Standard Chartered Bank looks to sustainable investments for competitive edge advantage
While the focus on sustainable investing enables deeper engagement with clients, it also requires a very different conversation and the bank has had to need to train its relationship managers.
From a corporate perspective, said Eugenia Koh, head of impact investing and engagement strategy at Standard Chartered Private Bank, sustainable investing is about future-proofing the business. About 10% of the client base is already interested in it, and the numbers are set to grow. Millennials, in particular, are investing with their values, she said, and are twice as likely to invest in companies with positive economic, social and governance (ESG) outcomes
Why sustainability matters
From a global perspective, Koh said, the United Nations sustainable development goals (SDG) offer a blueprint for ensuring that no one gets left behind. A massive gap in funding of about $2.5 trillion each year has, however, led to a call for the private sector to provide funding.
Clients want to be involved so they can make a difference and have an impact, Koh said, and two segments stand out. The next generation (NextGen) is engaging with their parents and telling them to look more at more sustainable investments. “We work to help with conversations”. And clients who are older are thinking about their legacy and impact on the world.
Insights from HNWIs
As the bank looked last year at launching an impact philosophy and having more structured conversations with clients about how they can make an impact, it decided to commission a survey to obtain insights to inform the process. The survey included more than 100 high net worth individuals (HNWI) in each of 4 markets – Hong Kong, Singapore, the UAE and the UK.
The bank found that respondents are looking at increasing their allocation to sustainable investments, Koh said, and 80% of HNWIs who are involved in philanthropy are open to shifting their contributions to sustainable investments so that they can use their capital more effectively. The survey did find, though, that some clients are confused and think sustainable investing is about philanthropy. “That is a myth we try to debunk,” Koh said.
The survey found differences between countries as well. Whereas Singapore HNWIs see their role as giving money, for example, there is momentum among HNWIs in Hong Kong around providing non-financial expertise and getting involved in supporting NGOs.
The three SDG goals of greatest interest, Koh said, are affordable & clean energy, clean water and sanitation, and good health & well-being. That may shift, however, as respondents also said the most motivating goals for the next three years will be zero hunger, affordable & clean energy, and no poverty. Koh also observed that some people are passionate about niche areas. “While we want to provide frameworks, the uniqueness of passion points should be celebrated.”
Even though measurement is quite important, Koh said very few people have looked deeply at it. This survey, however, mapped metrics and delved into details. Increasing land under sustainable cultivation was of more interest in moving to zero hunger, for instance, than an increase in products and services to address hunger issues.
The survey has been especially useful in providing a more structured framework for talking to clients about their passion points, Koh said. “We want to delve into the impact they want to create. It provides a more nuanced conversation. Metrics in our impact philosophy booklet also give clients a sense of what to measure.” Even though there’s often a shyness in Asia about holding beneficiaries to metrics, since people feel they shouldn’t be exacting if they’re giving money to do good, she believes quantification of outcomes is beneficial.
New Conversations to Grow the Business
More than just completing a survey and letting it sit on the shelf, the bank is using it to drive the business.
Going back almost a year, said Vic Malik, global head of investment advisory at Standard Chartered Private Bank, bankers were finding that clients were increasingly in looking at how they could leave a legacy. “The reason they’re giving me time was about having cash flow available to dedicate toward such goals. It is critical that we understand what drives them.”
At the same time, he said, it’s important for clients to measure how they intend to use their time, money and effort. “We ask about your role, how much time will you spend, what is the amount you want to dedicate. Those questions allow the client to put more substantive thought about their aspirations and give us an opportunity to understand the client. It is a superior way of engaging with clients. Especially in private banking, the one thing you want to get from a client is trust. This process allows us to get there very quickly.”
To address clients’ needs, Malik said, the bank has sustainable investment products across the entire spectrum of capital markets, equities, fixed income, funds and private equity. The bank uses an open architecture platform rather than its own products since wealth managers are called to be unbiased, so managers can select products that are best suited to clients’ needs. It uses funds from Blackrock, BNP Paribas and Allianz, for instance, to help clients make impactful investments. To evaluate adherence to governance systematically, the bank can draw on third-party vendors that evaluate 200-300 data points across all types of ESG topics.
Beyond a qualitative impact, though, the bank also wants to make sure clients have a positive return. And studies do show positive results to a principled approach to investing. A review of 2,200 studies, for instance, showed that there is a positive correlation between a superior return and investments that incorporate ESG principles.
While the focus on sustainable investing enables deeper engagement with clients, it also requires a very different conversation and the bank has had to need to train its relationship managers. “It is a different language set,” Malik said. The bank’s private banking academy focuses on training on key points, he said, and the bank is also building a core community of bankers to understand the language of impact investment in more depth.
Wealth management is leveraging the proposition to grow new clients, Koh noted. Since last year to end-February this year, there has been 13% growth in sustainable investing assets under management (AUM). “That’s something we want to continue.”
While the bank’s traditional offering is competitive, Malik said in conclusion, “we are having conversations we were never had before. I have a competitive advantage now.”