Even before the Covid-19 pandemic broke out and shook our lives, the polarization of society was a permanent topic of conversation. A social tension also related to the secondary effects of the digitalization of the economy and the speed that this transformation was imprinting on economic cycles, literally leaving many people behind.
Not in vain, Nobel Prize winner in Economics Jean Tirole has spent recent years publicly warning that, if nothing was done, “inequality and polarization will worsen, while the destruction of jobs will accelerate.” Tirole now heads the commission of wise men that will advise France on the best way to undertake post-pandemic reconstruction in the digital age.
A recovery that represents a unique opportunity to break with linear economic models that have proven unsustainable in the long term and to contribute to making the world, finally, a better place.
This is also seen by Carlos Recoder, responsible for the Western European, Luxembourg and Northern European markets at the Swiss bank Julius Baer, ??who points out the fundamental role that banking plays in this reconstruction scenario: “Covid-19 is offering us a way to rebuild our society, and socially responsible investments are the way to achieve it. After 25 years working in private banking, it is the first time that I feel that our industry, and especially the wealth management industry, can have a positive impact on society.”
Recoder says this cautiously, because it is aware that 2020 was a complicated year that has widened the inequality gap. And seismic crises such as the one generated by the pandemic are moments of great danger in which the risk of authoritarian drifts arises in response to the emergency situation. “The Covid crisis will most likely contribute to a much more polarized world in which many more authoritarian leaders will emerge,” confirms Recoder. “That said, the best way to fight this crisis is far from authoritarianism or even liberalism and the key factor in this sense lies in social cohesion and trust in institutions,” he emphasizes.
In short, we are facing a great opportunity to change society, but still under the effects of a great shock: “The health crisis is an unprecedented disaster that has caught us all off guard and will accelerate existing structural trends as a consequence of the shock. economic,” warns Recoder. Therefore, it is vital to transmit confidence to society to be able to channel this new economic reconstruction. For the director of Julius Baer, ??this trust is based on two pillars: ethics and transparency.
Transparency in the sense of “analyzing what measures have been taken.” “In the case of the eurozone, the monetization of public debt was chosen to try to preserve employment and ensure that the crisis did not trigger a profound destruction of the labor fabric. Although, yes, these expansive measures translate into a rise in inflation; a problem that States are willing to take on. It is precisely based on these premises that we offer detailed advice to our clients, which allowed us to guide them at all times during the health crisis,” he confirms.
Likewise, transparency cannot be understood without an ethical attitude. This is one of the keys to the global shift towards sustainability that is already perceived by asset owners, who are now aware that their investments can cause irreparable damage to society and the environment. Yes, they want a financial return, but generating a positive impact on the environment and without compromising the economic future of the next generations.
This also influences companies, because it forces them to adapt to these sustainability protocols if they want to be part of the list of investment opportunities. Of course, Recoder warns of the need to be vigilant against the risk of ‘greenwashing’: “Impact investment is a transformative element at a social and environmental level, but it should never seek to attract a client.” This is how that second essential pillar to generate trust appears: ethics.
In any case, the transition towards a more sustainable model cannot be left only in the hands of those who invest. Governments need to establish regulations to create a clear framework in which to operate. “Everything related to ESG criteria implies a new way of functioning, of behaving. This is a process that covers the entire value chain in asset management, starting with the governance of the institution and ending with specific investment advice,” says Recoder.
Relying on the two pillars of transparency and ethics, the Swiss bank managed, despite general concern, to clear up the initial uncertainty and obtain an optimal return for its clients throughout the year. It’s not the first time. “The uniqueness of Julius Baer’s business model makes it much more resilient in turbulent economic periods,” explains Recoder. “The formula for success is none other than a business model based solely and exclusively on wealth management, allowing unusual customization and specialization.”
This distinctive model of Julius Baer has allowed it throughout its more than 130 years of history to position itself as one of the reference banks in periods of crisis. On the other hand, they can boast of being the only independent private bank listed on the Stock Exchange in the world, something that attracts “many large clients.” The result is mathematical: they closed 2020 with historic figures.
As we approach the halfway point of a year in which the recovery still appears fragile and the pandemic still looms over economic forecasts, Recoder is convinced that the combination of the values ??of ethics and transparency will allow Julius Baer to play an essential role by accompanying its clients on this path of sustainable reconstruction, in which the benefit is double.
First, because it helps meet the Sustainable Development Goals set by the United Nations. Second, because sustainable investments, as the director of Julius Baer recalls, “are the most profitable.” The American writer -turned guru- ‘Zig’ Ziglar expressed it perfectly: If people like you, they will listen to you; But if they trust you, they will do business with you.”