Sustainability as a guiding principle is here to stay. It already affects customer priorities, changes business models, impacts risk management, and regulatory obligations. The transition towards sustainability is changing fast – financial institutions need to adapt in order to differentiate.
We observe that clients want to «invest with purpose» which corresponds to the desire to receive a transparent reporting on ESG KPIs (digital, real time). Given the financial market participants, institutional investors need to have solutions for their clients, although a shortage in sustainable investment possibilities remains.
According to our 2020 Sustainable Finance Survey one out of five clients is willing to change the bank for a more sophisticated sustainable investment product offering. Hence, offering sustainable investment solutions benefit the competitive positioning amongst peers. In conclusion, a comprehensive product offering as well as advanced reporting capabilities will be crucial: new ESG KPIs will be key to differentiate against the competition.
Financial institutions are facing fast-paced changes in regulatory requirements such as client suitability, product disclosure, and very importantly ESG Taxonomy. The implementation of these regulations - especially the EU Taxonomy - will have a fundamental impact on client advisory, portfolio management, investment decision processes, and credit processes. Thus, it imposes the need for additional ESG classification data.
Climate and ESG related risks need to be considered in various dimensions of the banking business, e.g. investment products, credit, and portfolio management. The adaptation and mitigation measures addressing the effects of climate change result in business opportunities for corporates. Consequently, banks can benefit from a tailored integration of these risks into their risk management framework.
It is key to take a holistic approach on sustainability.
BearingPoint contributes to the sustainability transition by actively engaging in industry organizations and by publishing studies, commentaries, and white papers.