Christoph Weber, Deputy Chairman of the Executive Board of Zürcher Kantonalbank ZKB and Head of the Private Banking business unit. Photo: Kostas Maros

‘Chari­ties bear a lot of respon­si­bi­lity – and they’re in a parti­cu­larly expo­sed position’

Sustainability and negative interest rates are a challenge for charities, says Christoph Weber, Deputy Chairman of Zürcher Kantonalbank (ZKB). The newly launched performance index for charities is intended to create more transparency and, in turn, help them to make well-founded investment decisions.

THE PHILANTHROPIST: Why have ZKB and StiftungSchweiz laun­ched the perfor­mance index for charities?

CHRISTOPH WEBER: The index will help create trans­pa­rency. It shows what profits can be achie­ved, what invest­ment stra­te­gies can be used and what the diffe­ren­ces are between indi­vi­dual chari­ties. These topics are beco­ming incre­asingly important.

TP: Why now, of all times?

CW: In Switz­er­land, many wealthy indi­vi­du­als are part of the baby-boom gene­ra­tion, and we are now at the stage where baby boomers are begin­ning to think about their wills. They will pass down around 80 to 90 billion Swiss francs a year, and this gene­ra­tion doesn’t neces­s­a­rily have a large number of child­ren. Baby boomers are asking how they can invest the assets at their dispo­sal so they can be of use in the future. Within fami­lies, this leads to discus­sions about possi­bly inves­t­ing the money in chari­ta­ble projects, for exam­ple. This market will grow: it’s an ongo­ing topic that will remain with us for the next ten to 20 years.

TP: And this is where the index can help?

CW: These people want to do some­thing good. As a bank, we’re in cont­act with these custo­mers, and we want to support them. They want to make dona­ti­ons, and we can help them create as much value as possi­ble – along with good returns. Trans­pa­rency is key. As with pension funds, we now have an index for chari­ties so we can make this a reality.

TP: Is it possi­ble to compare the invest­ments made by chari­ties and those made by pension funds?

CW: They have a lot of simi­lar crite­ria in terms of their needs.

TP: Such as?

CW: Both focus on the long term, both want their wealth to be preser­ved, both want secu­rity. Pension funds are tightly regu­la­ted, and chari­ties are fami­liar with rules in the form of their chari­ta­ble regulations.

TP: Are chari­ties grateful custo­mers of a bank?

CW: Good ques­tion. It depends on your perspec­tive, but it’s deman­ding in any case. As I mentio­ned, chari­ties want to protect their capi­tal. At the same time, they need their returns to be as big as possi­ble, which means that we’re confron­ted with some­what oppo­sing objectives.

TP: Is this a major chall­enge, parti­cu­larly when inte­rest rates are low?

CW: More and more, chari­ties need to get to grips with the ques­tion of what risks they can (and want to) take. Having a high percen­tage of shares means brin­ging vola­ti­lity into the port­fo­lio. When cash earned five, six or even seven percent inte­rest, the situa­tion was rather diffe­rent, but nowa­days, just keeping money in cash isn’t an option for meeting a charity’s objectives.

TP: How long will this situa­tion last?

CW: The nega­tive inte­rest situa­tion could last for a long time: we’ve estab­lished a ‘new normal’.

Chris­toph Weber tells us about the new Swiss Phil­an­thropy Perfor­mance Index (SwiPhiX).

TP: What does this mean for charities?

CW: Chari­ties are in a parti­cu­larly expo­sed posi­tion, as are all the tradi­tio­nal insti­tu­tio­nal inves­tors that need secu­rity. Liqui­dity is not the only thing that’s affec­ted. The same situa­tion applies to bonds, as we see bonds with a certain secu­rity level and dura­tion brin­ging nega­tive returns.

TP: But conver­sely, shares have deve­lo­ped well in 2019?

CW: Yes. We are seeing shares brin­ging good divi­dends. Instead of a bond with inte­rest, you can invest in a share that pays out divi­dends, but you need to be prepared to bear the fluc­tua­tions of a port­fo­lio like this. That said, bonds are not safe from fluc­tua­tions either. Chari­ties need to adapt certain invest­ment rules (and this is key) so that they can follow the right invest­ment stra­tegy for this. Howe­ver, this means properly asses­sing the conse­quen­ces. Not every stra­tegy works for every charity: they need to be conside­red on a case-by-case basis. This situa­tion requi­res high-level profes­sio­nal dialo­gue between the bank and the charity’s bodies. The members of a board of trus­tees do not neces­s­a­rily come from the finan­cial sector, and yet they bear a good deal of respon­si­bi­lity for their decisions.

TP: Is it easier to talk to a trus­tee with a back­ground in the finan­cial sector?

CW: It’s the bank’s job to find the right language. Regard­less of a person’s back­ground, we want to help them under­stand the rele­vant crite­ria that they need to bear in mind when making invest­ment decis­i­ons. A certain amount of expert know­ledge does help, of course, and chari­ties often have repre­sen­ta­ti­ves that they select on this basis.

