‘Colla­bo­ra­ti­ons are one key to success in the nonpro­fit sector’

Urs Baumann, CEO of Zürcher Kanto­nal­bank, explains why impact inves­t­ing is an ideal approach for foun­da­ti­ons and what the bank is hoping to achieve through its invol­vement with StiftungSchweiz. 

Answer us honestly – how sustainable are the invest­ments at Zürcher Kanto­nal­bank really?

Sustaina­bi­lity is dyna­mic. We keep it moving forwards and evol­ving. Our commit­ment to guiding our custo­mers into a sustainable future is writ­ten into our busi­ness stra­tegy. And we set oursel­ves high stan­dards and ambi­tious targets in this area. 

What does that mean exactly?

Zürcher Kanto­nal­bank joined the Net-Zero Banking Alli­ance in Decem­ber 2022, which means we’ve commit­ted to the target of hitting net-zero emis­si­ons by 2050. As far as our active asset manage­ment invest­ment solu­ti­ons with tradi­tio­nal invest­ments are concer­ned, we’re working in line with the Paris Climate Agree­ment and have adopted a binding quan­ti­ta­tive reduc­tion path. This means we’re contri­bu­ting to climate-friendly finan­cial flows. 

So is your focus on climate action?

It’s certainly one of the areas we’re focu­sing on – but it’s not the only one. For exam­ple, we’re curr­ently plan­ning an invest­ment solu­tion focu­sed on educa­tion as a sustaina­bi­lity goal in part­ner­ship with educa­tion foun­da­ti­ons and the Swiss Agency for Deve­lo­p­ment and Coope­ra­tion (DEZA). The returns from this sustain­ably mana­ged fund, which foun­da­ti­ons and private custo­mers will be able to invest in, will be paid out to ‘Educa­tion Cannot Wait’, a fund dedi­ca­ted to provi­ding unin­ter­rupted educa­tion during inter­na­tio­nal huma­ni­ta­rian crises. In other words, private capi­tal will be mobi­li­sed to solve sustaina­bi­lity problems. 

How do you make sure that there’s no risk of false claims being made about sustainable invest­ments at Zürcher Kantonalbank? 

We syste­ma­ti­cally inte­grate ESG risks and oppor­tu­ni­ties into all our invest­ment solu­ti­ons. Given our bank’s pionee­ring posi­tion when it comes to sustainable invest­ments, asset manage­ment for active invest­ment funds is based on a binding quan­ti­ta­tive reduc­tion path as stan­dard. This means that the CO₂e inten­sity – CO₂ equi­va­lents – of port­fo­lios is being redu­ced by at least 4 per cent a year. With direct invest­ments, we focus on the dialo­gue with inves­t­ing compa­nies and call upon them to define and imple­ment meaningful targets for redu­cing their carbon emis­si­ons. Our stan­ding as one of the largest fund provi­ders ensu­res that our voice can be heard. We publish regu­lar reports to disc­lose how sustainable our invest­ment funds are. And we were recently named the ‘Best Asset Manage­ment Company’ in the Swiss Sustainable Fund Awards for the second time. That’s veri­fi­ca­tion that we’re on the right track. 

Does digi­ta­li­sa­tion help you explain the bene­fits of sustainable invest­ments in a way that custo­mers can really understand?

Digi­ta­li­sa­tion helps us to address our custo­mers directly, improve the custo­mer expe­ri­ence, such as through our consul­ta­ti­ons, and make our sustainable opti­ons acces­si­ble through digi­tal chan­nels like frankly. And then there’s data analy­tics. Our ESG Data Analy­tics Team has more and more orga­ni­sa­tio­nal and natio­nal data to refer to, which means that the quality of ESG data analy­sis is constantly impro­ving. Tech­ni­cal inno­va­tion is incre­di­ble when approa­ched with a commit­ment to social responsibility.

Would you say you have a better under­stan­ding of your custo­mers these days?

Running a busi­ness successfully is all about anti­ci­pa­ting your custo­mers’ future needs and deve­lo­ping the services to match. It’s so important to pick up on shifts in values and be attu­ned to the current problems being faced by society. 

