I'm Lindsay Hall. And I'm Esther Wielden. Welcome to All Things Sustainable, a podcast from S&P Global. As your hosts, we'll dive into all the sustainability topics that are reshaping the business world. Join us every Friday for in-depth analysis and interviews with leaders from around the globe. Together, we'll break down big sustainability headlines and cut through the jargon. Welcome to our special coverage of Climate Week Zurich. We are thrilled that All Things Sustainable is the official podcast of this first ever Climate Week Zurich, May 4th through 9th. And all this week, we'll be bringing you daily episodes featuring leaders from the public and private sectors. Now, Climate Week Zurich is convening business leaders, policymakers, nonprofits, and members of the public across hundreds of events with a goal of scaling climate action. Zurich is an international hub for banking and finance. And in today's episode, I sit down with a guest who works for a Swiss private bank to talk about the state of play for sustainable finance. Here's our conversation. Thank you so much for sitting down with me on the sidelines of Climate Week Zurich. Can you start, please, by introducing yourself to our audience? Yeah, thank you, Lindsay, and thank you for having me. It's a pleasure to be here. So my name is Melanie Baylor. I'm the Global Head of Sustainable Investing at EFG. And my work actually sits at the intersection between capital clients and companies who are adapting to a more sustainable and resilient economy. My background is in finance. So I've studied banking and finance at the University of St. Gallen. And then I spent several years at Credit Suisse from private banking, asset management to investment banking. And then in 2017, I joined EFG as a fund manager. and gradually also shifted my focus towards sustainability. And that shift became also very personal for me because when my son was born, it just became even more important. How do I spend my time away from him, right? How can I spend it in a meaningful way? So I wanted to use my work to help bridge a real gap between investors who want attractive financial returns and companies that are helping build a more sustainable, resilient economy. So maybe about EFG, who is EFG, right? Yeah, for anyone who's not familiar, what should they know about the bank? Yeah, so EFG is a global private banking boutique headquartered here in Zurich. We are listed on the Swiss Stock Exchange, but we also have at the same time a longstanding family anchor shareholder. We are present in about 40 locations worldwide and have around 3,000 employees. And I think what makes EFG really distinctive is its entrepreneurial culture. And that's also what makes my day-to-day work really exciting and valuable, I think, because it allows me to be really proactive in my approach inside the organization, but also in developing solutions for our clients. Remind me, who are the clients that you're working with? Tell our audience about the EFG client base. Yeah, right. So when we are or I am talking about our clients, it's mainly private clients, so ultra high net worth individuals who we are serving. Okay. And I'm really curious to dig in. What should our audience understand about the bank's approach to sustainability and how it thinks about that with its clients? So for us, sustainable investing cannot be sustainability for sustainability's sake. I think that is just not resilient enough in today's world. So it has to be connected with a real economic imperative. And so, in my opinion, the mistake is to treat sustainable investing like a product label. I think especially for private banks, it's becoming a client relevance question. So why? Because the future of wealth is changing. As part of the Great Wealth Transfer, it is expected that 22 trillion US dollar will be transferred to the next generation of clients, which are millennials, Gen X, right? And this wealth transfer is expected to happen by 2034, so that is 22 trillion will be transferred. And importantly, these generations, they are not that young, right? They are between 30 and 6 years old, but they have already very different expectations from their wealth and how they invest their wealth than previous generations. So many of them want to have their capital reflect financial objectives but at the same time also their personal values their family values and also be aligned with the kind of economy they believe is important for a more resilient future And interestingly, I think the data also supports this. So one recent study found that 76% of Gen X and 92% of millennials choose their financial advisor based on their sustainable investing offering. And if you then combine that with the other interesting data point, so that more than 70% of next generation family members are likely to switch advisor after they inherit wealth. So then for us, sustainable investing is not a nice to have. It's part of the future of client relevance. I'm glad to hear you address this idea that it's not just sustainability for sustainability's sake. Something we cover a lot on this podcast, something we've heard frequently the past few years, is how companies are sometimes struggling to make the business case for sustainability. How do you think about that challenge in New York? So for many years, I think a lot of companies treated sustainability more like a bumper sticker, right? So big net zero pledge, put it in the annual report and move on. and this is not really strategy that is more marketing right and when times got tougher and investors started asking harder question that bumper sticker did not hold up but importantly I think that's not the failure of sustainability right that's more the failure of pretending and so I think we we need to separate companies that struggle from the ones that win and so the serious ones, they do not treat sustainability as a campaign. They use it as a management tool. And so what