It is hard to escape the climate change debate at the moment. It dominates the news headlines, be it as lead item at the agenda at Davos, or coverage of the Australian bush fires. It is a topic of discussion at almost every press briefing I go to, and even here at the new FT headquarters there are screens dotted around the offices beaming images of erstwhile reporters and columnists explaining what we can do to lower our carbon footprint (top tip – don’t have any more children).
Most private banks are at pains to point out that they are taking environmental, social and governance factors, or ESG, very seriously indeed when it comes to portfolio construction. They say this is not a fad, rather it is quickly becoming the norm, and, importantly, that far from damaging performance, constructing portfolios with an ESG screen layered over the top can actually boost returns.
I doubt they would be advising their clients to refrain from having children though, as many seem to have identified that by getting on board with climate change and ESG, they have found a way to forge relationships with the next generation.
Ed Raymond, head of portfolio management UK at Julius Baer has done some digging, and reports that more than 95 per cent of the Swiss bank’s UK clients investing in ESG are baby boomers. “That seems to debunk the myth that this is a millennial-driven thing. But when I spoke to the relationship managers, each one said how these clients are seeing pressure coming from their children.”
As he puts it, these children are not only inheriting their parents’ money, they are also “inheriting the world”. This next generation are clearly talking to their parents and getting them to think about how they invest.
Coutts reports similar trends. In July 2019 the bank held a big climate change event at their London offices on the Strand. “We had Sir David Attenborough and Mark Carney,” says Camilla Stowell, managing director of wealth and investment management, at Coutts.
“I must say it was probably the most popular event we have ever done, we were literally having to turn our clients away at the doors, and actually it was multi-generational as well, whole families were coming. Kids and parents.”
She explains some of the little changes Coutts is making as it attempts to prove its green credentials. At the end of last year the bank promised to plant a tree for every client who opted for paperless communications and claims it now has 2000 saplings to find homes for. Ms Stowell lauds the bees the bank keeps on its roof, and the vertical farm which provides produce for its kitchens. And in April it plans to publish the carbon footprint of its own portfolios.
Forward-thinking private banks are taking ESG very seriously indeed. No doubt many in the upper echelons really do believe it is their duty to help their clients, and companies they invest in, transition to a new, greener world. But the way this chimes with the world view of the very people who will hopefully be their clients of the future may be the biggest draw of all.
Elliot Smither is chief sub editor and senior writer at Professional Wealth Management. Follow him on Twitter @ElliotSmither
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