Asia’s wealth management revenue is expected to reach $90 billion by 2025, and private banking in Asia is expected to display significant growth in the coming years as the number of ultra-high-net-worth individuals (UHNWIs) in the region increases, says WWF-Singapore (World Wide Fund for Nature Singapore).
According to the results of a pilot study released by the independent conservation organisation on June 5, nearly half (49%) of high-net-worth individuals (HNWI) under 40 are interested in sustainable investments, and banks gear up to the $84 trillion wealth transition by 2045.
WWF-Singapore conducted a pilot study from October 2022 to February with seven private banks that have presence in Singapore and headquarters in the US, Europe and Asia.
The study found that private banks are making commitments to integrate sustainability. However, there is a need to tailor and integrate these specifically to the reality of private banking, including measurable targets and increased focus on climate and nature-related risks, says WWF-SG.
There is a need for stronger risk management among private banks, adds the organisation. “There are some green shoots with private banks undertaking environmental, social and governance (ESG) risk assessments and scenario analysis, using multiple data sources for due diligence at the group level, but it needs to be an integral part of the private banks’ processes.”
In addition, the majority of private banks have group-level oversight committees, says WWF-SG, but there is limited progress on appointing dedicated sustainability officers and incorporating sustainability considerations into board audit and nomination processes.
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Banks that do not factor ESG considerations in their assessment are more vulnerable to reputational and regulatory risks, warns the organisation.
The study follows WWF-SG’s Sustainable Private Banking and Wealth Management (SPRING) framework. SPRING highlights that ESG considerations are essential in supporting private banks in understanding their clients’ risk profiles and investment preferences, says WWF-SG. “Due to their distinct business model, private banks can adopt different strategies to engage, inform and encourage clients to invest sustainably.”
Looking ahead, WWF-Singapore aims to continue to partner with banks, investors, regulators, and stock exchanges in Asia to integrate ESG into mainstream finance and build more resilient and sustainable financial systems.