they do is they cut energy waste, they reduce dependence on fragile supply chains, they prepare for regulation, they attract and retain good talent. And so these benefits then become real and they show up in the business. And I'm sometimes thinking of this example that it's a bit like health, right? If you eat well and exercise only for your next vacation or for the beach photo you have in mind, right? You quit when it gets hard. But if you look after yourself, because it's how you live, it's who you are, it makes you stronger. And companies are the same. So sustainability is only done for the photo opportunity, for the annual report. You will always struggle to justify the cost. But if it's used to make the business more efficient, more resilient, better prepared for the future, then the case becomes much, much stronger. And so with climate risk, tighter regulation, resource scarcity not going away, I think the real question is not, can we afford to do this? But the real question should be, can we afford not to do this? That's a great analogy with the health. And you mentioned when times get tough. Certainly, times are tough right now. And we hear a lot recently about how immediate priorities like the war in the Middle East are distracting from sustainability for some companies. So what conversations do you have? How do you think about balancing long-term sustainability commitments with responding to these immediate near-term needs? Yeah, I would argue that actually these energy crises are making the case for sustainability stronger, not weaker. They remind us that energy is not just a climate topic. Energy is sovereignty, it's economic security, it's national security. And so if you're a country depending heavily on imported fossil fuels, you are exposed to volatile prices, geopolitical risks, supply disruptions. And Europe learned this the hard way when Russia invaded Ukraine. And we're just learning it again right now, right? And so for me, the strategic lesson is that the transition is not only about reducing emissions. So it's about building a more secure, more resilient, and more self-sufficient energy system. And then we start talking about renewables, right? Wind and solar, and we all know they are not perfect. So we need storage, we need grid, we need permitting, flexibility. But importantly, they are domestic resources. So no country can embargo your wind or sunshine. So then I will conclude that a short-term crisis, yes, they distract attention. That might not be a good thing. But strategically, for the long term, actually, it strengthens the argument that clean domestic energy is needed or required in higher quantities. You need energy efficiency and you need resilient infrastructure. Absolutely. Absolutely. So shifting gears a little bit Melanie what are you seeing in terms of opportunities and what demand signals are you hearing from sustainability investors that you work with Yeah I think it an interesting question because here I think the perception and the reality really don match too much So if you listen to the market chatter you might think that sustainable investing is out of fashion. There is hardly any demand left. But then if you look at the data, you get a very different picture. And Morgan Stanley just published a very good study just last month. And it shows that the sentiment around sustainable investing remains high and is actually increasing year over year. And so they find that 55% of respondents are very interested in sustainable investing and 37% are somewhat interested in sustainable investing. So you end up with 92% of over 2000 respondents globally that show some level of interest in sustainable investing. So I think that is hardly niche. And so when you compare that also with my own experience, it matches quite nicely because from a distance, when I speak, for example, to relationship managers, they say, oh, no, I don't think my clients are interested in sustainable investing or even worse when they say in ESG. And then we sit down, we have a more proper discussion. What's actually the opportunity around sustainable investing? And then they start thinking of their clients who are, for example, entrepreneurs who have a business link to sustainability, or they are thinking about women who mentioned to them they are interested in combining their financial priorities with their personal preferences, or they start thinking of the next generation family members, so the sons and daughters of their clients, and then suddenly you discover that interest. So for me, then the question is, where is this connect, right? And for me, the issue is not the lack of demand. So the demand is there, but the real challenge is recognition and activation. So are we asking the right questions? Are we asking them well enough? Do we create the right opportunities for clients to engage? And so clients, I think, are becoming more sophisticated. They don't want slogans, but if we provide them with relevance, with evidence, with solutions that connect to their lives, then you find the demand. Okay. I live in the U.S., and so I hear also a lot from people who are maybe less savvy when it comes to climate as an investment strategy. So I see opportunity to do, I guess, more education, and that's some of the work that we do through this podcast. But how do you educate an investor base who doesn't necessarily understand why climate could be both a risk and also an opportunity? I think the biggest challenge, or at least the biggest challenge from my experience, is to get to the opportunity that you can have a conversation or they really listen, right? Because that's often the challenge. If they hear sustainability, sustainable investing, or as I mentioned, ESG, it becomes very difficult because they can't connect the dots, right? they can't connect it with the real world. Also, if you're talking about reducing emissions, that's just not really tangible for them, right? But