The canton’s perfor­mance mandate requi­res you to harmo­nise your busi­ness acti­vi­ties with the
envi­ron­ment and society. How do you go about that? 

We’re very conscious of the perfor­mance mandate and we make sure we’re reflec­ting it at all times. That applies to orga­nised meetings and spon­ta­neous conver­sa­ti­ons alike. Basi­cally, it’s part of our DNA. What we all want is for the people who live in the canton of Zurich to be able to thrive as much as possi­ble. And that’s why we’re invol­ved with a wide range of spon­sor­ship acti­vi­ties. As for society – we run the largest educa­tion insti­tu­tion in the canton of Zurich, support youth educa­tion and promote cultu­ral diver­sity and equal oppor­tu­ni­ties. The fact that we receive more than 2,500 requests for our support every year says it all, really. Envi­ron­men­tal issues have been part of our coll­ec­tive mind­set for a long time now. 

Is this work akin to corpo­rate philanthropy?

Abso­lut­ely – even though we don’t have our own corpo­rate foun­da­tion for it in place. A lot of our acti­vi­ties may be based on a give-and-take arran­ge­ment, but ever­y­thing we do is deli­bera­tely aimed at making life better for the wider popu­la­tion of Zurich. And that invol­ves a patro­nage aspect too.

Can you give us an over­view of your wide-ranging activities?

Even before I star­ted working at Zürcher Kanto­nal­bank, I was aware of many of the bank’s commit­ments. Some examp­les include Zoo Zurich, the Schau­spiel­haus theatre, the Grei­fen­see­lauf run and the jazz festi­val. And I think ever­yone is fami­liar with our Nacht­schwär­mer night-time public trans­port offer for our youn­ger customers.

The mandate means that Zürcher Kanto­nal­bank is working in many of the same areas as nonpro­fit orga­ni­sa­ti­ons. How do you work together? 

Colla­bo­ra­ti­ons are one key to success in the nonpro­fit sector. Gene­rally spea­king, it’s only possi­ble to do good in society when multi­ple stake­hol­ders are on the same page. In that spirit, Zürcher Kanto­nal­bank has a wide range of banking services that are aimed at nonpro­fit orga­ni­sa­ti­ons and support every rela­ted aspect of finan­cial manage­ment. In paral­lel to that, Zürcher Kanto­nal­bank spon­sors lots of events in the foun­da­tion sector, inclu­ding Schwei­zer Stif­tungs­tag, an annual event orga­nised by proFonds. I also want to mention our invol­vement with the stiftungschweiz.ch phil­an­thropy plat­form, which we’re hoping will enable all nonpro­fit stake­hol­ders across Switz­er­land to colla­bo­rate digi­tally. Last but not least, lots of our employees volun­teer for asso­cia­ti­ons or foun­da­ti­ons. As part of our corpo­rate volun­tee­ring efforts, entire teams from our bank have alre­ady taken part in orga­nised projects and initia­ti­ves to give back to society.

What is Zürcher Kanto­nal­bank hoping to achieve through its invol­vement with StiftungSchweiz? 

As a full-service bank opera­ting nati­on­wide, we have plenty of cont­act with nonpro­fit foun­da­ti­ons. We under­stand the chal­lenges invol­ved with making the sector more public and more profes­sio­nal. Along­side Zürcher Kanto­nal­bank, StiftungSchweiz has a broad-based consor­tium of grant giving foun­da­ti­ons that came on board last year as stake­hol­ders. To us, it’s clear that there’s going to be a growing need for trans­pa­rency, impact-driven action and dialo­gue going forwards – both intern­ally and extern­ally. And that’s exactly why we’re working with StiftungSchweiz to achieve the goal of exploi­ting the poten­tial offe­red by digi­ta­li­sa­tion to ensure phil­an­thropy with an even grea­ter impact.

Critics within the foun­da­tion sector are saying that StiftungSchweiz is a gold mine for ZKB. Are they right? 

