Banks in Switzerland and around the world have played an important role through the trials of 2020, providing state-supported financing to keep local and global businesses afloat during the pandemic. We can play an equally vital role in financing a sustainable and future-oriented economic recovery.
Sustainability is no longer the feel-good part of a bank’s strategy or an investor’s portfolio, as evidenced by the massive inflows into sustainability-related funds in recent years and the broad outperformance of these types of assets this year. Nor is it narrowly confined to our thinking about climate change, which remains of critical importance.
Rather, the COVID-19 pandemic has again exposed longstanding fragilities in our economies and societies, in extraordinary ways: income inequality, gaps in educational opportunities, high rates of youth unemployment in many parts of the world, caring for children and the elderly, and health and nutrition, to name only a few.
Sustainability is not an impediment to growth; it is the essential ingredient.
Climate change has not been locked down during the pandemic, either: The first half of 2020 was the second hottest on record, a trend brought to reality in horrific ways including the tragic wildfires that are gripping the West Coast, drought in parts of Asia, and another active hurricane season in the southeast US.
What is clear is that the world economy will struggle to achieve a durable global recovery until we address these challenges. Businesses need confidence in future demand for their products and services in order to invest and hire. In emerging markets—where the rapid expansion of the middle class has helped propel global growth—as well as developed economies, the global recovery may stall if people lack access to quality health care. As long as anxieties linger in large economies, globalization will remain under pressure, putting at risk many of its benefits.
There will be a necessary reshuffling of key economic sectors, creating opportunities for entrepreneurs and investors in medicine, technology, education, and infrastructure. In short, sustainability is not an impediment to growth; it is the essential ingredient. Financial institutions must play their traditional role of channeling credit and equity into these highly productive parts of the economy.
Reflecting these possibilities, at Credit Suisse, we recently launched the Sustainability, Research & Investment Solutions unit at the executive board level, which I am delighted to lead. This is more than just an organizational shuffle. It integrates Environmental, Social, and Governance standards across our global businesses, binding critical areas with one shared purpose: providing our wealth management, corporate, and institutional clients the research, advice, and solutions they need to navigate volatile markets while ensuring that “sustainability” does not degenerate into a meaningless buzzword.
This builds on the progress we have been making with our clients, including 76 percent annual growth in sustainable assets under management last year and an ambitious goal to provide at least 300 billion Swiss francs of sustainable financing over the next 10 years.
Banks must look beyond traditional business models to ensure best practices and products. For example, aligned to United Nations Sustainable Development Goal (SDG) #14, we recently launched an Ocean Engagement Fund in partnership with Rockefeller Asset Management to support small- and mid-cap companies transitioning to “cleaner” business models that support ocean preservation (a severely underfunded environmental issue). We also are financing and engaging the ecosystem of private companies that play an integral role in driving innovation in education, health care, technology, and the environment.
Governments and central banks—who took aggressive, early actions aimed at averting an even worse global recession—will continue to play a role. Green-focused stimulus will likely total trillions of dollars worldwide in the coming years, offering opportunities to innovative companies and investors in transportation, climate mitigation, and other sectors.
Central banks—which hold trillions of dollars in assets through bond purchase and lending programs—are examining climate change’s implications for the financial system. To quote European Central Bank President Christine Lagarde on climate change recently: “At the end of the day, money talks.”
Such efforts will also create fresh opportunities for private-sector growth and, critically, job creation in developed and emerging economies, a priority given the damaging toll the pandemic has taken on employment.
More fundamentally, they reflect the reality that the global economy cannot just pick up where it left off in January as if the pandemic never happened.
Rather, a sustainable approach to the environment and social policy will unlock growth opportunities, create jobs, and make our economies more resilient to future shocks.