Swiss banks ready to drive sustainable innovation in Gulf investments
Switzerland’s financial and banking system offers huge potential to spur disruptive innovation and sustainable businesses in the region as the UAE and the Gulf shift to clean energy, according to a panel of ministers, bankers and officials. Swiss financial experts.
“We want to reaffirm Switzerland’s leading position in sustainable finance, with a new climate label for financial products, while exploiting the opportunities of digitalisation in the financial sector”, said Swiss Finance Minister Ueli Maurer. during the Swiss Finance Day held recently at the Swiss Pavilion at Expo 2020 Dubai.
He was speaking ahead of a panel discussion on the Swiss financial center’s main contribution to innovation and sustainability, with its advanced infrastructure and regulations covering fintech, blockchain and green investments that now help thousands of companies around the world.
International Financial Services Center
A world leader in international financial services, Switzerland is home to banks, asset managers, insurance companies, fintech and blockchain companies, and advisory firms offering innovative solutions to clients around the world. The Swiss Finance Day brought together high-level speakers from the Swiss financial center and Swiss bankers to present Switzerland’s place among the world’s leading financial centers.
“Digitalization creates new players and new opportunities for innovative services. From the customer’s point of view, financial services are becoming more efficient and profitable. But at the same time, the risks associated with data protection and life privacy are increasing, and we need to be prepared for that,” Maurer said.
Explaining the Climate Label initiative, Daniela Stoffel, State Secretary for International Finance at the Federal Department of Finance in Switzerland, told the forum: “This is perhaps the first case where a country develops a climate score by assessing significant climate-related financial risks and their impact on business models. Anyone who meets these parameters will receive a Label of Excellence and several other incentives.”
The decision, currently applicable to major banks and insurance companies in Switzerland, will help create a standardized market for sustainable finance, align banks and businesses with the United Nations Sustainable Development Goals (SDGs) on climate change and to attract new clientele from regions such as the Gulf and the Middle East, Stoffel said.
Sustainable solutions for wealth management
These goals resonate well with traditional Swiss banks and wealth managers such as UBS, which have made sustainable investing their preferred solution for private clients looking to invest globally.
“Our strategies seek to achieve competitive investment returns while explicitly focusing on sustainability objectives,” Ali Janoudi, head of MEA wealth management and head of MENA group at UBS, told Reach by Gulf News.
“Considering global net zero ambitions is an integral part of our assessment, as net zero offers both opportunities and risks for investors. By advising them appropriately, we can have a real impact on the transition to net zero, in addition to addressing their risk-return aspirations,” explained Janoudi, one of the forum participants.
In 2020, UBS recorded a 30% increase in its sustainable investments and, according to Janoudi, the Middle East and the United Arab Emirates offer great potential for diversification from fossil fuels to clean energy.
“This trend could accelerate further due to growing ambitions to reduce reliance on fossil fuels, and due to greater fiscal space for oil-exporting countries, due to the windfall from rising oil prices. Our offering includes specific instruments providing access to clean energy investments as well as the other UN Sustainable Development Goals,” he said.
Growing Interest in UAE Green Finance
The United Arab Emirates is Switzerland’s most important trading partner in the Middle East, with an annual trade volume of nearly 77 billion dirhams (20 billion Swiss francs). With greater market access for Swiss companies in finance, this number could grow rapidly as innovative investments expand.
“In an oil-producing country like the UAE, the question might be, are they really interested in sustainability? And the answer is definitely yes. Not only can you demonstrate that with sustainable cities like Masdar, but also with new projects and technologies continues,” said Arnaud Leclercq, CEO of Lombard Odier Group.
According to the Geneva-based Swiss banking group, a recent survey in the UAE found that it was not only the new generation that was keen on sustainable investments, but also the older generation that wanted access to green financial instruments.
“It’s probably because the idea of sustainability is also rooted in Islamic finance, which is very important. Sustainability and these values together create a powerful driving force for green investments,” Leclercq told the forum.
The Ukrainian crisis could be a sustainability accelerator
Commenting on the sustainable investing landscape in the aftermath of the Ukraine crisis, Leclercq said: “This has created a new supply shock and we have seen commodity prices soar. Inflation may rise to higher levels than we all expected. , and could in fact be an accelerator of sustainable investments.”
Some of these investments are directly piloted by banks in Switzerland.
Citing a real-world case study, Blaise Goetschin, CEO of Banque Cantonale de Genève, told the forum how the centuries-old public bank was financing a project to convert water from Lake Geneva into renewable energy to heat and cool its own headquarters and other buildings in the Swiss city using hydrothermal technology, which also allowed the lake to be reclassified as a tropical lake since its water temperature remained constant around 3.5 degrees Celsius.
“The Cantonal Bank succeeded in changing the heating system of this project to a hydrothermal system, based on renewable energies. This is an example that shows that philosophical discussion will not help the client – which will help the climate , it’s pragmatic technology and action,” said Goetschin.
Wallet temperature alignment
Citing a similar approach to sustainable finance, Lombard Odier’s Leclercq said the bank has experienced more than 40 global crises since its founding in 1796, but has always tried to lead by example when it comes to innovation.
“What we have done at Lombard Odier is have a partnership with the University of Oxford to build what we call portfolio temperature alignment. This means our clients can determine if, among the positions of their portfolio, if a certain percentage is actually in line with the Paris Agreement. For our clients, this means not only investing in green bonds, but also being able to assess in real time the impact of their portfolio on the environment,” said Leclercq.
To achieve this, he said, the bank was working with Oxford climate scientists and artificial intelligence experts, while creating physical risk and verification tools to make investment portfolios climate-compliant.
Reduce exposure to carbon-related assets
According to Ali Janoud of UBS, the bank has backed more than 100 green, social, sustainable or sustainability-related bond issues. “Our private and institutional clients in the Middle East looking to manage their wealth sustainably have access to these investments,” he said.
Additionally, as UBS is a founding member of the Net Zero Banking Alliance, the bank is committed to reducing its exposure to carbon-related assets and its own carbon footprint.
“Our climate strategy underlines our commitment to the United Nations Sustainable Development Goals on affordable and clean energy and on climate action. We take responsibility as a company. For example, we do not finance any new power plant projects coal-fired power generation, new arctic offshore oil projects, new thermal coal mines or new tar sands projects, plus we have a net zero greenhouse gas emissions target for our own operations. ‘by 2025,’ he said.