.

 

Key points include:

  • The growth of green market
  • Requirements for ESG portfolios
  • Sustainable pricing models

 

Read the full article, Do good and earn money with it – how private banking can grow and become more profitable with ESG, on Paddags.com.