Wealthy clients’ commitment to environmental, social and governance (ESG) investing remains intact despite the oil price soaring this year, according to the region’s private banking CEOs.

The Ukraine war sent crude prices to a 14-year high, topping $120 a barrel, helping drive traditional energy stocks to the top of the performance charts in what has been a bruising year in markets.

But speaking at Citywire’s ESG and Thematics Asia Congress last week, private banking bosses said clients are not suffering ‘fomo’ and questioning sustainability, but rather looking to the future.

‘Most clients will look at ESG as a long-term journey,’ said Bahren Shaari, CEO of Bank of Singapore. ‘Looking at it from the sole lens of investment returns is probably not sustainable, therefore volatility in oil prices should not have a big impact on their ESG portfolios.’

Shaari said Bank of Singapore is still in the ‘early days’ of its own sustainability journey, having embarked on it a few years ago with the aim to embed ESG in its investment advisory process, as well as in the operations of its organisation.

In July 2021, the private bank built ESG factors into its assessment of loans for those invested in mutual funds that have MSCI ESG fund ratings of AAA or AA, by increasing the advance ratio by 5% to 75%. Through adding ESG factors, the bank tried to encourage wealthy individuals who use investment financing to enhance returns to invest sustainably. 

Similarly, Omar Shokur, Asia CEO and Singapore branch manager, Indosuez Wealth Management, said that in the past five to six months, most of the bank’s discussions around ESG with clients have been ‘unchanged’ by macro events such as the fluctuation of oil prices.

‘The questions are on longer-term impacts of their ESG portfolios,’ he said.

Indosuez Wealth Management believes energy transition and waste management are two areas that will generate solid returns in years to come, according to an earlier conversation with Arjan de Boer, the bank’s head of markets and investments solutions for Asia.

Rather, private banking CEOs said their focus has been on equipping their private wealth clients with an in-depth understanding of ESG, which includes the different product ratings and frameworks that are used.

‘It is our job to guide our clients through their ESG journey and suggest sustainable investment opportunities as alternatives, so they are able to assess the situation and their portfolios,’ said Pamela Hsu Phua, chief executive officer Asia, VP Bank.

The Lichtenstein-headquartered bank has built an ESG rating system called the VP Bank sustainability score, which measures the level of sustainability of an investment based on various criteria.

‘Whether the clients are institutional clients or private wealth clients, the majority of them are interested in understanding the Group’s ESG capabilities,’ Shokur added.