We became heavily invol­ved in the plat­form in 2018 and we’ve been faci­li­ta­ting posi­tive deve­lo­p­ment consis­t­ently as a depen­da­ble part­ner ever since. It’s our aim for stiftungschweiz.ch to be able to sustain itself in the medium term. Any future profits made from running the plat­form will be inves­ted back into its development. 

Before you took on the role of CEO at Zürcher Kanto­nal­bank, you were working in impact inves­t­ing. Would that not be an ideal approach for foun­da­ti­ons too? 

Abso­lut­ely. With impact inves­t­ing, the finan­cial return is used for a nonpro­fit purpose and the invest­ment itself has social impact too. But there are diffe­rent forms of impact inves­t­ing. One key distinc­tion is whether the prio­rity of an invest­ment is the impact or the finan­cial return. Foun­da­ti­ons in parti­cu­lar may find that they end up putting them­sel­ves at more risk as a result of their focus on social impact. But impact invest­ment doesn’t always have to go through a foun­da­tion. Zürcher Kanto­nal­bank has been inves­t­ing in start-ups for over 15 years and support­ing inno­va­tion in Switz­er­land that way. That’s an exam­ple of impact inves­t­ing at its best.

ZKB has some foun­da­ti­ons as custo­mers. How big is the demand for sustainable finan­cial products among this custo­mer base?

Many foun­da­ti­ons are conside­ring taking a sustainable approach to their invest­ments. At the most basic level, this invol­ves a foun­da­tion apply­ing exclu­sion crite­ria to its invest­ments. But more and more foun­da­ti­ons are taking it further than that by running an ESG analy­sis or using it as a way of redu­cing their carbon emis­si­ons or achie­ving the UN Sustainable Deve­lo­p­ment Goals (SDGs). Some­ti­mes, they even go as far as impact investing.

Are banks inte­res­ted in foun­da­ti­ons as customers?

The short answer is yes, abso­lut­ely. Expan­ding on that, I would say that foun­da­ti­ons are among our most discer­ning custo­mers. They often ask ques­ti­ons about ethi­cal or social stan­dards along­side envi­ron­men­tal conside­ra­ti­ons. This makes these part­ner­ships inte­res­t­ing. In our role as a pioneer in sustainable invest­ments, we can deli­ver real added value through the advice we offer. 

Zürcher Kanto­nal­bank has crea­ted an index for clas­sic phil­an­thro­pic invest­ments called SwiPhiX. Is it a contra­dic­tion to measure the perfor­mance of these invest­ments in an index? 

Not at all – it’s abso­lut­ely neces­sary. The better the assets perform in the long term, the more funds a foun­da­tion will have at their dispo­sal. The SwiPhiX is a trans­pa­rent indi­ca­tion of the return an average foun­da­tion mana­ged to gene­rate within a certain period. This gives all foun­da­ti­ons a refe­rence value they can use to bench­mark the perfor­mance of their own invest­ments. Having said that, a foundation’s invest­ment stra­tegy should be desi­gned to fulfil that foundation’s purpose first and fore­most. The invest­ment aim is usually to gene­rate enough returns to finance the foundation’s projects and cover its allo­ca­ted funding as comfor­ta­bly as possible.

There is often a focus on climate and carbon issues. How important are social concerns?

When talking about the climate issue, what really matters is the world we’re leaving behind for the next gene­ra­tion. But there are also plenty of oppor­tu­ni­ties to invest directly in social concerns. One good exam­ple is the fund I mentio­ned earlier that’s focu­sed on educa­tion as a sustaina­bi­lity goal. As a bank with a compre­hen­sive perfor­mance mandate, we consider it our respon­si­bi­lity to take both social and envi­ron­men­tal issues seriously. 

You have big plans ahead of you. Is the role of CEO at Zürcher Kanto­nal­bank a dream job?

First and fore­most, it’s a huge privi­lege. And a huge oppor­tu­nity. We certainly have big plans. That’s one thing we have in common with StiftungSchweiz.