TP: Are chari­ties’ trus­tees willing to make more risky invest­ments because it’s not their money – or are they more timid?

CW: I wouldn’t call it timid: I’d say it’s respon­si­ble. Anyone who’s in charge of this issue at a charity wants to do the best for the charity. When it comes to their perso­nal invest­ments, the trus­tee would possi­bly pick more risk in exch­ange for grea­ter perfor­mance. Howe­ver, as a trus­tee, the respon­si­bi­lity you hold means that chari­ties take a more prudent approach, and are likely to be some­what more conservative.

TP: And that fits with the image of the chari­ta­ble sector.

CW: Yes.

TP: This can also be seen with digitalisation…

CW: …which is why I perso­nally believe that our commit­ment to StiftungSchweiz is very important. We need to find sustainable solu­ti­ons for sending money effi­ci­ently to where it’s needed. The plat­form aligns perfectly with our values of being stimu­la­ting, respon­si­ble and passio­nate. We want to see some­thing be deve­lo­ped that’s not yet on the market. The StiftungSchweiz plat­form and the perfor­mance index will help boost trans­pa­rency, encou­ra­ging the right decis­i­ons to be made, from a quali­ta­tive perspective.

TP: Won’t incre­asing requi­re­ments in terms of super­vi­sion inevi­ta­bly encou­rage chari­ties to go digital?

CW: A modern board of trus­tees needs to reco­g­nise the sign of the times. They cannot wait for super­vi­sory autho­ri­ties: they need to drive forward the topic them­sel­ves with the power of their own convic­tions. Action is needed in terms of digi­ta­li­sa­tion and profes­sio­na­li­sa­tion, espe­ci­ally with regard to invest­ments, and it is important that people making decis­i­ons on these topics are aware of this so they can do so responsibly.

TP: Nowa­days, the term ‘respon­si­bly’ is also unders­tood to mean ‘sustain­ably’ – is the chari­ta­ble sector parti­cu­larly aware of these questions?

CW: Chari­ties often, if not always, deal with topics of sustaina­bi­lity, and the people making decis­i­ons are just as aware of these issues. In gene­ral, we’re curr­ently noti­cing that insti­tu­tio­nal inves­tors, espe­ci­ally pension funds, are incor­po­ra­ting this topic into their invest­ment stra­te­gies more and more. The finan­cial world has to provide the answers to this.

TP: Is this a short-term fad?

CW: No, this trend is here to stay. We’re doing the right thing by deal­ing with this topic. It’s not a trivial matter, precis­ely because lots of people inter­pret sustaina­bi­lity and protec­ting nature in their own way.

TP: An ideal topic for ZKB – because you’re not just about earning money?

CW: That’s right. Our objec­ti­ves are ancho­red in canto­nal law. We have a duty of care. ZKB is obli­ged to have a sustainable impact, and sustaina­bi­lity is in our DNA. We want to be pioneers in this area. Every day, we really think about how we can align our profile even more closely with sustainable invest­ments. As an AAA bank, we should basi­cally alre­ady be an exem­plary part­ner that has this topic at the very top of our agenda.

TP: Have custo­mers’ demands in this regard changed?

CW: Yes. We are really noti­cing this demand. To start with, it encom­pas­sed insti­tu­tio­nal inves­tors like pension funds, but this topic is now being picked up by private custo­mers via profes­sio­nal private inves­tors and chari­ties. I would call it a mega­trend, even though I’m not a huge fan of the term.

TP: It’s certainly not the first that ZKB has seen: the bank is cele­bra­ting its 150th birthday.

CW: Exactly.  And we want to cele­brate it with our stake­hol­ders, in parti­cu­lar, namely the popu­la­tion of the canton of Zurich, by hosting an array of acti­vi­ties both in cities and in the coun­try­side. Some of our custo­mers have trus­ted ZKB for gene­ra­ti­ons, and we want to mark this special occa­sion with them.

Chris­toph Weber has been Deputy Chair­man of the Execu­tive Board of Zürcher Kanto­nal­bank (ZKB) since 2008, where he heads up the Private Banking depart­ment. Prior to this, he was head of Private Banking North and a member of the Execu­tive Board at Banca del Gottardo. From 2000 to 2006, Chris­toph Weber was an execu­tive at AAM Privat­bank AG. ZKB has a balance sheet total of 170 billion Swiss francs and employs more than 5,000 people. As the largest canto­nal bank, it is also one of Switzerland’s biggest banks. It was foun­ded in 1870 as an inde­pen­dent insti­tute of the canton of Zurich under public law, and in 2013, the Swiss Natio­nal Bank clas­si­fied it as being syste­mi­cally important. ZKB is invol­ved in the StiftungSchweiz plat­form.

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