if you frame it as, first of all, the world is changing, change creates risks and opportunities. The risks, at least from our perspective, in our opinion, managing risks is our fiduciary duty. And then we have the choice if we also want to capture the opportunities that are being generated alongside that change. And then it doesn't become a very philosophical question suddenly, but quite the more tangible one, right? Do you want to invest in companies who are making businesses more efficient, are saving costs thanks to these savings? Do you want to invest in technological innovation, right? So it changes, it broadens the discussion. So for us, the challenge is really to be able to talk about it and educate about it. But then once you're there, you're just discussing reality and financial opportunities and it's not that hard anymore. It's again tying it back to the business case. Yes, absolutely. Always. Right. So what are you excited about in sustainable investing and what opportunities do you see? so for us sustainable investing starts with a very practical question again right so it's what will the world need more of in the future and which companies are well positioned to to provide it so it's really not about a narrow label but it's about investing in a changing world with a specific lens right and the specific lens is which changes can help build a more sustainable more resilient economy And we see mainly three major points drivers themes So one is the world will need more efficient resilient energy systems We quickly talked about that already. Then it will need more resilient infrastructure, especially also when you think about all the AI developments that are happening. And then third, you will also need more solutions for longer, healthier, more independent lives, because that's the other big shift is the demographic shift, right, that people are living longer. And so then for us, sustainable investing is not about asking what carries a green label, or what is ESG, but it's about asking what will the world need, and especially a more sustainable world, and what is financially material, which companies have the capabilities to provide that, to deliver on that front. And I think that is a very exciting investment question. Yeah, absolutely. So again, it's this idea, it's not just slapping a bumper sticker on something. It's really looking for value creation and absolutely building it into the business. Okay. So we're having this conversation in Zurich during the very first Climate Week in Zurich. And I'd love to know just what does your week look like? What do you have planned? And what is EFG's involvement in the week? Yeah, so it's a very busy week, I have to say, but in a good way. Personally, I'm really positively surprised that there are over 260 events planned, right, over 10,000 participants. And for me, that's an amazing opportunity that especially not only so many people are gathering, but also from so many different angles, right, that we're bringing together companies, investors, entrepreneurs, academics, policymakers, and have them all in one room or in several rooms and to have these conversations together. And yeah, we'll be speaking at your event, the S&P event later today, and also at some others. And yeah, just overall, it gives me really confidence that we are now ready to have such an important conference here in Zurich, gathering so many people and hopefully with less noise, more implementation, less signaling, more substance, and also less pretending and more proof. That's a great way to put it. And I had a chance to sit down with one of the event's co-founders and the managing director of Climate Week Zurich, and they were telling me how Climate Week New York was the inspiration. And it's been fascinating to see these Climate Weeks popping up in different parts of the world all over the place and this growing momentum. Have you heard anything interesting so far this week, or are there any questions that you're hoping to have answered this week? So what made me really confident is that I was joining the opening ceremony, and we had really big players committing again to sustainability and the overall transition that needs to be happening. And that made me very confident so that kind of the peer pressure is increasing again right so we maybe exit the phase of green hushing and become again a little bit more courageous and overall I think just I experienced that also in Davos it's like this mindset that we're really all in this together and you not only think that we're all in this together and we're so many really working to make progress. But during this week now in Zurich, you really see all these people, you meet them, you can have discussions. So for me, that's very inspirational and much needed. And of course, Zurich is a big financial hub. And so financial institutions have a big role to play in helping drive change and financing the transition to a greener, more sustainable economy. So thank you for sitting down to share your perspective. Melanie, I've asked you a lot of questions. Is there anything that you'd like to get across to our audience that I haven't asked about? No, very happy that you gave me the opportunity to spread the word and hopefully, again, educate a bit about what is it really that we care about when we care about sustainable investing, right? What's the opportunity? Great. Well, thank you so much. And I hope you have a fruitful rest of your Climate Week Zurich. I'm sure I will. Thank you, Lindsay. Thanks for joining us for this special Climate Week Zurich episode of the All Things Sustainable podcast. We'll be back with more coverage tomorrow, so please stay tuned. Thanks for tuning in to this episode of All Things Sustainable. If you like what you heard, please subscribe, share, and leave us a review wherever you get your podcasts. And a special thanks to our agency partner, The 199. See you next time. CSU Army
